Projected Tax Refund

Well… it looks like we are going to get a tax refund. Quite unexpectedly, I might add.

We have enjoyed getting more money in our paychecks every two weeks and have used that money pretty diligently. With each paycheck we were able to increase our debt payments, but because of that, we weren’t expecting a tax refund this year. (*Aside from the 30% federal rebate we were going to get on our solar, which, as part of our contract, will be paid directly to the solar company.)

After our initial run through of our taxes, it looks like we will be getting nearly $4000 back all told between federal and state. That is on top of the $10,100 that we are getting as a rebate on the solar. I’m still shocked at the projected amount of our refund. Although it’s slightly less than last year’s refund, last year there weren’t tax cuts that put an extra $2500 in our pockets over the course of the year. Somehow, I feel like we won the tax lottery! We got more money in our paychecks each month and we are getting a pretty sizable refund!

That is so much more than I was expecting. I was expecting somewhere in the $1000 range, maybe! Now, having said that, we haven’t actually filed our taxes yet as The Husband wants to run through them again to make sure that all the numbers were inputted correctly and that there are no errors. I will do an update when everything is actually filed and on the up and up.

Now for the plan we have for our tax refund. Don’t judge me, but we aren’t planning on sending any of it towards our debt. First of all, yes, I realize that would be the smartest thing for us to do with our money. Secondly, I’m okay with not doing the smartest thing. And lastly, we do have a plan and are not just going to fritter it all away!

We have a lot of expenses coming up in the next few months. All of these are “extras” and things we don’t need, (but are going to do anyway). And the entirety of our refund, and then some, will go towards paying for these things. The Girl is going to Japan in June and we will need to pay for airfare, some new clothes, and gifts for her to take over with her. Our season tickets to the theater will come up for renewal in June-ish and we will use our refund to pay for that. Lastly, we will use the remainder of our tax refund to take a vacation over the summer. (We don’t know where we are going or what we are doing, but our tax refund is how we are going to pay for it and we do know we are going somewhere.)

I know none of these are necessary expenses. I know that almost $4000 could go a long way towards getting us out of credit card debt. But I also know, and have said over and over again, that although getting out of debt is a huge priority for us, it’s not the only priority. We still want to live our life and give our kids experiences while we dig ourselves out of the mess we made. That may not be your debt philosophy, but it is ours.

Once we actually receive our tax refund, it will be shuffled straight into savings and then used as it’s needed. The Girl’s airline ticket will need to be paid in the next four weeks or so. As I said earlier we will renew our theater tickets around June and then we will take a family vacation in July. This will completely tap out our refund but to get to do all these things will be money well spent! During this time, we will also continue to contribute to our savings account at our usual rate.

Taxes, Tax Cuts, and Tax Refunds

I will warn you right now, this is likely to be a rant; an up-on-my-soapbox-quit-your-stupid-whining kind of rant.

I also want to add a caveat: we have not yet done our taxes, so my rant has nothing to do with my refund OR lack thereof!

At the beginning of 2018, most people were so happy with the extra money they were receiving every paycheck because of President Trump’s tax breaks, myself included. But fast forward 12 months, to 2019, as people start filing their taxes and they are wondering why their refund is so much smaller than last year, or why they aren’t getting a refund, or why they owe a little bit. Figure it out, people. You can’t have it both ways! You don’t get more money in your paycheck every month AND a big refund at the end of the year! It doesn’t work that way.

I saw something on one of the major TV networks and I wish I remember exactly where I saw it because the news anchor broke it down like this:

She said, people that usually get a $1000 refund are mad because now they are not getting anything! But that they earned $90+ more every paycheck (after the tax cuts) which amounts to $2400 over the course of the year. Even subtracting their “usual” refund of $1000, they are still coming out on top with $1400 more dollars then they had gotten the year prior.

You can’t have tax cuts and tax breaks and a huge refund. The math doesn’t work that way.

Let me be the first to say I am no financial analyst, I am not a CPA, and I don’t know tax law. But I do understand logic, reasoning, and basic math. +$1400 overall still means more money in my pocket and the tax cuts we were promised.

I truly don’t understand how people expected bigger paychecks and bigger refunds.

I did not hear all these people complaining in March, April, or May when they were taking home bigger paychecks. They are only whining now that they aren’t getting a “big” refund. Really, what did they expect?

Last year, we received the largest refund we have ever received. We were shocked. We obviously don’t expect the same this year. In fact, as nice as a refund is, we hope it’s not too big. We hope we didn’t give our money to the government and waste time being able to build interest on it.

