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Post by justwhoever on Jan 19, 2011 16:25:56 GMT -5
Hello everyone. I've never posted here(or over on msn) so I'm gonna pick some thoughts and ideas from your heads if you can spare them.
If any of you were to get a large sum of money(tax refund) how would you spend it if you couldn't save it?
Pay off bills? Pay up bills? Fun stuff?
Thanks!
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Peace77
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Post by Peace77 on Jan 19, 2011 16:49:43 GMT -5
If savings is not an option, The best thing to do is to get current on your bills (if you are behind).
If you are current on your bills, then pay off debt.
If you have no debt, then take care of whatever you postponed because you didn't have the money. Car maintenance, visit the dentist or doctor, home repair, etc.
If you have money left over, stock up. Buy non perishable food. Buy extra soap, shampoo etc. Buy some Forever stamps.
Consider giving to a charity that helps the needy.
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Tiny
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Post by Tiny on Jan 19, 2011 16:52:55 GMT -5
What's the difference between pay off bills and pay up bills? What kind of bills are they - CC/Loans/medical bills or are they things like utilities?
Another way to look at it would be to ask yourself which of your options buys you a brighter future one year from now - versus a single brighter tomorrow.
If I couldn't put some of the money into savings - 1.) If I was behind on my utility bills ( gas/water/electricity/phone/cable/whatever) I'd bring them up to date. 2.) I'd pay off any CC/Loans/Medical Bills I could. 3.) Going forward I'd then either snowball the payments from the paid off debts towards the remaining debts OR I'd put the payment amounts into savings (I'd earmark some of it for FUN STUFF!)
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Peace77
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Post by Peace77 on Jan 19, 2011 16:57:21 GMT -5
If there is some reason that you cannot put funds into savings, buy gift cards to cover future needs. For food, buy grocery store cards For gas, buy a gas card
You can pay ahead on utility bills but I would rather put the funds into my own savings than give some company an interest free loan.
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haapai
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Post by haapai on Jan 19, 2011 17:25:47 GMT -5
It helps to make a list of all the possibilities, with all the details. Then sleep on it, add more possibilities to the list, and carefully study how each one will play out.
Conventional wisdom usually argues for paying off the debt with the highest interest rate. The tighter things are, the more likely you are to deviate from that advice, and that may not be a bad thing.
About 8 years ago, I received about $900 in tax refunds while making $7.35 an hour. I used about $425 to pay off a Perkins loan (5% interest, fixed, and tax-deductible, $40 a month payment) and about $475 to pay down a signature loan at 10.9% with a payment of $101 a month.
Conventional wisdom would argue for putting everything toward the debt with the highest interest rate (the signature loan) and absolutely nothing towards the incredibly cheap, probably deferrable Perkins loan. I agonized over the choice, made elaborate spreadsheets figuring out how much more interest this move would cost me, and finally said "hang it I need some slack in my budget".
Getting rid of that one debt had a ridiculously positive effect on my financial picture. It was my only debt that had to be paid by mail. It was also the only debt for which I could not look up payment information online. It also fell at the same time as a whole lot of other bills, so I was always having to figure work my finances two checks in advance. Something about the even $40 payment messed with my ability to calculate my checking balance and I found myself adding instead of subtracting more than once. At any rate, once it was gone, the whole picture simplified tremendously.
One month later, the payment on the signature loan was not sucked out of my bank account on the due date. I called the bank and asked why this was, and then they explained that I had advanced the due date.
I might have made a different choice if I had known that paying multiples of the minimum payment would advance the next payment due on the signature loan.
Ah well, live and learn.
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dragon2008
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Post by dragon2008 on Jan 19, 2011 17:31:08 GMT -5
I may get kicked here, but I always try to give myself a little fun money when I get windfalls (tax refunds, bonuses, find money in old wallet). May not be much, but even a book is enough to make my day brighter! Buying gift cards with any extra money is a good idea - I love using my grocery cards or even a gift card for a dinner out. As long as you don't lose track of them....
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Post by haapai on Jan 19, 2011 17:35:10 GMT -5
Ooooooh, I like the gas card idea. A very good suggestion if you have a long commute.
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❤ mollymouser ❤
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Post by ❤ mollymouser ❤ on Jan 19, 2011 19:14:12 GMT -5
If I had credit cards or other debts that were incurring interest, I'd probably adjust my withhholdings to minimize future large returns in favor of having more money throughout the year to pay down credit cards, other debts accruing interest.
I think we'd use the money for some home improvement projects we've been considering: we need a new outside door from our garage to our yard, and we want to get a security screen door there, as well. And we'd like to get a dual pane window for our pantry to match the other dual pane windows in the front of the house.
Finally, we'd probably use some money for a short vacation to the coast.
* * * * *
Is this just a fun hypothetical or is there a real reason why the money can't go to savings?
