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Debt Payoffs!

February 11th, 2013 at 08:32 pm

We received our tax returns today. $4,848. We are doing the following:
• $2,318 to payoff auto loan. Woohoo!
• $900 to payoff credit card balance from moving last year for new job. (No more credit card balances!)
• $445 to payoff BillMeLater for camera and gear I purchased for side-work.
• $600 to Checking Account to keep one month of expenses in Checking, while income gets direct-deposited to Savings. (Thanks to the community for recommending this method!)
• $180 to IKEA for two dressers, one for wife and I, one for kiddo (currently stacking things on shelves; quite hectic!), and new crib mattress (either from IKEA or Target).
• $405 remaining for our anniversary trip to Portland, OR in May.

Paying off these items will free up quite a bit monthly for extra savings. Smile Which is great, because we have a few savings goals that we have yet to start on. They are:
• Savings for future business.
• Medical care savings.
• Future car savings. (We probably won't need one for quite a few years; only have 49,000 miles on our 2007.)
• College savings for the kiddo.
• Cushion savings!

Posted in Budgeting, Debt, Personal Finance, Saving Money | 23 Comments »

23 Responses to “Debt Payoffs!”

  1. Carolina Girl Says:
    February 11th, 2013 at 08:41 pm 1360615309
    1360615309

    What a great post!!! Congratulations!

  2. creditcardfree Says:
    February 11th, 2013 at 08:43 pm 1360615414
    1360615414

    Nice! Can you change your withholding to avoid such a big refund. That could change your paycheck by several hundred dollars each month. There is a withholding calculator on the IRS website, that works great.

    Just looking at your sidebar...what is the status of your student loan? Do you have plans to pay that off?

  3. NJDebbie Says:
    February 11th, 2013 at 08:46 pm 1360615592
    1360615592

    Great plan!

  4. Frügal Says:
    February 11th, 2013 at 08:54 pm 1360616094
    1360616094

    @creditcardfree - Yes, I have thought about changing my withholding. However, I seem to be much more responsible with a lump sum, rather than little bits more every paycheck. Next year, we will be paying off the student loan and putting the rest into savings. If I doubled the loan payment, it would be paid-off in a year. But we would do better by increasing our grocery budget (been eating ramen noodles for lunch; current budget is only $250 for three people, and we make everything from scratch [except, of course, the ramen]).

  5. PNW Mom Says:
    February 11th, 2013 at 08:56 pm 1360616210
    1360616210

    Congratulations on paying off those debts!

  6. BuckyBadger Says:
    February 11th, 2013 at 09:12 pm 1360617135
    1360617135

    Make sure you don't let college savings overshadow saving for your own future. A kid can borrow money for college. You can't borrow money for retirement. It's nice to want to help a kid with college money, but it's just not practical for a lot of people.

    How is retirement savings going? I'd consider trying to put as much into a Roth for each of you as humanly possible. Do you have a 401k through work? I would try to do the Roth asap. Maybe you already have? I can't remember the details about your retirement savings. Even a couple hundred bucks a month would go a long way.

    I would have also suggested tweaking your withholding so that you don't get such a big refund, but if it works for you and you like it -- no problem.

  7. Frügal Says:
    February 11th, 2013 at 09:26 pm 1360617961
    1360617961

    @BuckyBadger - Yes, retirement should have been on that list as well. Oops! Well, I just opted out of the 401k offered ere at work through Prudential. The default 3% contribution ($59/mo) would hurt. That should give you an idea of what I make (see previous blog post). Employer also contributes 50% (or so my supervisor says he recalls). The packet sent to me have me absolutely no information. And HR has yet to get back with me. But yes, $59 would hurt us. "/

  8. Frügal Says:
    February 11th, 2013 at 09:28 pm 1360618126
    1360618126

    Also, we don't even have health insurance yet! Through work would be $220/mo for both of us.

  9. BuckyBadger Says:
    February 11th, 2013 at 10:02 pm 1360620164
    1360620164

    What about a term life policy? Probably important with a single wage earner and a baby...

  10. BuckyBadger Says:
    February 11th, 2013 at 10:18 pm 1360621108
    1360621108

    Just saw your previous answer to my questions.

    In regards to the $59/mo not being possible -- once you feel more comfortable, just think how far that tax refund could go spread out throughout the year. That's nearly $416 a month. That's enough for some 401k, some retirement into your IRA, term life policies, AND health care.

    There are reasons that people suggest not getting a big tax refund -- we're not just blowing smoke! ;-) See how much that money could do?

  11. Frügal Says:
    February 11th, 2013 at 10:18 pm 1360621131
    1360621131

    Yes, we have that (though only $10,000 each) as well as dental and vision.

  12. LuckyRobin Says:
    February 11th, 2013 at 10:39 pm 1360622373
    1360622373

    I don't know if you've noticed this, but your posts have sure gotten a lot more positive since you started posting. Your all around attitude seems hopeful and so much more optimistic. It's nice to see that. Your progress must be giving you a nice little boost of spirits.