Refunds are nice, yes. But they are also not guaranteed and anybody who planned on getting a certain amount from the government in the form of a refund is crazy. People need to be realistic and understand that they did get the refund they were promised. They just got it in the form of small increments, every paycheck, over the course of the year. What they did with that money is their problem, not anybody else’s. If they frittered it away, that’s on them. If they weren’t responsible with the extra money they got in their paycheck every month due to the tax cuts, then they have nobody to blame but themselves!

I can tell you exactly where all out extra money went: it went to paying down debt. It wasn’t much, but every little bit helps. Whatever our paychecks increased by, so did our debt payments. If you did something else with your money, or don’t even know where your money went, why is that the IRS’ fault?

Sorry, rant over. I think.

But seriously, before you whine and complain, do the math. How much more was your paycheck every week? How much do you usually receive in a refund? Now, do the math and figure out where you really ended up? Did you come out on top? Like I said, we haven’t completed our taxes yet, but I think I will.

Goal Check-In

Since we are 8 weeks into 2019, I want to check-in on my financial goals and see if we are making any progress. My 2019 goals are pretty basic and all include improving our financial situation.

I came up with 6 financial goals I wanted to meet in 2019. Some are repeats, some are new, but I feel they are all realistic.

2019 Goals

•  Decrease debt/no new debt
• Pay kids back (including interest)
• Pay off car by 12/31/2019 (about 2-3 months early)
• Credit card debt under $10000
• Save/budget for Christmas
• Stick to cash only budget

Goal 1: Decrease debt/no new debt PASS

So far, so good. We haven’t added any new debt and from our last 2018 debt update to now, we have decreased our total debt by $1917.07 and I feel pretty good about that! If every month were as good as the last two, we would just about be out of debt by December of 2019!

Goal 2: Pay kids back (including interest) PASS

We still owe them $200, but we continue to steadily pay them back $50 per month and are on track to have them paid in full, including interest, by June.

Goal 3: Pay off car by 12/31/2019 NOT ON TRACK

We are not on track to be successful with this goal, and I think that’s okay. We pay interest on our credit cards so we send any extra money towards that debt and are not focusing on paying off our car early, however, I still like the idea of having this paid off by December, so we will see how this goal progresses as the year continues.

Goal 4: Credit card debt under $10000 ON TRACK

We are on track with this goal. Since our last 2018 update to now, we have decreased our credit card debt by $1000 which puts us right on track to bring this under $10000 by the end of the year. Ideally we would be well below $10000 in credit card debt by the end of the year, but being realistic means I need to account for our actual spending.

Goal 5: Save/budget for Christmas PASS

For the first time, in literally ever, we are planning for Christmas. We are budgeting $200 per month to pay for Christmas for next year and currently have $400* in an envelope “waiting to be spent”! I don’t know if $2400 will be enough to pay for Christmas, but I know I will have more next year than I had this year or any years past! (*Full disclosure, we don’t actually have $400. We have added $400 but have already spent some of the money for Christmas next year and, as such, don’t have the full $400 in the envelope.)

I also have a new envelope this year “food”, that I put excess food money in from our bi-weekly budget. This will help when we have particularly expensive grocery shopping trips and as we get closer to the holiday season and have to pay for our Christmas party.

Goal 6: Stick to a cash only budget NOT ON TRACK

Although I am not “passing” this goal, I also feel like I am not completely failing at it either. I have used my credit card a few times in the last 7 weeks. Overall, I am using cash and funding my budget envelopes, but I have had a couple of slip-ups. Several times I have opted to use my debit card (from one of two different banks) and then had to work out how to pay for it.

Overall, I would give myself a solid B for my financial goals for 2019. I’m not unhappy with where I’m at and feel like I am making strong strides towards meeting our goals for 2019! Throughout the year I hope to periodically check-in with them and see if I’m on track.

Debt Update February

Our last debt update wasn’t as good as I’d hoped, but we did make continued progress on our debt and our total debt did decrease. Last month we paid off over $400 in debt and only about 1.8% of our total debt. It wasn’t the best month for debt payoff but we did keep our debt going in the right direction. This month is much better and the reasons are twofold: we spent less money on our credit card and The Husband had a bunch of overtime that we were able to send (mostly) towards debt.

The debt we owe our children has continued to (ever so slowly) decrease. We borrowed almost $1500 from each child and have paid back $1300 to each of them, which means we are almost there! I’m so happy that I can see the light at the end of that tunnel! Although once we have fully paid them back, we will continue to deposit $50 into their bank accounts, I will be so happy when I can no longer consider them a debt! Our car loan has continued to decrease as well. We have a 0% loan so it’s nice to see the payment actually affect the bottom line; to that end, I don’t really focus on paying extra towards our car payment because it’s at 0% interest. I know that goes against what Dave Ramsey teaches, but I can’t see paying more interest on my credit card balance just to get an interest free loan paid off quicker.

