Not this time!
Because I didn't work this year, we made less. Which lowered our tax bracket, which allowed us to qualify for other things we never did before, which made our tax burden much less.
So much so that our refund will be enough to pay off all our outstanding debts (other than our house, of course) with money left over for a savings account! Which lands us squarely on step three of Dave's six step program!
In case there are those of you who may have forgotten my goal: debt free in fifteen while following the Dave Ramsey budget system. The debt free part will be accomplished as soon as we get our refund checks. We will pay off all outstanding medical bills and bank the rest. Here are the six steps if you would like to play along:
1. $1000 dollar emergency fund. This is a savings account with a thousand bucks in it for emergencies only. If the car blows a tire, a window shatters, the refrigerator quits, the furnace breaks, etc. It is only used for emergencies. You throw this one together immediately by eating beans and rice, rice and beans. Selling anything and everything. Taking a second or even third job to get extra cash for this fund. This cushion will take a tremendous amount of stress off your shoulders. Just knowing you have a rainy day fund available is wonderful.
2. Debt Snowball. You are probably paying the minimum amount on everything you owe. Okay. Continue that, but any extra money you have-even if it's just 2 bucks-add to the smallest bill. Pour everything onto the smallest bill. You will soon have that one paid off. Victory!!! Savor that win! Now take the money you were putting on that bill and add it to the next (smallest) one in the bunch. Pour any extra money onto that bill payment as well. That bill will soon be paid off. A second victory!!!
Now add all that money you were paying on the second bill to the next in line, again adding any additional money you have to it, so your payments for bills 1 and 2 are now added to the payment for bill three. Bill three is soon paid off! And on and on you go until all the bills are paid off. Adding each payment of the previous bill(s) to the payment of the next. You will still be paying out the same amount of money you have always been paying out, with the addition of any extra money available you can throw in, but the money just goes to different bills once one is paid off.
The key to success here is this: When you are in a hole, stop digging.
In other words, do not add any more debt to yourself as you are paying off what you already have. (We will talk about spending in another post.)
3. Three to Six months living expenses. This is a savings account. Not a save to spend account, a savings account. Money available should you lose your job, have a medical problem which requires you to be off work, you need time off from work for a family issue, or whatever.
This is always the step we land on and have never actually moved beyond. Saving this amount of money is a huge challenge for us, but I'm angry which makes me determined to succeed this time!
4. Invest 15% of your income in ROTH IRA's and Pre-Tax retirement funds. I confess, we are investing in pre-tax retirement funds through my husbands 401K. Normally I would be screaming about never going out of order with these steps, but we are not getting any younger and since our years before retirement are dwindling we felt we just couldn't wait on this one. We've been participating for several years now. Not that there's much in there now, but-God willing-the market will rebound and perhaps we can recoup some of our losses. At the very least I hope we can have enough money in there to provide a livable base amount which we will be able to supplement with ROTH IRA's and other investments once we save the six months of living expenses...
5. College Funding for Children. Our two youngest children are currently in college, so we are already funding their college experiences.
Fortunately, our youngest received a full-ride scholarship to the university of his choice for the program of his choice! It was a gift from God, as there was no way we could have sent him there. Utterly impossible. So we just need to worry about room and board, which isn't cheap but we can make that work with careful planning. Our daughter is going on for her masters degree, and is planning on taking the accelerated program. We will see what we need to do about this one...
6. Pay off Home Early.
7. Build wealth and Give it Away! Every time I read this I wonder what that would feel like. Can you imagine the joy it would bring to be able to give money to people who are hurting? Those who are in desperate financial situations? Those with horrible situations in their lives which could be made easier with things money could buy?
I've always wanted to start an AIDS home. For those folks dieing from AIDS whose families have turned their backs on them, leaving them with no where to go, no one to love and care for them at the end.
I can do that.
Or a home for pregnant girls whose parents have tossed them out for becoming pregnant and want nothing more to do with them...
Or expand Benjamin's Hope to many more areas because the need is so great.
Or Special Olympics.
And of course my most treasured charity: Autism Speaks
With money I could give-not only my time which I already do-but also stuff to so many wonderful charities and organizations.
Just imagine...