Monday 124: Reflections on 2016

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Monday, 20 February 2017

While our finances do not look like this – geometrically increasing – our finances do reflect this curve as far as overall net worth.  As our bills decrease, our net worth increases, even though we have taken on more debt.  This latter is frustrating, but we signed up for the program when we sent The Student off for undergraduate work.  The same when we bought the car.  The car was the result of several months of increasingly expensive car repairs on the Subaru and spending about two months looking for an affordable replacement and not finding one.  Looking back a year, I can see we could have done things differently.

So, while not completely happy with what we have done, I think it wouldn’t hurt to step back and look what we have accomplished since January 2016, which is when we started working on our debt snowball.  These are “guestimates” based on simple multiplication and a quick look at historical balances.  Some adjustments have been made for assumed interest payments, knowing what our rates are.

  • House:  $42,500
  • Car:  $3,110
  • Credit Cards:  $10,000
  • Student Loans:  $4,000

The total we paid off is $59,610.  That’s more than the average American makes in a year, based on government statistics.

Should I feel good or bad about this?  I don’t think that is important.  More important is what do we do – can we do – not should we do – and what are we going to do?

Decisions

So, in discussing various aspects, we are considering cashing out some stock to drop the snowball further.  We are already in an obnoxious income tax bracket and live in a high-tax state, but in discussing this with our accountant, he says that pulling money for the snowball will increase our taxes, but in doing so, we can up the 401K contributions to offset this, as well as increasing our withholding from the checks.  I need to do some math, but to me, that is a good solution.  We would pay off the one credit card that has a 20.49% interest rate.

We are also not using Amazon or any credit cards, unless we need to for security purposes.  Then the cash is moved immediately to the credit card.  The result is that our “Amazon” card has a positive balance (meaning it’s not maxed out by our little fingers) and when the next monthly payment comes along, it will be dropping, and our snowball will be better funded.  That is a big change.

We changed our mobile bill service plan to one that gives us what we need / want, but costs less.

We will increase our savings rate by sweeping all extra cash into our savings account at the end of the month.  This means every month, every penny will have a job, not just a roll-over into the next month.  I want more money in the bank in cash this year, not just debt reduction and increased retirement savings and matching.  I want to meet emergencies and needs more successfully this year.  We are currently working at saving $1000 / month, but also are using it to fund big purchases, taxes, and vacations.  That really is too little considering all we are using it for.  The kicker is how to balance pay-off of debt with the need for cash – that is the hard decision, and one which will most likely be tweaked as we progress through this year.

Altogether, I see a lot of positives from one year of debt reduction.  We feel more sane.  Nice!

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