http://www.destroydebt.com/blogs/jeremy.html Jeremy's Debt Blog www.destroydebt.com Mon, 28 Apr 2008 08:55:39 GMT webmaster@destroydebt.com webmaster@destroydebt.com http://www.destroydebt.com/blogs/jeremy/184-10-ways-to-more-than-double-your-tax-rebate-check.html http://www.destroydebt.com/blogs/jeremy/184-10-ways-to-more-than-double-your-tax-rebate-check.html Mon, 28 Apr 2008 08:55:39 GMT The government announced they will start sending out tax rebate checks this week to help stimulate the economy.  Some people may use this money to make the down payment on a new car, or buy a new tv, while others may use it just to help ease the burdens of every day expenses.  I’d like to ...
1. Pay off credit card debt - If you currently have credit card debt, paying it off with your tax rebate check is probably the wisest thing you can do.  Odds are you're paying 12-24% interest on that money, and paying it off or paying off a good chunk of it can help you free up even more money to pay off your other debts.  It can have an incredible snowball effect.  To see how large of an affect it can have, check out our Financial Planner.

2. Pay down mortgage - If your less than half way through paying off a 30 year mortgage, using your stimulus check to make an extra payment can have drastic results.  For example, making an extra $1,200 payment towards a $100,000 that was just opened will allow you to pay off your home 14 months early and save you $6,470.  That's like multipying your rebate by more than 5.

3. Contribute to your 401k - According to the Motley Fool, a well diversified 401k investment in US stocks has historically yielded 10.7% per year on average.  Using this average, by investing an extra $1,200 to your 401k and allowing it to sit for 20 years you'd end up with $27,726.72.  If your employer matches your 401k contributions, you can double that to $55,453.44 - over 46x the amount of your rebate check.

4. Save for college - A college savings plan has the same compounding interest effect as contributing to a 401k, but in many states it has the added benefit that the money you save in a 529 plan is state tax free, not just deferred like with a 401k.

5. Make a down payment on a house - In most areas you can buy a house for about the same monthly payment as paying rent.  If lack of a down payment is all that's stopping you, use this rebate check to finally make that move.  There are also government programs in place to help first time home owners qualify for a loan.  Housing prices are at record lows, that rent check might as well be going towards making an investment in your future.

6. Keep an emergency fund – Open an (deleted) and hang onto that cash for an emergency, or just keep it to help pay for Christmas presents.  ING direct is currently offering 3.4% on electronic (deleted).  If nothing else you'll have the cash on hand come Christmas or when some unexpected expense comes up and not have to charge it on your credit card.

7. Make home improvements - Making home improvements is usually a good investment anyways, but when those improvements go towards improving the energy effeciency of your home, you also benefit from lower energy bills.  It may be time to replace your air conditioner or windows.  Or maybe just do some basic improvements to remove drafts and improve insulation.

8. Repair your car – If your car is in need of repair, this may be the time to do it.  Taking care of repairs early can help prevent larger problems from forming.  It could also save you the cost of towing from breaking down in the future or improve your gas mileage.

9. Refinance your mortgage – What’s your mortgage rate?  If it’s higher than 6% you may want to look into refinancing.  Refinancing to a lower rate can save you a significant amount over the life of the loan.  Use your rebate to pay the refinancing fees or to buy some extra points.

10. Invest in your career – Do you need a degree or certification to advance in your career?  Use this extra cash to pay for some night classes at the local community college, or use it to buy some books and pay for your certification test.  Go after that new job you love and this tax rebate may continue to pay you for years to come.]]> http://www.destroydebt.com/blogs/jeremy/114-your-share-of-the-national-debt-is-not-120000.html http://www.destroydebt.com/blogs/jeremy/114-your-share-of-the-national-debt-is-not-120000.html Tue, 15 Jan 2008 07:46:40 GMT I've seen countless articles talking about the national debt and what "my share" of it is. The story usually goes something like: The US National debt has reached a record new high of $9,000,000,000,000.00. (It would be too easy to just say $9 trillion, you have to make the reader coun...
The US National debt has reached a record new high of $9,000,000,000,000.00. (It would be too easy to just say $9 trillion, you have to make the reader count the zeros so it looks bigger). There are about 300 million US citizens, meaning every man woman and child owes $30,000.

To which the reader is suppose to think. "I have a family of 4, and last I checked my kids weren't paying taxes. I guess that means I owe $120,000! Oh no! Uncle Sam is going to be sending his henchmen to my door to collect any minute now!"

Now, I'm not trying to make light of the National Debt. It is a big issue and something that needs to be addressed. But this business of every news site calculating out "your share" needs to stop.

