I took my first 6 hour tax course today at a popular tax preperation company.

The instructor knew his tax return. I must say his investment advice went against the pet peeves I see all the time on the internet.

The advice was a person in the 33 or 28% bracket to contribute to a Roth and the person in the 15% bracket to not contribute to an IRA at all.

I got both federal returns correct in the workbook and screwed up the same line on both Ohio state returns.

Course also shed some light on saving some money on Ohio return. Anxious to see if that tip helps us. Stay tuned.

If you need to know the problems, check my last two blog entries.

http://jim.savingadvice.com/2008/09/09/rebuilding-the-ef-the...
http://jim.savingadvice.com/2008/09/08/ef-went-from-12k-to-1...

Wife and I are working every day to a solution which works.

We originally had 5 bank accounts, all joint, for various reasons.

First checking account was the one I opened when I moved here 11 years ago. Wife was added to this account around the time we moved in together, around 7 years ago. I had a savings account attached to that too. That account was at key bank.

When we sold our condo, we had a 30k check which needed to be deposited. Because of prior problems with depositing money at key (a large 5k surplus got spent without knowing what it was spent on a few years earlier), we created a new account at 5th 3rd. Part of the reason for this was 5th 3rd did not charge for electronic banking and electronic bill paying at the time. checking and savings accounts were opened.

Then 9/11 happened and there were rules about how many transactions a savings account can have, so the IRA deposits (which were 6-7 deposits each month) were causing some 9/11 violations and account fees. So we opened a second checking account for my IRA deposits.

So the end result was 5 accounts, each getting a fraction of each paycheck to pay various bills electronicly, by check or by automated withdraw.

We now have reduced it to 2 joint accounts and each of us will also have our own savings and checking accounts with debit cards.

Part of issue with the budget was I did not have a debit card in my name, so when crises hit, I did not have access to cash.

We each deposit $20 per check into our savings accounts and our checking accounts, deposit the same amount each to one of the accounts which pays most bills, and then the rest goes to the mortgage/IRA/car payment account.

I want the items which can be repossessed or foreclosed to be withdrawn from one account (car and house payments) so we know, worst case, which bills must be paid each month.

So after the EF has gone from 12k (3 4k CDs) to 1k left, a plan is needed to rebuild it. If you need to know why the EF was reduced, read this

http://jim.savingadvice.com/2008/09/08/ef-went-from-12k-to-1...

To complicate matters, we have a vacation planned for July of 2009 which will cost ~$2500 to disneyworld and in Aug of 2009 we will have a payment on my wife's lease which I am estimating at $4k (went over on milage).

We had to lease because wife travels too much to make buying a good deal (IMO). We are talking about buying the next one in August, we will see.

The household budget has a 20% savings rate built right in (401k for both and Roths are maxed for both). That same budget has 5k in extra disposable income which may or may not get captured.
$2500 of that would be the months my wife gets paid 3 times.

We plan to sit down each Saturday for next 8 weeks to do the checkbook, As we come in underbudget on things, my intention is to move that money to the savings account. I expect to get about $100/month doing this.

We cancelled the home phone line- saves us another $100/month.

I will work doing taxes for HR Block (I hope) Jan-March and I am estimating I take home about 3k.

$1200 from phone
$1200 from being underbudget
$3k from second job
1k already in EF
$2400 from 2 extra paychecks
That is $8800 of the 12k needed.

Simple things get us 2/3 of the way there.

If you read the forums you know where this is going.

Last weekend was probably a weekend I will never forget. Portions of this are edited for brevity.

On Thursday night (9/4) I found out my wife had ~6k in cc debt on a card in her name.
We had a brief discussion Thursday then a much bigger argument Friday morning (9/5). DS1 was also not tolerating feeds and needless to say the argument continued on the way to the hospital.

DS1 was admitted to hospital overnight while wife stayed with him. I took DS2 home and decided to do a quick cc check of my own.

2 of my 4 cards had a balance (1.9k and 1.7k). My wife had changed addresses on both cards so bills were being sent to her mothers- I did not know either card had a balance. Some of the balances were 18 months old or longer.