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Post by montanatransplant on Jan 19, 2011 22:50:01 GMT -5
Molly, when we installed a door from the garage to the outside, they had to cut some of the concrete foundation. That adds to the project cost.
Hey your hubby is a rich LtCol on flying status. . . have fun
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Post by Agatha on Jan 20, 2011 1:44:17 GMT -5
I may get kicked here, but I always try to give myself a little fun money when I get windfalls (tax refunds, bonuses, find money in old wallet). May not be much, but even a book is enough to make my day brighter! I concur, my dear dragon. Take out twenty buy something nice then start going through your payoff options. Being frugal is a lot like dieting; if you don't let something come out once in awhile it could have a tendency to blow out! Been there, done that, bought tee-shirts.
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Post by justwhoever on Jan 20, 2011 11:41:08 GMT -5
How are people able to get behind on paying their electric/heat/phone/cable and it not get shut off? Here you pay it or it's cut off. There is no getting behind.
Thankfully we are NOT behind on any bills.
What I am worried about is, we are on a tight budget. And it's not because we are throwing extra into savings. It's just tight. But I am worried that we will be "well we've gone without any fun for so long, it won't hurt to get this." And then before you know it.....it's gone. And you might have some new clothes or movies. Maybe went out to eat a few times too many. But really nothing smart to show for it.
Our withholdings already seem small and it doesn't feel right not to pay something in. I know that mine are set to married but at single rate. And even though I know as a low income family it's not likely we'd have to owe come tax time...it still scares me that we could. Never trust the IRS. it does spell THEIRS. And I don't think we can have less taxes taken out can we? Isn't that illegal?
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haapai
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Post by haapai on Jan 20, 2011 12:30:51 GMT -5
What I am worried about is, we are on a tight budget. And it's not because we are throwing extra into savings. It's just tight. But I am worried that we will be "well we've gone without any fun for so long, it won't hurt to get this." And then before you know it.....it's gone. And you might have some new clothes or movies. Maybe went out to eat a few times too many. But really nothing smart to show for it.
That sounds extremely familiar. Our withholdings already seem small and it doesn't feel right not to pay something in. I know that mine are set to married but at single rate. And even though I know as a low income family it's not likely we'd have to owe come tax time...it still scares me that we could. Never trust the IRS. it does spell THEIRS. This also sounds familiar. When the prior year was a whacked-out nightmare that you don't ever want to repeat and it isn't over yet, it's hard to know what level of withholding is correct. The answer that I found was to study the tax code and get a little obsessive about year to date income. It helps to save pay stubs, especially if you think you might be leaving a job. Googling the relevant portions of the tax code can also be helpful. A lot of tax credits have phase-out rules that are easily explainable but you won't necessarily find those explanations on IRS sites. The more you understand your taxes, the easier it is to adjust your withholding appropriately, and you'll sleep better. And I don't think we can have less taxes taken out can we? Isn't that illegal? Your fears here are probably overblown. The IRS doesn't care how you fill out your withholding forms, only that you have enough withheld. Severe underwithholding can trigger criminal charges and penalties but you are protected by a number of safe harbor provisions. Here's one link to get you started. It's for an earlier tax year, but the rules don't change much. www.bargaineering.com/articles/irs-safe-harbor-income-tax-underpayment-rule.htmlI wouldn't worry about breaking the law or paying penalties nearly as much as I'd worry about finding myself owing the IRS an unexpected $500 next February. Even knowing as much as I did, I could not get myself to adjust my withholdings to prevent a refund. I deliberately set it at a level that would result in a small refund. I liked having extra money in February and I had a lot of reservations regarding my ability to use the extra money in my paychecks wisely. It takes a while to get the self-confidence back. Getting a couple of wins under your belt or some room for error in your budget helps.
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Peace77
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Post by Peace77 on Jan 20, 2011 13:01:15 GMT -5
No, it's not. The requirement is that you pay most of what you owe in the year you earn it. The amount can depend on what you paid last year and other factors.
If you pay less tax and get less of a refund, there is nothing wrong with that. When you pay too much tax and get a large refund, you gave the IRS a tax an interest free loan.
In other words, you gave your money to the IRS, they kept it for a year or so and then gave it back. You didn't get any interest on it.
That's no bargain. You can change your withholding to married. Then, look at the difference in your paycheck. Put that difference into your savings account.
Look for free things to do for fun. There are programs at your local library for starters.
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Post by justwhoever on Jan 20, 2011 13:15:36 GMT -5
Looking at last pay stubs I paid in $102 to federal taxes and husband $1096.
I do not understand tax brackets clearly but after standard deduction and exemptions we will be at 0. What does that mean for us?