The numbers are accurate, and with all things being equal every person's share would be $30,000, but we all know all things are never equal. Fortunately, in this case, it probably works to your advantage. I'm sure you've heard the other comment sites like to quote "The richest 2% own half the world's wealth". What they don't mention is they also pay pay the lion's share of taxes and bear the a much bigger share of the national debt.

The annual "on-budget" income for the federal government is about $1.8 trillion. On-budget meaning it excludes taxes for items like Social Security and Medicare which doesn't go into the primary budget and is also taxed separately. This means to pay off the debt, the US government would have to dedicate 100% of the budget to it for exactly 5 years. That's never going to happen of course, but it does make it very easy to calculate what "your share" is.

If it would take 100% of the budget for 5 years to pay off the debt, "your share" is 100% of what you pay in federal taxes for 5 years. Still a huge number, but for the average, middle class family of four making around $60,000 a year, it's no where near $120,000.

Here's a chart to give you an idea of what "your share" is based on your income. This is based on taxable income assuming no deductions, which is never the case, even if you're filing 1040EZ. In most cases your taxable income after deductions is going to be somewhere between 50-75% of your actual income.

Taxable Income	Annual Fed Taxes	"Your Share"
$10,000.00	$1,000.00	$5,000.00
$20,000.00	$2,217.50	$11,087.50
$30,000.00	$3,717.50	$18,587.50
$40,000.00	$5,217.50	$26,087.50
$50,000.00	$6,717.50	$33,587.50
$60,000.00	$8,217.50	$41,087.50
$70,000.00	$10,347.50	$51,737.50
$80,000.00	$12,847.50	$64,237.50
$90,000.00	$15,347.50	$76,737.50
$100,000.00	$17,847.50	$89,237.50

So for the average middle class family of four, making around $60,000 a year, your taxable income is most likely closer to $40,000 making "your share" of the national debt $26,000 NOT $120,000. That is $6,500 for "every man, woman and child" in your family instead of $30,000.

I'm sure you have a warm fuzzy feeling now, knowing you have an extra $26,000 in debt, but hey, at least it beats the $120,000 those other sites are telling you, you owe. That's what we're here for, to settle all your debt for "pennies on the dollar". ;-)

One fact I was looking for but couldn't find is how much the U.S. has is accounts receivable, lent out to other countries. I know we do lend money to other countries because I keep hearing about us forgiving that debt whenever something happens, but those numbers are much harder to come by. If anyone knows where to find them, I'd really appreciate it if you could post a comment.]]> http://www.destroydebt.com/blogs/jeremy/37-how-many-dollars-does-it-take-to-change-a-light-bulb.html http://www.destroydebt.com/blogs/jeremy/37-how-many-dollars-does-it-take-to-change-a-light-bulb.html Thu, 29 Nov 2007 01:19:43 GMT Like most people I've heard repeatedly how switching my lights to compact florescent bulbs can save you money and helps save the environment and I actually have a couple.  I've always really wondered though, is it REALLY worth it?  Am I going to save a significant amount, or even enoug...
I have an average size house (1300 sqft) and was somewhat shocked when I counted up all the light bulbs in the house and it came to 24!  The house is occupied by someone most of the day so I'm estimating each bulb spends an average of 6 hours each day turned on.

Incandescent Lights 

First let’s calculate out the cost of operating my lights currently.  One of the key selling points with the florescent bulbs is that they last for 7 years, so I'm going to calculate all the costs on a seven year scale.

Operating each bulb for 6 hours a day, 365 days a year is 2,190 hours a year per bulb.  The average bulb lasts for 1,000 hours so it will have to be replaced 2.2 times a year.  You can buy a 4 pack of bulbs for $2.99 (about $0.75 per bulb).  This makes the total cost of replacing each light bulb $1.65 per year. 

These are all 60 watt bulbs, and where I live electricity runs for $0.08 per kilo-watt hour.  60 watts at 2,190 hours a year is 131.4 kilowatt hours.  At $0.08 per kilowatt hour that makes the total annual cost of electricity $10.51 per bulb.

So $1.65 in bulbs plus $10.51 for electricity is $12.16 per bulb, per year.  Multiply that out times 24 bulbs and 7 years, that is $2,042.88 I spend every 7 years on lighting. 

Florescent Lights

The compact florescent have the startup cost of buying 24 bulbs.  Just checked the prices at walmart.com and it looks like it's going to cost me $40 total. 

Since I won't need to change these bulbs for the next 7 years, there won't be any charge for replacement bulbs this time.  I'm still going to run each bulb for 2,190 hours per year, but since they only take 13 watts instead of 60m they'll only consume 28.47 kilo-watt hours per year.  That make the annual electricity cost $2.28 per bulb.