  13. Frügal Says:
    February 11th, 2013 at 11:07 pm 1360624029
    1360624029

    @LuckyRobin - Well, during that little hiatus, I did some personal growth. I have been reading more, sleeping better, developing myself, etc. Some examples of that are that we have been purging a lot of our belongings that we don't use, I have been meditating more, and we have been consuming more coffee. We don't go out for coffee anymore (been a few months); instead, we enjoy fresh brew from our home. It has become a shared hobbie. We are pretty much snobs when it comes to coffee now. Haha. We only get 8 oz at a time, which lasts 15 days (prime freshness period), we time and measure the brew, etc. Believe it or not, that little half hour a day hobbie has really helped. Strange as it may sound.

    Thank you for noticing! I am ever-changing in who I am and work hard to make sure I don't become someone I can't love.

  14. ceejay74 Says:
    February 11th, 2013 at 11:14 pm 1360624487
    1360624487

    That's so amazing, congrats! I like Bucky's idea of reducing your withholding enough to start contributing to your 401(k). Even though employer-provided plans aren't always the best or cheapest, if they match even 50% on what you contribute, that's nearly a 50% return right there. And it'll be pretax so will reduce your tax burden a bit.

  15. rob62521 Says:
    February 12th, 2013 at 02:19 am 1360635550
    1360635550

    Way to go! Be proud...very proud!

  16. wowitsawonderfullife Says:
    February 12th, 2013 at 05:52 pm 1360691553
    1360691553

    Awesome job!

  17. snafu Says:
    February 12th, 2013 at 11:37 pm 1360712270
    1360712270

    Good on you, your progress has been phenomenal! You and wife have surely strengthened your relationship by working together on your goals. Your coffee hobby is a clever reward. Like the others I too suggest you press HR for details on employer's retirement program. If they are giving free money by their contribution to your plan, it's smart to change withholding to cover the $59. without hurting your plan.

    I hope you'll keep us up-to-date on your progress and let us cheer you on.

  18. Looking Forward Says:
    February 13th, 2013 at 08:02 am 1360742568
    1360742568

    Good for you!
    I think moving was the best thing you and your wife ever did. A much better situation now. Enjoy your progress and keep moving forward. Smile

  19. MonkeyMama Says:
    February 13th, 2013 at 08:52 pm 1360788771
    1360788771

    I agree with LuckyRobin - definitely more positivity, and a LOT of progress.

    I hesitate to say it, because I think is important to always be saving for retirement. BUT, I find it hard to believe you paid/owed any taxes (meaning: your taxable income was $0 and your income taxes were $0), as you just revealed your income recently. For that, the 401k is really not a good deal for you. I am questioning if it is even worth any match. I would work on contributing to ROTH IRAs. 10% of your income is like $2500? You can put $2500 into a ROTHs, next April, for 2013, with your 2013 tax refund. I would seriously consider this. Also, look into the retirement savers credit. You may be able to get back 50% of what you put in.

    Text is http://www.irs.gov/uac/Get-Credit-for-Your-Retirement-Savings-Contributions and Link is
    http://www.irs.gov/uac/Get-Credit-for-Your-Retirement-Saving...
    It is not too late for 2012 - you can amend your tax return. I don't get the feeling you are prepared for that - but just FYI. Make sure you are taking advantage of benefits available to you.

  20. Frügal Says:
    February 13th, 2013 at 11:08 pm 1360796885
    1360796885

    Thanks for that awesome information, MonkeyMama! I used TurboTax's TaxCaster to see how contributing $2,500 to retirement would change my returns, and it went up by about $300. Definitely not half of $2,500. Haha. Punched in $5,000 just to see, and it didn't change. Strange. TaxCaster is quite accurate too. Was only off by $8 on our return this year, and was dead-on last year.

    I am considering doing this, though. I coul also purchase health insurance for the whole year for both of us for ~$2,600 (if I remember the premiums correctly). Or for just myself for ~$960, I think. Something to think about. However, I really want to start saving for our business. Even if we only saved $2,000/yr (from returns) for the business, we would have $20,000 in ten years. Definitely not enough for our future business, but it's definitely better than $0.

  21. MonkeyMama Says:
    February 15th, 2013 at 05:06 pm 1360948015
    1360948015

    I think the problem is the retirement savers credit is a non-refundable credit. It has to reduce your tax liability, but your tax liability is $0. (See line 46 of your 1040 - Total Tax is probably $0. This number would have to be $2,000, to get the $2,000 max savers credit). The EIC and child tax credits are refundable credits. So basically, the refunds you are getting is mostly not money you even put in. It is government welfare of sorts. Meaning, you don't have to pay it in to get it back. {So the advice to adjust your withholding is probably not very useful either. Your withholding could be $0 and you'd be getting a large refund?}.

    If your income increases, just keep the retirement savers credit in mind. If your income goes up a little bit, it might be more beneficial next year. The nice thing is you can just run the scenario when you do your tax return. Might not make sense in 2013, but maybe it will in 2014 or 2015.

  22. SavingsQueen Says:
    February 18th, 2013 at 08:31 pm 1361219517
    1361219517

    Cogratulations on paying off all the ugly debt!! You must feel so proud (and also relieved). January 1, 2014 I believe that all Americans will be required to have health insurance and that at your income level the government may give you some help with that. I hope they do and that it is something you can take advantage of. Good luck with all your dreams. Day by day you are getting there!!

  23. Mayara Says:
    February 21st, 2013 at 07:56 am 1361433412
    1361433412

    Good for you Smile

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