Archive for the ‘Personal Finance’ Category

Our taxes are almost done and I have kind of a crazy admission that comes with them. Our income will be higher than my original estimate of $24,000 because of our tax return. I estimated our tax return at $6,000 for that, but we’re expecting closer to $8,400.

My husband is the officer for a (very) small corporation , and the way that corporate taxes work is that if the company gets a refund it flows through to the officers. Because the company is getting a refund, we are getting more back than I anticipated. This is the first year we have had a refund from the business, as it has had carry over losses for the past few years from its start up.

Even with the flow-through business tax refund of about $3,000, we will qualify for the Earned Income Tax Credit of about $3,400, the Child Tax Credit of $2,000, bringing our annual income up to $26,400, not including the money I’m making, tracked in the Goals and Progress page.

My case worker told me that tax refunds don’t count against us for low-income health insurance if we don’t save them. They can’t be in the bank longer than a couple of months. Doesn’t that seem kind of backwards? Like people with low incomes should be encouraged to save, and perhaps benefits are scaled back rather than removed outright? Maybe that’s just me.

Anyway, with the $8,400 we’re expecting around April, I am planning to:

– pay off the remaining car loan – $3,800
– pre-pay both car and renter’s insurance for the year – $900
– renew my driver’s license – $31
– pre-pay life insurance for me and Mr. Penny for the year- $480
– put $1,000 in the emergency account

We will then be debt free and have no recurring monthly expenses besides rent, reducing our regular monthly output by $280 a month. (Our utilities are paid by the company and a portion of our rent check.)

That leaves about $2,189 of the refund for us to use responsibly. I would really appreciate your comments and suggestions of ways to use the money to further our goals, since I can’t leave it all in the bank and still qualify for low-income health care. You can see our budget here to get ideas of what we’re not buying right now. We receive food stamps and have a small chest freezer, so it is not necessary to stock up on food.

– buy gift certificates for Costco, the cheapest place in the area to buy gas
– buy a replacement key and key fob for the car for $150 (we just have the one that came with our car because $150 is outrageous for a key!)
– stock up on household goods like toilet paper, dish soap, etc.
– get a membership to the YMCA for gym access, kids’ swimming lessons, and family activities (they offer a low-income scholarship, but I’d still need to pay an out of pocket fee that isn’t in the budget right now) – about $360 for a year
– replace our mattress, which is 10 years old and quite worn out – $650?
– put together a 72-hour emergency kit (We live in Northern California, and the earthquakes in Haiti and Chile have me feeling like we’re not quite well enough prepared!)
– spend it all on lipstick, movies, books, expensive restaurants, and pretty fabric for sewing class (just checking if you’re paying attention, haha!)

Edited to additions  from the comments:
– fire-proof box
– family activity, such as a day at an amusement park or movies
– give some to charity
– museum membership
– save for Christmas and gifts

What do you think we should do with the unexpected extra cash?

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It sounds crazy, but going back to work outside the home would cost my family money. I’ve done the math and it just doesn’t work; staying home is simply more cost effective.

My former job paid an hourly rate of $14/hr., double the minimum wage at the time, and was a standard 8am – 5pm with a one hour lunch break. If I were to go back at that same rate full time, I would make about $29,000 a year, which would certainly help out our financial situation, right? Not so much.

Adding $29,000 to our current income would bump our tax bracket up from 15% to 25%. Our current Federal tax on $24,000 a year is $2,765. Our Federal tax bill would be $7,115 if we added in my potential income. (I used the IRS tax calculator to figure this out.) Right off the bat, my income would go down $4,350 by the difference in Federal taxes alone, bumping it  down from $29,000 to $24,650, even without state taxes.

Still, $24,650 is nothing to sneeze at! But we haven’t factored in childcare, which is ridiculously expensive in our neck of the woods. Full time childcare for my two children would be (are you sitting down?) at least $2,000 a month. I’m not exaggerating this for effect; I called 5 day care centers and 4 in-home daycare providers to ask the current rate for full time care. I would make too much for subsidized childcare. So my $24,650 would be down to a measly $650 a year.

So I’d be bringing in a whopping $650 a year, just over $50 a month, without taking into account the cost of work clothes (since my shlubby mom gear won’t cut it), transportation, hidden work expenses like contributing to birthday gifts and baby showers for co-workers, more expensive convenience foods because I wouldn’t have enough hours to cook from scratch, and potentially the cost of unpaid time off when the kids or I got sick. And that is if I could find a job paying $14 an hour; with so many people looking for work, with more experience and education, who have not been out of the work force for 5 years, I doubt I’d be able to command my old wage.

While the economics are a primary factor in our decision for me to stay home, we also value this special time in our children’s lives and I appreciate the opportunity to spend it with them.  Having the time to share our values and shape them into the people they will become is priceless to our family. I’ll return to work when they’re old enough to go to school, but this time together is so special and I’m willing to make sacrifices to have it.

Once the kids are in school full time and the cost of daycare doesn’t suck out the vast majority of my income, I intend to go back to work. In the meantime, I’m going back to college in the fall to complete my Bachelor’s degree so that I can return with a higher earning potential and I’m enjoying the little years of my kids’ lives.

Is staying home is cost effective in your family? Plug your numbers into this calculator to find out.

This post is linked to Frugal Friday at Life As Mom.

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OVER $300!! I am astounded.

I have spent only $7.31 on unplanned expenses and have avoided shopping altogether except for a planned grocery trip for dairy/produce, so my budgeted expenses for the month are lower than expected so far. I’ve also had 4 No Spend days. My goal of 7 No Spend days a month may be too few!

I’m spending the day in Financial Literacy Training for the IDA and will report back with any new savings revelations

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