I really wish there were things offered at our local library....but the only that is offered there are a few old books and a few minutes on their computers. We have books here at home and a computer. Small towns don't have fun free things to do. Even the high school plays and sports cost $7 or more per person. That's not cheap. When DD was playing basketball it cost $6 per game to get in. And she was in 5th grade. During the summer they have gospel sings on the courthouse lawn. That's great if that is the type of music you like. Sorry just not into that sort of thing.
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haapai
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Post by haapai on Jan 20, 2011 13:47:29 GMT -5
I take it those are the last 2010 pay stubs that you are referring to.
By the sound of it, you will not have any 2010 federal income tax liability. That means that you will receive a refund of at least what you had withheld ($102+$1096).
The odds are also extremely good that you will also receive the EITC, which is a refundable tax credit. (I'm going on what you have mentioned in other places, not by what those numbers tell me.)
But what I was referring to when I spoke of retaining pay stubs was holding onto 2011 pay stubs. Knowing how much you earned year-to-date and how much you have had withheld YTD can be very useful when your income is changing a lot. You may need the information on those stubs in order to determine whether your withholding is adequate or the size of your refund.
Once you leave an employer, or they close for the summer, getting your hands on the information on that pay stub can be surprisingly difficult. You may have to wait until the employer issues a 2011 w-2, which can make for a nerve-wracking January. (Hold onto the last pay stub in June. )
Understanding federal income tax brackets can transform your life. It's dead simple algebra but it isn't taught in school because it gets indexed each year.
Once you understand income tax brackets, then you can move onto understanding the EITC.
You've got the chops to understand this stuff. Quite a bit of it is available on the web.
Maybe some of the folks here could recommend some links?
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Post by justwhoever on Jan 20, 2011 14:35:19 GMT -5
LOL I use to work for a tax company, one of the big ones. I understand enough of the EITC to explain that it's called EARNED INCOME and NOT UNEARNED income, you wouldn't believe how many people say that. And explain that if you worked you MIGHT get it.
I also know enough about it that that will be most of our refund. I can't change much on our withholdings to make us get a smaller refund. Only find more income to lower that. And I wish we could.
Molly just seen your question. yes there is a reason we can't save money. With our income we can not pay bills plus buy food. So we are on fs. If we have over 2k in ANY savings we are then told....spend your cash and then reapply.
I know that kinda makes me sound bad probably.
The wonderful ladies who work at our local office will tell you to go buy tv's, game systems, clothes, toys, movies, new cell phones. Whatever to blow that kind of money so that you do not have to turn it in. I do not want to blow the money. I mean a new tv would look sweet in our living room but that old tv we have works fine. I figure it's got at least 3 more years.
So I want to know what is the smart way to spend money that you can't keep so that I can continue to feed my kids. If I knew there was a better paying job gonna happen this year I wouldn't even be worried. But no one can be sure of a job these days. better paying job would mean we no longer need the fs and that would be wonderful.
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Post by BeenThere...DoneThat... on Jan 20, 2011 14:48:11 GMT -5
...public library should be able to do inter-library loans on your request... this can include movies and audio books, so there is plenty of "free" entertainment to be had there, especially if you get into some friendly family competitions like "who can read X pages" from a book or "who can practice X skit" from a movie... ...when I get extra grocery $ to spend, I stock up on on-sale staples... rice, dry milk, canned goods, soaps... it's so nice to watch that stretch us between paychecks... ...once when I had extra, I "splurged" on a set of flannel sheets and it just made me feel better... one of the best $15 we've spent... ...and padding the EF is always a nice feeling, imo...
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haapai
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Post by haapai on Jan 20, 2011 14:50:18 GMT -5
Ouch! I'm glad to hear that you're tax-savvy but the thought of making over six grand disappear makes my head ache.
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Post by BeenThere...DoneThat... on Jan 20, 2011 14:51:44 GMT -5
<<< The wonderful ladies who work at our local office will tell you to go buy tv's, game systems, clothes, toys, movies, new cell phones. Whatever to blow that kind of money so that you do not have to turn it in. I do not want to blow the money. >>> ...good for you... and yes, it's a sad set of suggestions... I'm sure I'm not one of the first to suggest stocking the pantry... "beans, bullets, and band-aids" style... stock up on any non-perishable consumable your family uses... including what you are going to use soon... school supplies, etc.... I know some ladies buy the next size up in clothes if the sale is going on right now... ETA: didn't you mention elsewhere that you had some needed home projects? make a honey-do list... ;D
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Peace77
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Post by Peace77 on Jan 20, 2011 15:04:42 GMT -5
You can borrow books and things from other libraries through InterLibrary Loan. Look around the internet or bookstore to find something you would like to read and then ask the librarian to order it for you.
For gift cards, you could also get them for Target or Walmart or your favorite clothing stores so when the kids have a growth spurt, you will be able to get clothes for them.