Although we are not paying off our debt as fast as I would like, I am happy to say that for the sixth month in a row, our overall debt decreased! (I am so happy to get to be writing that instead of having to say that our debt went up!) We are not making giant leaps and bounds in our debt repayment, but slow and steady wins the race.  In our last debt update, I explained how we had to borrow $1100 from our savings account to send towards our debt to make sure our debt didn’t increase, but due to The Husband’s overtime, we have been able to pay it all back and continue to make progress on our debt!

Here are our current debt totals:

            $17,931.62       Credit Card at 16.24% interest

            $200                 The Girl

            $200                 The Boy

            $4435.00           Car Loan at 0% interest

          

Our total debt stands at: $22,766.62. YIKES! I can hardly wrap my head around that number. I absolutely HATED seeing a 2 as the first number on our credit card and I hate seeing a 2 as the first number of our total consumer debt! I’m so happy that our credit card debt is back under $20,000 and at least our credit card debt only has a 1 in the front and I can’t wait until I can say the same thing for my total debt!!!

Plus side: our debt decreased! We paid off almost $1500 of debt in actual dollars, which amounted to about 6.1% of our total debt. We finally broke the <$18,000 threshold, which seemed to take forever!  Mostly unexpectedly (and excitedly) skipping the $23Ks altogether and falling into the 22K-something range! I mean, I knew it was possible, but I didn’t really think it was going to happen! We continue to make progress on both our car loan and the loan to The Kids and the fact that we haven’t borrowed any more money from The Kids is a plus. All the hours of overtime really contributed to debt payoff and to paying back our savings account. Overall, a good month!

Down side: all The Husband’s overtime couldn’t go towards debt as we had to pay back our savings account and cover the extra for his tires that we didn’t have in our car repair envelope. L Of course I also hate that several hundreds of dollars went towards interest on our credit instead of towards the principal.

Looking forward to: getting our credit card debt below $17000. Making continued progress on our car loan and decreasing our overall debt from 22K-something to 21K-something. I’m also looking forward to fully funding our envelopes and continuing our use of a cash only mainly budget! I see a tiny glimmer of hope of reaching a total “debt worth” of less than $20,000. I know I’m still a few months away, but I can see us creeping up on it.

I posted my 2019 financial goals. They are all doable if I work at them. And if I am successful with each one, I will definitely improve my financial situation by the end of the year. Getting out of debt is such a gigantic goal of mine! Debt affects almost all of my decisions: food, vacation, transportation… it’s crazy how much our past mistakes are affecting our future choices.

Clearly, I’m not in an ideal situation. But if I have to get out of debt one baby step at a time, I can do that.

WOW! Another long post!  If you stayed around until the end, thank you! If you got bored and moved on, I totally understand.

New Worth vs. Debt Worth

I was writing a blog post the other day and as I was writing about my debt, the idea of a “debt worth” came to me. Now I imagine somewhere in the blogoshere and the internet somebody has coined and copyrighted that phrase, but it was the first time it occurred to me. And it got me thinking, what is my net worth compared to my debt worth.

Let’s start with a simple definition.

To me, a net worth is everything you have, all your assets: house, car, bank accounts, jewelry, cash on hand, etc.

Debt worth is everything you owe, and some of those things could be repeats: house, car, credit card debt, solar loans, 401K loans, personal loans, etc., any money that you owe anybody else.

Sometimes in our society, I think people confuse net worth and debt worth with their personal worth. People who have a huge net worth are not better people than people who have a lot of debt. Financial wealth does not equate to “good people”.

Lately, I have been comparing my worth, net worth and my debt worth.

Worth:

4 cars                                     $20,000

1 house                                  $591,000

1 401K                                   $200,000             

1 403B                                   $50,000

Bank accounts                       $12,000

                                                ________

                                                $873,000

On the surface, it looks like we have a very healthy financial worth, but I only showed you one side of the picture. This only takes into account our assets, and assets are only half of what determines a net worth.

Now let’s take a look at the other side and see a more accurate picture.

Debt worth:

1 car loan                             $4700

1 house loan                         $455,000

1 401K loan                         $9000

1 Solar loan                          $27,000

Credit Card debt                   $17,600

                                                ________

                                             $513,500

We have a lot of liabilities so our “worth” isn’t nearly as good as it looks.

