Not long ago I was becoming frustrated with our progress on Baby Step 2. I am painfully impatient to get out of debt. Just ask The Wife.

Yet it’s a long road. Most people who follow the plan we are doing need 18 – 24 months to become debt-free. I’m afraid we’re going to need more.

What does ole Ramsey say? “Children want it now, adults devise a plan and stick to it.”

>sigh<

Last year we gained real traction for the first time when we got our tax return. It was around $6,000 and suddenly we felt like we were really moving. Cards were cut up, accounts were closed; we were doing a total money makeover for real.

We buckled down and embraced our plan. I changed my W4 withholdings to increase our take-home pay by ( $6,000/12 ) $500 per month and we put that to use for our debt snowball.

Let me tell you: THAT IS SCARY. Well, it’s not scary in March when you do it, but it’s deathly frightening the year after; when you’re walking from your car to the CPA’s office to find out whether you owe or not.

How close did we get to having the right amount withheld for 2009?

What do you think our accountant said when the 1099s, W2s, statements, and deductions were all mashed into this year’s new and improved tax tables?

A seven thousand dollar refund. Seriously.

WHAT THE HECK IS GOING ON? I asked her to double check the numbers — twice. Nope. It was real and the return was right.

I headed off to HR the next day and upped our exemptions again. Maybe this time we’ll get closer to our goal of +/- $1,000. That’s most interest-free money I’m willing to loan the government and the most I’m willing to cough up on short notice.

In the mean time, this year we get to throw $9,000 at our debt! (NINE THOUSAND? Oh yeah, I got the first $2k from that freelance work I told you about). That takes us from 38% paid off up to 58%.

TALK ABOUT TRACTION!

You certainly cannot call it planned, but it sure is nice to have an unexpected boost. Don’t ask me how to get your exemptions right. The tax tables are obviously some kind of weird voodoo.

The real story is that we never thought about using the money for something else. Two years ago we would have bought stuff, taken a vacation, or frittered it away. Today we have no question about what to do with found money. We have our steps. We know which one we’re on.

Save Strong,
the Dad

© the Dad, Climbing Out, 2010. | 13 comments

Every village needs an idiot and today I guess I’m it.

You know those times when you think you’re being nice, but it turns out you’re just lying for someone else? Compound that with a fat slice of Stupid and you’re going to end up owing someone money.

Just like me, the village idiot. (Can you tell I’m not proud of what I’m about to tell you yet? I really can be more self-deprecating. Truly, I can.)

It begins when we did our taxes two years ago. Our kids were in daycare then. If you haven’t had the pleasure of daycare let me tell you, in addition to the petri dish of germs you invite into your life you will be truly amazed at how much it costs. Our kids went only part-time, but nonetheless we spent nearly $11,000 in daycare that year.

Tax time rolled around and I asked our provider for her tax ID number which she happily gave me along with a seemingly innocuous request, “Please just claim $6,000 for the year; it’s the max they allow anyway.”

In retrospect it seems so clear: we were being asked to lie for someone else. Why reason left me is a mystery, but that’s what I did. I claimed we spent $6,000 instead of $11,000.

Now here comes Stupid; are you ready?

Five thousand was paid for from a pre-tax flexible spending account for dependent care thus not reducing our taxable income by that amount… and I didn’t catch that. Guess who did?

Yep, the bill from Uncle Sam just arrived. Had I kept things clean and simple — and honest — this month’s debt snowball payment would not be paying back-taxes. Arg!

It’s not the end of the world, it’s just one month’s snowball, but I feel dirty knowing that I look either very dishonest or very dumb in someone’s eyes. I suppose the truth is I am both.

The nice thing about being an idiot? If it’s painful enough, you’ll never do it again.

the Dad

© the Dad, Climbing Out, 2009. | 10 comments

That’s not a misspelling. Remember Snigglets? Snigglet: noun: a Word of no prior origin, that you make up on the spot. I think my personal best is “Commusion: the confusion created by taking a wrong turn on your way to work. Usually after changing work locations, a long detour or change of traffic patterns.“. Today I have a new one: taxtion.

Lately I’ve whined about getting traction on our debt. I think we may have some. Could taxes = traction? Maybe this year they do and I’m getting excited about it.

We did our taxes and are getting back about $7,500! Were I farther along this financial adventure I think I would lament a zero-interest IRS savings plan like that, but this year it’s just the shot-in-the-arm we need to feel like we’re making some progress.

Looking back at the State of our union, it looks like that tax return will nearly wipe out our first three cards. Yes! Now you’re talking!

I have been aching to see quick progress on that mountain of debt. Although barely 16% of our total debt, emotionally it will be great to be done with 50% of the accounts.

The substantial tax return brings up another issue, of course; why the hell am I giving so much to the government interest-free all year? That doesn’t make sense when all our focus is on paying off debt. So an hour with HR and on my company’s benefits web site led to a real raise in take-home pay.

First I stopped my 401k contribution. That didn’t hurt at all as the company stopped matching contributions not long ago. Next my exemptions were at 0. What the heck did I do that for? The IRS calculator said they should be 18 ( I know, weird ). I settled for setting it at 3 for now. I expect these changes to equate to $300 more dollars every paycheck or $450 more every month after taxes.

Finally I came across an unexpected windfall. Inspite of opting out of the dependant care flexible spending account our payroll company was still making deductions. I really should have noticed that on my paycheck stubs, but I didn’t. They were apologetic and will be putting the $961 they have deducted so far on April’s first check!

Ah… can you hear that? It’s my sigh of relief. For the first time it feels like this thing is going to roll.

Taxtion. My snigglet of the day. I encourage you to use it in daily conversation. I feel like it has gotten us off the starting block and moving forward. It may be a small debt snowball right now ( a Smebtball? I’ll let that one go ), but by God, it’s rolling!

the Dad

© the Dad, Climbing Out, 2009. | 4 comments