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Catching Up

February 14th, 2015 at 08:35 am

I've started several 2014 wrap-up/2015 goals posts, and never get around to publishing them, because a) I start yammering on and b) it gets too depressing!

Some days I feel great about where I am -- I've paid off a lot of credit card debt and have a good start on an emergency fund -- but then I do my yearly budget projections and end up $10-15K in the hole by the end of the year. (I overestimate spending and underestimate income, but still....)

Then I did our taxes and we really need to change our withholding! We had claimed a high number of exemptions for a while, because with the rental we had a fairly decent loss to write off, but we don't get the full amount anymore and it's really affecting our bottom line. We owed around $2,800 last year; we have a small refund this year but only because we had a lot of stuff donated to charity, from his parents and my grandparents (finally cleaning out the basement, garage, and attic!). We won't have that next year, and without it we'd owe about $5,000 so it's time to make a change!

I'm also having us increase our retirement contributions; we're both putting in just the minimum to get the match right now. We aren't able to contribute directly to an IRA or Roth; a backdoor Roth won't work for S because has an existing IRA. I could do one -- I have a teeny tiny IRA and the tax on a conversion would be negligible -- but at this point, having it come directly out of my paycheck, and reducing my taxable income, is preferable. (Plus I actually think we'll be in a lower tax bracket when we retire, so tax-deferred is our better option at this point.)

Of course none of this helps our monthly bottom line any, but it's a necessary evil. We do have lots of areas where we can cut back, and I've already identified about $5,000 I won't be spending on a particular hobby this year. I also haven't included any side gigs I can pick up. Still, my focus has changed a bit for 2015, and rather than working quite so heavily on eliminating debt, I'm going to work more on not incurring additional debt.

I have a refinance to do mid-year, and potentially another one in the fourth quarter. The first will definitely ease up cash flow, and significantly lower our highest interest rate. (The second will probably end up being neutral overall.) I also have a small 0% balance transfer offer through August 2016. That combined with the refi will put my highest credit card interest rate at 3.99%, so I'm a little more comfortable about scaling back on repayments than I would be with the 24.99% I had a couple of years ago! (I will still pay some extra to the cards; paying just the minimums means I'm in debt until 2030! As of now this change will extend my payoff by one year.)

Unfortunately, we have decided that we really do have to replace the wall furnace that died on us back in November. We've been limping along with an electric space heater, but it doesn't do much on these sub-zero nights, and it's expensive to run! So that's $2,500 out of the EF -- the only good aspect being that at least I had the funds set aside!

My 2015 goal, then, will be to replace the $2,500 and get the EF back up to $5,000. Since I'm still finishing up the 52 Week Mega Challenge ($1,890) and doing the regular 52 Week Challenge ($1,378), I'll easily meet and exceed that goal. My original goal of $7,500 in the EF is a little ambitious now (given I still need to save up $3,700 for property taxes in September), but I think I'll stretch the EF goal to $6,000. That's only another $232 I need to come up with, which seems do-able.

(Actually my EF goal hasn't changed -- save up $2,500 this year -- it's just the final account balance that's changed because of the heater.)

Anyway, my other goal of paying off $17,500 in credit card debt is adjusted down to paying off $12,000. That includes a few 0% balance transfers that will come due this year. It doesn't include the one card I'll pay off with the refinance, since I'll still owe that money, just not on a credit card.

To end on a happier note, I did negotiate a 7% pay raise (which is a lot less than it sounds like!), which will help offset my increased 401(k) and withholding. S should get his standard 2% increase, which will help a bit, too.

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