Stocking up is a good idea, too. Look for good prices on non Food items such as shampoo, toothpaste, toilet paper, etc.
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haapai
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Post by haapai on Jan 20, 2011 15:09:14 GMT -5
Can you purchase food and let a balance build up on your EBT card?
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haapai
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Post by haapai on Jan 20, 2011 15:24:30 GMT -5
How do you heat your house? When are your vehicle insurance premiums due? How much gas fits in the vehicle(s)? Do you have any debts? Paying off some short-term ones, or ones that will advance your due date would be ideal. Heck, I might even consider paying down your mortgage. Is that allowed? It ain't terribly liquid, but there's minimal waste.
When was the last time the carpets got washed? How about haircuts for everyone? Is that a funny noise coming from the engine? Are the tires bald? Will this winter's coat last through next winter?
How fast do you need to get this money out of the bank? Do these stupid regs virtually force you to go to a tax-prep outfit and take out a refund anticipation loan?
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TrixAre4Kids
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Post by TrixAre4Kids on Jan 20, 2011 15:31:44 GMT -5
Stash the money under your mattress? Bury it in backyard? Cash savings/EF.
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Post by BeenThere...DoneThat... on Jan 20, 2011 15:36:11 GMT -5
<<< Cash savings/EF. >>>
...I read somewhere that somebody had a picture frame on the wall, with 100s stashed behind it, with the message, "in case of emergency, break glass" ;D
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Post by BeenThere...DoneThat... on Jan 20, 2011 15:37:57 GMT -5
<<< Heck, I might even consider paying down your mortgage. >>> ...she might get a better return on her investment with the pantry... have you seen the price of green beans lately?
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haapai
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Post by haapai on Jan 20, 2011 15:43:15 GMT -5
How about medical or dental care for you and your husband, assuming that only the kids are covered now?
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haapai
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Post by haapai on Jan 20, 2011 15:45:13 GMT -5
Underwear! How about lots and lots of new underwear. Socks too.
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doxieluvr
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Post by doxieluvr on Jan 20, 2011 15:46:43 GMT -5
Stash the money under your mattress? Bury it in backyard? Cash savings/EF. I would pay down any debt, put $200 in your savings account, and then put the remainder in a safe deposit box in a bank. It is there for emergencys but not really "savings" on paper.
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Post by Deleted on Jan 20, 2011 15:55:35 GMT -5
There are some great answers on here. And I'm with the stash some cash crew. I would be upset if you had $10,000 or more in the bank and were trying to collect welfare. But a few hundred is sensible.
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Post by justwhoever on Jan 20, 2011 16:06:31 GMT -5
If we are going to have this money over 30 days we are suppose to report it. It's a catch 22 really. I want to be honest. They KNOW people are going to get money during this time of year. But they don't get all in arms if you don't report it. However they can ask for bank statements any time they feel like it.
Having a yr worth of everyday items like tp, laundry soap, dish soap, hba would be a very nice thing. I might just throw a lot money into that stuff.
Does anyone know if you can purchase your plates for vehicle early? Our tags are good til August...so can I go ahead and buy them now but not change them til August and they last til next August? If not then I will just hide that money. It's not much money but I remember it catching me a couple weeks early last yr. I thought(assumed) that I had til the last day of the month to get them....no...they were due in the middle. Don't wanna go there again. I will go back to work in August just won't have a check til end.
We heat with natural gas. insurance on vehicle is paid monthly...have thought about paying that in lump sum with refund too. Thanks for reminding me of that one! Yes we have debt. Paying that off with refund, but there will be a lot left. Paying van off a yr early(is that smart?) And paying off last cc...1k. By my math that will total around 4k for both those and be freeing up $300 a month for the yr!!! And yes with van payment gone....we will lose some(I've heard half) of our fs because then if we wanted to sell it we could so they consider that to be cash. lol
Hair cuts...the lady that does kids and husband's hair costs $9/cut. I don't get into that type of thing. My hair does NOT need "done" I'm a cook and wear hair net at work and when I am home I'm just mommy! Long hair is ok for the "job" lol Kids grow so yes they will need new ones probably next year. In laws just got hubby a nice cost for Christmas...mine is good for many more years. I hope I am not growing at least lol.
Carpets always need cleaned. In laws have a nice fancy machine to take care of that. No cost. So far the van sounds great! Cash hidden in the house is exactly what I was thinking just scared that if things get tight or we see something we think we need....I'm afraid we aren't strong enough yet to say no. Work in progress!
So with the idea of getting a stockpile of tp and laundry soap. Is it smart to go to like a Sam's for that stuff. I know that in laws have membership and DH has a card thingy but is it a good idea? We have walmart here, are they that different in prices?
I guess I should go on over to irs site and start our taxes to see how much we are getting. Only have last pay stubs though....should be able to figure it out.
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