Taking away our liabilities, or our debt worth, brings our total net worth down to around $350,000.

Our debt worth is still a bigger story than numbers. Debt, and finances in general, bring so much emotion to the table that it becomes difficult to determine our true “debt worth”.

Debt makes me feel inadequate, ashamed, irresponsible. These feelings factor into my debt worth just as much as the actual numbers do.

Having debt doesn’t make you a bad person, but it often makes you feel like one.

Taking control of our finances and making progress towards our debt makes me feel like I’m getting it right. Making a plan for my money, and sticking to it, makes me feel like I am on the right track and makes the weight of my debt worth more manageable.

I am one of the lucky ones, even taking into account the huge amount of debt that we have, we have a positive net worth, that’s mostly in part to our retirement accounts. Our retirement accounts are nowhere near where we wish they were. In fact, we changed our contributions to help us get out of debt. I can’t wait until we are credit card debt free and can max out our contributions to our 401K again. Then we will really see our net worth grow!

Remember, you are not your debt, even if feels that way sometimes. Your debt worth does not determine your worth as a person, child, parent, friend. You are more than your debt.

One Step Forward, Two Steps Back

I am sick of the constant “one step forward, two steps back” that I feel our financial journey has become.

If it’s not one thing, it’s always something else. Just this past Christmas season, I was paid back some money I was owed and instead of being able to put the money back where it belonged, I had to use it for this or that. For example, we took a long weekend trip to visit family in Nevada and only spent money on gas: all our meals were cooked at home; but on our next-to-last day, our neighbor called to tell us that the fire alarms were going off in our house. Once we were home, we had to replace all the fire alarms in our house, to the tune of $125. I do think that was money well spent, I just hate that it happened when it did. I hate feeling like we can’t get ahead.

There is always a silver lining to the story above: we did have the money to buy new smoke alarms and we didn’t have to charge them. But, the money, which was earmarked for something else, didn’t get to go where we wanted it to.

We also started building up our savings account again, but we overspent on Christmas and have to transfer some money out of savings to pay our credit card so that we don’t increase our debt. And it is worth it to not increase our debt. In fact, out debt repayment was very minimal this month because of Christmas. Next year will be different because we are already starting our “Christmas fund” for next year.

Another example of one step forward, two steps back: The Husband’s car needs new tires and it will cost about $400. We don’t have enough money in our car repair envelope yet so we are going to charge the difference. The Husband had overtime on his last paycheck so the extra money more than covers the extra for the tires, but I’m sad we couldn’t send all the extra money towards debt. Again, I’m happy that we had a “plan” to pay the difference since we didn’t have enough money on hand, but I just wish Murphy would stop popping up all the time.

I feel like every time we start to make real progress on our debt, Murphy is right there to get his share. If it’s not one thing it’s another: kids sports or activities, cars, washing machines, etc. It’s always something. But I’m not going to let him get me down. I’m going to keep making progress on our debt and meet my financial goals!

Sorry this is just a whiny post but I’m so sick of the debt cycle and we are struggling so hard to break it. Now that I wrote it down, I got it out of my system!

Continued Progress

We continue to make small progress on our debt. The Husband had several hours of overtime on his last check, and will have as many, if not more, on his next check, due to a big project coming up at work, so we were able to send a little extra money towards debt.

We took some of his overtime and used it to replace some of the savings we had to use last month for our credit card debt. We didn’t get it all paid back, but we were able to make a good dent. With his next paycheck, which also has a lot of overtime, we are paying back another $300 towards our savings and then will have paid back everything we “borrowed” from savings last month to make sure our credit card balance didn’t increase. We will still be under where I feel comfortable for savings, but will continue to add money to our savings while paying off debt. We will get there. I like to keep $10,000 in our savings account as real emergencies happen. Being that we have kids, own two cars, and a house, we know emergencies will pop up and we want to be able to pay for them "stress free".

Some of his overtime this month is eliminating a shortfall we had for new tires for The Husband’s car. We only have about $300 in our Car Repair envelope and the total cost for his new tires will be $390. I’m so happy he has the overtime to cover the difference so that we can actually pay for the tires right away.

We are also paying our normal amounts towards our debt and the rest of the overtime money is going towards debt, too.

This should be a good month for debt payoff and I’m excited to see how the numbers fall out.

I joined another blogs, Six Figures Under, debt payoff challenge so I’m keeping better track of my records than I ever have.  Each month we will report our total debt payoff, total investments, and total saved towards our financial goals. I wasn’t too happy with my numbers last month but I think my next report will be way better!