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Archive for January, 2015

Debt reduction...reversing the trend

January 25th, 2015 at 03:48 pm

The past five years were financially a struggle, as I was either under- or un-employed, and I lost my mother and three pets during that time. I went from a position of having no debt except the mortgage to having nearly (gulp!) $30,000 of non-mortgage debt (most of it on 0% or very low interest loans, but STILL...

Finally with my new job, I can whittle away at this. Or, actually, carve this year and whittle over the next few. This year, for the last time (I also did this last year), I took the RMD (required minimum distribution) from my inherited IRA and used it to pay off some of that debt. Plus about half of my January pay is going to debt reduction. I won't be able to keep that pace up all year, but by month's end, the non-mortgage debt will be under $24K, and I aim to halve that by year end, while also contributing 10% of pay to my retirement. At year end, I'll re-consider my plan for paying off the rest of that while also increasing savings.

Meanwhile, I did re-finance my house during that time to a shorter term and lower interest, so I feel confident that I'll have the house paid off before I retire.

Two Months into my New Job

January 18th, 2015 at 09:50 pm

I thought I had updated this blog before now, but I think I wrote a long post that somehow got "eaten" before it was posted, and I didn't have the time or energy to write again at that time. This post, I have learned better and I am drafting it in Word and cut & pasting it into a blog posting.

So, I am now two months into my new job. It's gone quickly. Up until now, I have been focused on doing tax projections for people's 2014 tax returns. Before year-end, the projections were done with a mind to any last-minute year-end tax planning we could do; then the past two weeks have been focused on ensuring that clients' estimated tax payments are sufficient to meet the "safe harbors" to avoid penalities.

Now I'll be switching to focus more on estates and trusts, then back to taxes when we put out "tax packages" to clients' accountants with their investment earnings reported.

There's been (and continues to be) a steep learning curve, as my predecessor didn't document things as well as he might have, but I feel like otherwise there is good support at work and like I am fitting in as part of the team.

It's nice to be able to save again for retirement. For the past few years, I have been taking from my inherited IRA accounts (when you inherit an IRA, you have to take required minimum distributions just as the original owner would have). Ideally, one takes the RMD, pays the tax, and puts it into a Roth, losing nothing in terms of retirement savings, but for the past 2 years, I have been taking my RMD (and then some) and using it to supplement my low wage income. I've also accumulated an uncomfortable amount of non-mortgage debt, so this year, once again, I'm taking my RMD, using it to reduce a portion of the debt load, but from now on, I expect to go back to using the RMD to put into a Roth. It will take somewhere between 12 to 18 months to pay off the debt I've accumulated, depending on how much of my current income I can put towards that goal. I also have some home repairs that need doing, and I need to pay for another certification program, so I'll see just how quickly I can pay the debt down. But in general, I figure I can live frugally on 50% of my take-home, so that leaves me the other 50% for debt repayment, retirement and other savings, and extraordinary expenses. For now, I'm putting just 10% for retirement, but after the debt gets paid, I'll up that substantially. I might also look, later this year, into getting a home equity loan to pay for that new roof and some other work on the house--that has the advantage of adding to tax deductions. While I don't like debt, I'm also not averse to using it as leverage when I'm in the position to be able to pay the debt off quickly.