The end result is a $40 up front investment + 2.28 per bulb, per year.  With 24 bulbs running for 7 years that is $423.04 to light my house for 7 years.


The Results
 
End result is $423.04 with compact florescent compared to $2,042.88 for incandescent.  That's a savings of $1,619.84.  Seems to be a worthwhile investment to me!  The environmental savings are bonus.]]> http://www.destroydebt.com/blogs/jeremy/3-how-i-got-out-of-debt--part-1-credit-card.html http://www.destroydebt.com/blogs/jeremy/3-how-i-got-out-of-debt--part-1-credit-card.html Mon, 29 Oct 2007 03:32:32 GMT In the previous post I mentioned how I managed to go from no debt, to about $110,000 in debt in under two years.  It was a huge struggle to make it to the next check each month and this was a real turning point for me.  I became determined to get rid of ALL our debt. I knew that the major...
I knew that the majority of my payments each month were going toward interest, so my goal was to begin eliminating the interest as fast as possible.  Paying less interest each month would allow a greater portion of my payments to go towards the principle which would reduce the amount of interest I pay even more.

In order to get this snowball effect started, I knew the best path was to focus entirely on the debt with the highest interest rate.  In my case it was my credit card at 12%.  My wife and I put ever extra dollar I could towards this card, while making the minimum payment of the rest of our debt.

If I knew then what I knew now, I would have tried to transfer the balance on that credit card to one with a lower rate, or one that offers 0% interest for an intro period.  Having 12-15 months to pay off a credit card without any interest at all allows you to make incredible progress towards paying off that debt when you can only afford to pay a little over the minimum payments anyways.  If you're looking for a balance transfer credit card be sure to shop around.  That link I provided is to another website I operate which provides an easy way to compare rates and other features when choosing a credit card.

However, we did not know this at the time and had the mindset of "the last thing we want is another credit card" so we just continued to pay as much towards the card as we could each month.  I received a couple of bonuses from my job which really helped accelerate the process, and in a little over a year we had the credit card paid off.  I can not begin to tell you how great that felt!  Plus now we had a couple hundred 'extra' dollars each month to use towards paying off other debt.]]> http://www.destroydebt.com/blogs/jeremy/2-how-i-got-into-debt.html http://www.destroydebt.com/blogs/jeremy/2-how-i-got-into-debt.html Mon, 29 Oct 2007 03:31:43 GMT After high school, I opted to go to take some classes at a local community college while working instead of going away to college, so I was fortunate not to start out my adult life with tens of thousands of dollars in student loan debt.  However that did not last long. Shortly after turning 18...
Shortly after turning 18 I applied for a received a credit card from Bank of America.  I used it on occassion but never charged more than a few hundred dollars and always paid it off quickly.  I managed to stay fairly debt free until I got married at the age of 20.  Between the wedding and honeymoon I charged just shy of $3,000 on my credit card (my limit at that time).  My wife went to college on a partial scholarship, so I also inheritted about $10,000 in student loan debt for a total of $13,000 in debt.

Then came the house.  We purchased a modest starter home for about $80,000 and received a few government grants as first time home owners to help pay for the closing costs on part of the down payment.  After buying the house money was very tight for a while, we couldn't get approved for credit to get the basic things you need in a home such as a refridgerator, washer and dryer etc, so we had to save every penny to buy these items and as a result made the minimum payments on all our debt until we could buy the basic necessities.

Within a year, the one car we had between the two of us was constantly giving us trouble so we bought a new car for about $15,000.  Due to having about $93,000 in debt and virtually no credit history I had to get my parents to co-sign for the car.  So within one year I went from having no debt to being over $100,000 in debt.

We focussed on paying off the credit card for the next six months and in that time my credit limit on the card was raised from $3,000 to $7,000.  By the time we got it paid off again we were feeling the pain of each working separate jobs on oposite sides of town and having to share a car.  We decided we couldn't afford a new car again so we found a used one for $6,500.  We didn't want to go through the same process with the banks as before and have to get someone to cosign again, so we opted to pay for it with our credit card.  Bad decision!

That was the point in my life when I was in the most debt.  About $110,000 worth.  We managed to always make at least the minimum payments on time so our credit history wasn't really hurt too much, but it was challenging to get by during this period.  Virtually all of our income was going to paying bills.

So that's the story of how I got into debt.  I'd imagine it's typical of the average American family.  I can't say I really regret purchasing any of the items I did, they were all needed but I feel I could have researched some of them better, saved some money and found other ways to pay for them.  I hope you will share the story of how you got into debt as well.  I will post later on how I went about getting out of debt.]]>