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Tax Cut Expiries are not our budget's good friends

January 25th, 2013 at 09:32 am

I just saw what my husband brings home in net pay, and probably because my hormones are on high screaming alert right now, I am feeling defeated and lost.

Mind you, we are still paying for December's holiday shopping and this year's tire replacement (ouch), our insurance has been paid up until late July, our bimonthly bills have been accounted for and cheques have been mailed, we're paying one of the most expensive heating bills of the year (praise be it is under $120), and our first car payment is coming up (ouch). But it seems to me we have to move/sell our house in six months or else I get a job or we refinance again, this time for a longer term, and for me the refinance means giving up and paying more interest for longer.

An untrained mind can accomplish nothing.

I plan to track our expenses for next month, to see if I can identify where our spending problems are (I am suspecting food). Then I could list what I am doing, and ask what I could do better or differently. The biggest challenge will be to be gentle with myself. To help meet that challenge I will note, probably in pages so only the truly desirous will know, if my net worth is going up or down.

Today I paid $781.50 to the car loan. If we refinance the car loan, and I am working to get the title changed to show the credit union's position as lien holder, It means maybe fifteen fewer dollars in debt repayment per month. The mortgage principal monthly payment increases by $2.19 a month; the HELOC principal monthly payment increases by $1.30 a month if I work at it.

Should I jolly myself by noting that at least my home equity is rising, for the first time in four years? Is it folly to think that $2185 paid sales tax on the car is going to make a difference in our 1040 return? I know proper withholding and the spouse's 401(k) and Health Savings Account contributions will ensure we don't endure another horrific $2000 tax bill like last year.

Has anyone made a huge, immediate payoff on a low-interest loan and felt much better despite the resulting decrease in savings? Paying off debt at 12.99% or even 6.9% seems like a no-brainer: here our choices are a DEPRECIATING asset at 2.74% APR that takes $284.25 a month out, or a HELOC at 3.0%, or saving for moving expenses.

We do have enough equity to move. We see the effortless payment in full of our car loan and our HELOC with the post-commission, post-tax proceeds of the house sale, and at least 50% downpayment on our next home. And we do not have zero savings. If we had to pay for the car in full in February, we could. If we had to pay the balance owing on the HELOC immediately, we could. But it's one or the other, not both.

Really hoping to see at least a $50 decrease in conscious expenditures per month with regular YNAB tracking. Maybe more links to entrees made with tomato sauce (we have over a dozen cans now) and grains (bulgur, wheat berries, lentils, groats and rice dominate our pantry) would be helpful.

I am not going to London in August with my friend. It is unfair to my family to put us in further debt momentarily of something that has no benefit to them. Sacramento is still okay because its expenses will be one-tenth of what I would spend in the United Kingdom, it would be a family trip of brief duration, and there's at least the tantalizing prospect of passing the test and interview.

I used to fall for Safeway's "Gas Rewards" program but now that we fill our car up maybe once a month, the gas rewards accumulate faster than we can use them, unless we pay for 2 - 3 gallons once a week, and the gas rewards expire too.

3 Responses to “Tax Cut Expiries are not our budget's good friends”

  1. Thrifty Ray Says:

    Thanks to the tax cut expirations, my pay is $108 less per month, which is about 1/3 of the net from my raise. Two steps forward, one step back.

  2. FrugalTexan75 Says:

    I paid a large percentage of my car from savings (and robbing every other category I could safely do), and I plan on sending pretty much anything extra to it until it is paid off. Even at 1.99% interest, it is still better to get that paid off than to have the money sitting in a savings account earning .75% - not to mention the good feeling of having the title in my possession and no one else's.

  3. Jerry Says:

    I'm impressed with the good stuff you have going on (home equity increase, insurance paid ahead, etc.) -- but that is a huge bummer about the taxes. I know several people who are taking it on the chin. I think that delaying the trip to the UK only makes sense, since there is no way for that NOT to lead to a huge expense. I was there in November and could not believe the prices. Hang in there!
    Jerry

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