Budget to pay off credit card or throw into savings

With my tax return, I am getting a refund. It would actually be just enough to eliminate my credit card debt. However, I would like to keep a chunk of it in my savings. 

I am getting the hang of the 4 rules but which would be best in this case: to spend the money on paying down the cards to zero or to have a buffer and continue paying them with my current goals. 

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  • Are you incurring interest?

    What kind of "buffer" or "savings" are you talking about? Do you mean "extra" money to pay for unanticipated expenses?

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    • dakinemaui Just savings. The money I was going to stash away would be put into my rainy day fund. It's not extra. It is not enough to cover my entire budget. 

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      • dakinemaui
      • dakinemaui
      • 7 mths ago
      • 2
      • Reported - view

      Slate Blue Pilot (2903ac015cdb) So an emergency fund. Opinions vary, but I would definitely put that toward paying CC debt. In the event I had to use the CC for an emergency (instead of the cash), I would see that as a victory having saved interest in the meantime. Others, though, see the CC use as a failure. It's a glass half full vs. empty thing.

      Edit: I would fund the true expenses with known (or estimated) amounts/dates before paying down the debt.

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    • dakinemaui ok. That makes sense. 

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  • That's great, Slate Blue Pilot (2903ac015cdb) ! 

    The question I always ask when I'm talking to someone in this situation is: "How do your True Expenses categories look?"

    If they're well-funded, go ahead and attack that debt. The reason Rule 2 exists is to prevent you from having to rely on credit when "unexpected" expenses show up.

    So if your budget tells you you're on track for your annual bills, repairs, medical expenses, and so on, you're ready to pay down debt aggressively. If not, it's better to prevent future debt by bulking up your True Expenses—even if that costs you a bit of extra interest.

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    • Matthew ok that makes sense. I was actually rearranging my true expenses to better reflect my true expenses. I read it is helpful to order them from top to bottom. So that is a good idea.

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  • I just took the Financial Peace University course by Dave Ramsey.  He recommends (as Baby Step #1) that you stash away $1000 as an emergency fund before you begin to attack debt.  In our particular course, we determined to stash away $1000 per person in the household.  If you then run into an unexpected expense, you've got an emergency fund to help keep you from acquiring more debt.

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      • dakinemaui
      • dakinemaui
      • 7 mths ago
      • 1
      • Reported - view

      Terry Bauer FPU also doesn't have the benefit of a feasible (zero-based) budget. IMHO, that lessens the need for a cash EF.

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  • You can do half and half if you can't decide.  You can always send the rest later if you change your mind, but you can't get the cash back without taking another loan.

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      • dakinemaui
      • dakinemaui
      • 7 mths ago
      • Reported - view

      PhysicsGal in this case, it is credit card debt, so it's pretty easy to get it back. One viewpoint is that every budgeted purchase on the card is effectively a withdrawal. Admittedly, not everyone thinks about a CC account in that manner.

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