Tax Return Question

Here is a question that came in from a Bank On Participant related to best use of a tax refund:

With our tax return my wife and I have figured two options: the first would be to put the majority of it towards our largest debt, bringing the interest charges down. The second would be to pay off 2 or 3 smaller debts then using the money allotted to those monthly payments towards the larger debt and a savings account.

Is there a clear choice in the situation, or are we missing something? Thanks for your advice.  - GB

Dear GB:
Related to your question:  Smart thinking to use the refund to pay down debt.  I have no idea how large your refund is, but here are some rules of thumb that might be a help to you.  

Idea #1:  When paying off debt, if you do not have an emergency fund in place you will have a hard time breaking the debt cycle.  Murphy's law says that if anything can go wrong it will.  We all know unexpected expenses crop up just when you least expect it. 

Start by having at least $200 - 300 in a savings account and then work up to having at least one month worth of expenses.  If you have $300 in savings, you will create a small buffer for the unexpected and you won't have to go back to your credit cards if something should happen; you can borrow from yourself instead of the credit card and repay without all the interest charges.

My favorite strategy is to pay myself interest if I ever need to go to my emergency fund.  The bigger penalty I charge myself, the less tempted I am to use it for non-emergencies.  Also, it helps me to grow my emergency fund faster by adding the penalty to the amount I already had saved.

Idea #2:   There is great discussion in the financial community about best strategy for starting debt reduction.  The math guys say attack the highest interest rate debt because that will reduce your overall interest payments the fastest.  The problem is if your highest interest rate is on the largest debt, you may lose enthusiasm for your debt reduction plan before you pay off the first debt.

Studies indicate that attacking the smallest debt first and then the next gives you the quick successes in paying off debt that help you keep the momentum going.  There is a great website to help you build a debt reduction plan called PowerPay.  It is free from Extension Services.  You create your own login and can see how soon you can get out of debt.  As you make payments, you can see your progress toward being debt free!  You can visit the website at  Once you complete your debt reduction you can move right into power saving for your future needs!

Hope this helps and keep the questions coming! 

Free File Your Taxes

Virginia Beach Department of Human Services has just updated it's Earned Income Tax Credit webpage with a variety of free resources for you to get your tax refund for free. 

Free Tax Help
Did you know that households with income less than $51,000 are eligible to receive free income tax preparation services? Click Free Tax Help is Coming to You to learn more.  
You can get help preparing your taxes you can contact 757-385-3551 to schedule a time to work with an IRS trained volunteer.  Volunteers are available on Fridays during the month of February (9:00 - 4:00 pm) at Virginia Beach Department of Human Services. 
H&R Block Free File

Intuit Tax Freedom Project 
TaxSlayer Free File
​Adjusted gross income:
     >$57,000 or less, and
     >Age 52 or younger
​Adjusted gross income:
     >$31,000 or less, or
     >$57,000 or less and
        active military, or
     >Eligible for the EITC
​Adjusted gross income:
    >$30,000 or less, or
    >Live in any state or U.S.
      citizen and resident
      aliens with foreign
    >En Espanol

Homework from Lesson 2 - Crisis Management

Track spending for one month using your spending tracker.  (Copy additional pages as needed)

Complete Records Organization Checklist

Create a grab and go book of vital records

Write SMART Goals in your Financial Empowerment Passport pages 11- 13

Prioritize your SMART Goals on Passport page 14

Meet with your coach and creating a monthly savings estimate from your savings goal created for Virginia Saves.

For a printable version of this homework: click here

Homework from Lesson 1

Complete Smart Goals Worksheet

List Temptations that could throw you off budget and brainstorm ideas on how to avoid them.

Complete a debt list using informaiton from your credit report

Meet with your coach.

For a printable homework sheet, click here

32% of Americans are in Serious Debt

The Personal Finance Employee Education Foundation has just completed research that indicates that as many as 32% of Americans are in serious debt that may impact productivity at work and cause health concerns. 

This research also reports that families who are just getting by increased from 28% in 2004 to 44% in 2012.  This is a major change for families who had been previously doing well.  Contrastingly, Americans with little financial stress decreased from 42% in 2004 to 24% in 2012. 

Bank On is helping families operating in tight financial times to gain more financial control and take back their financial futures.  Contact Bank On to learn more at

Dealing with Fraudulent Debt Collectors

Knowing your rights and responsibilities as consumers can ease the stress you feel when collectors come calling.  Even if you don't owe a debt some scam collectors may try to convince you that you should pay them.  The Federal Trade Commission (FTC), is the nation's consumer protection agency and warns consumers to be alert to scam artists who may be posing as debt collectors. 

All legitimate collectors should be able to provide a validation notice.  This notice must include the amount of the debt, the name of the creditor you owe and your rights under the Fair Debt Collection Practices Act.  If they refuse to provide this information, this debt may not be legitimately yours.

Ask for ID.  Anyone calling you to discuss any debts owed should provide their name, company, street address and telephone number. 

Don't give personal financial information.  Never provide personal financial information like your bank account, credit card or Social Security number unless you are absolutely certain you are speaking with a legitimate caller.  Scammers can use this information to compromise your identity and obtain credit in your name. 

Report Fraud.  If you receive suspicious calls, notify the FTC and the Virginia State Attorney General's offices with the information you collect. 

To learn more about fake debt collectors, visit for more information on how to protect yourself from fraudulent practices.