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Americans are dependent on their credit cards. But you can live without credit cards, it just takes some time and effort. In this episode we talk about the very first action step you need to take. It’s the hardest step to take, even though the action is very easy – it’s just hard to stick to it. We also discuss a solution or substitution on what to do instead of using plastic by talking about how the envelope system works.
Holla From The Impala: Leaving money on the table is NOT smart money management.
In response to your question about what sense it makes to plan to have a large tax refund:
It totally doesn’t make sense to loan the government money interest-free. But it also totally doesn’t make sense to, per the Dave Ramsey Baby Steps, pay off your smallest debt first instead of the one at the highest interest rate. But clearly some people (like you) endorse the debt snowball method because of the psychological advantages of having an early “success” in paying one debt off completely. Maybe for some other people there is a psychological advantage to getting a large tax refund that they can put in a lump sum toward something like debt or a vacation and have some sort of “success” in completing that action. I don’t think either attitude makes sense but I recognize that it works for some others.
Thanks for the thoughts Emily! And what you said about paying off the smallest debt first shouldn’t make sense – but having to climb the biggest portion of a mountain before getting to the first rest spot wears folks out and they quit. That is why I do believe beginning the climb and reaching that first outcropping is so important – to keep people going.
I know, the math doesn’t work that way. But personal finance really isn’t math, is it? It’s harder than that.