A much bigger discussion followed.

I liquidated 10k of the emergency fund I keep in CDs, paying about $40 in penalties to pay off the cc debt. Two of the cards were paid off on Sunday morning 9/7 and the third card will be paid off on 9/8 when I get home from work.

The twins can now go 6 hours without feeding.

Actually DS1 goes about 5-5.5 hours and his twin goes about 6.5. We can usually time the feeds so one of us goes to bed at 11 pm and wakes up around 4-5 am to do the morning feed while the other spouse can "sleep in" until 7am. Yesterday I did not get out of bed until 7:30 am because both kids slept a little longer after the 4 am feed.

I signed up for a HR Block tax course today. Cost me $130 for the books and provided I pass the course with a 70 and final with an 80 I will be preparing tax returns for some extra money come tax time.

My wife and I have a wedding collage hanging in our living room. It is similar to the one in the picture.



The person which did this does not have her website running anymore. If anyone knows of anyone anywhere which can do something similar, please send me a link to their web site.

We paid close to $400 for a 24x32 framed portrait of that picture and a smaller reprint for wife's mother.

We are now trying to do either a birthday or mothers day present which is similar, except add our kids to it.

Thx

My wife and I discussed our household budget over the long weekend. She had been dreading the conversation and putting it off for months.

The first few conversations we had like this 7-10 years ago were tough- I had to tell her rent came before getting hair and nails done, and she was not used to that (her mom did not require her to pay rent before she moved in with me).

The last few have been real easy. She initiated this one because she wanted money for a vacation to disney world in July of 2009.

We sat down and plugged various numbers into our budget spreadsheet. I had a raise which had not been added in, and we decreased the phone bill from $100 to $55 by removing some options from the line. We need a phone line for home high speed internet- we have a satellite dish so roadrunner/dsl is not an option.

End result was we save 20% of gross pay and pay our bills. And have $5000/year left over after all spending is accounted for.

WOW- my last raise was only 3k and we increased Roths once the raise hit the bank account.

Needless to say, looks like our kids can meet Winnie the Pooh and Tigger.

As stated previously, my goal is to pay off my mortgage before my kids start college.

My twins are 5 months old at time of this post in September of 2008.

College for them begins in September of 2027 I think.

Our mortgage was originated in Dec of 2005, then refinanced in April of 2006 to get both loans (1st and 2nd mortgage) on fixed rate payment plans.

2nd mortgage is ~50k borrowed at 7.5%
1st mortgage is ~284k borrowed at 5.75%.

I need to pay both off more than 10 years early for this plan to work.

We currently round the 2nd mortgage payment up every billing cycle- meaning if we owe $385.85 we round payment up to $400. This cuts SIX YEARS off the payment according to the spreadsheet I ran.

In 2 years when my truck is paid off, the $700 truck payment goes to second mortgage. This will pay the second mortgage off in about 5 years from when I start the extra payments.

The $1100 extra ($400 2nd mortgage payment and $700 car payment) which will be available in 2015 goes to funding 3 goals:

1) Kids private school education- we don't like the public schools where we live, we estimate needing $400/month for both kids private schooling for elementary school.

2) New car fund for me. Probably $500/month going to this account

3) $200/month going to mortgage independance fund.

Mortgage independance fund is PRPFX- a mutual fund which should have about a 6% annual return and be relatively consistent in most market conditions.

My plan is to get this fund large enough to pay off the mortgage- might take 5 years, might take 10 or 15. Once this fund has enough money to pay down the mortgage, I will actually send the $200/month directly to the mortgage.

The risk before mortgage is paid off is liquidity- if I sent payment to the mortgage, I could not access the money. So by using an investment with intention to pay off the mortgage, when kids are 18 I either have a paid off house, a large taxable investment account, or both.

A few weeks ago there were 2-4 threads about college savings.

My general advice is that it is better to pay off mortgage before kids get to college, then use the old mortgage payment to fund their education.

I also think it is important to finance some of the education cost and have the kids pay that portion off after graduation. Gives them a chance to learn about debt and learn to not like debt in particular.