withholding status to ensure we don’t loan money to Uncle Sam, only to get it back without interest. If we were both working normal jobs, we would have done that. But with our previous tax years still being paid back, and the farm income in such flux, we wanted to max DH’s withholding just in case we erred in our calculations. That means the IRS withheld too much and we’ll be getting a lot of it back. Now, when you owe the IRS, and then get a refund, they’re not so naive as to actually send you the cash. They simply keep it and apply it towards your outstanding debt. In previous years, before DR, I might have snarled at that and wanted “my money” in my mitts to be spent (and probably squandered) as I saw fit. But owing over $8K and getting a $4K refund back, yea that’s just fine with me that they’ll keep it and knock down that debt by that amount. At the moment, that IRS debt is our second-largest debt on the snowball. Having that refund go towards knocking that down sure feels good!
The other thing from this past week was that we were able to use farm income to pay for the second half of our farm land lease. That was a nice “business income paying for business expenses” event. Sounds like a no-brainer, but it’s still relatively new for us to be able to pay such big bills, out of farm income, and have anything left over. The other nice thing is that by paying that on time, our landlords can now pay their county tax bill for that land on time. So they’re pleased too.
There’s something which feels pretty darn good about being square with not only Uncle Sam, but also being square with the families that we owe money to. So we continue to trundle along on the DR trail, but we covered a lot of ground last week.
What I’ve not seen anyone else mention is the interest savings in itself. Most, unfortunately not all, loans of any sort be it charge card, or a mortgage calculate your interest which is compounded and added to the amount you will pay back is figured on an average daily balance of the principle of the loan (with some it’s weekly or monthly—depends on the lender, read your paperwork).
So when you pay even half of the loan amount early you have essentially knocked down the average daily balance for the entire month. Lower balance, lower amount of interest you have to repay. You can accomplish the same thing by paying extra on your principle monthly too. In other words the shorter the time frame between payments the more interest you’ll save.
Here’s a much smaller amount that will show you how much it will save you. Our current “pet” bill is our little BOA account, we started last month owing on it roughly $1,500 I paid a total of $350 on it during the month, that was the minimum of $120 plus $230 snowball and “extra” money against it. If I had paid that all on the bill due date I would have been charged approximately $9.50 in interest on that based on the 4.9% interest rate because it would let the average daily balance be higher than how I actually paid it.
I pay a minimum of every two weeks on that bill $145 snowball money on the first pay period and $120 on the second. The remaining was paid in small increments as I had “found” money come in. Any time found money comes in I pay it IMMEDIATELY on the “pet” bill. The end result was I saved an additional $1.73 on interest on that $1,500 bill for the month. I know that $1.73 doesn’t sound like much, but remember we are talking a $1,500 debt not a $150,000 mortgage. Had it been a 4.9% mortgage and I’d paid similarly the savings would have been much more.
That is for just the first set of 4 weeks worth of payments. Then you add in that $1.73 won’t be added to future balances to be compounded and the savings grows. You then add in the extra two payments per year and the savings grows even more.
In a snowball scheme of things this also effects how much you will pay out on bills that are in line behind the current “pet” because you will get to paying your snowball amount on each additional one faster. The next bill in my line is Best Buy (Who I hate with a passion) and they are at 8.99% and currently has an approximate $5,000 balance. So those savings will really add up there.
My grandmother always said “Mind your pennies and your dollars will mind themselves.” (which is by the way the name of my frugal blog). This is a prime example of how minding your pennies will definitely produce dollars in savings.
but they are talking about making essentially 13 mortgage payments a year vs the normal 12. Paying one-half of your mortgage every two weeks would have you making 13 payments a year.
To do this though, you need to confirm with your mortgage company that they will allow this without paying extra fees for the privilege. (You can have the same effect by adding to your principle at each regularly scheduled payment.)
every 2 weeks vs 12 payments–one a month, which means you are actually making 1 extra monthly payment per year. this will lower your interest rate.
There are companies that do this for you for a fee, so your savings really don’t materialize. some banks won’t allow you to do it…depends upon your bank.
You could always add more to the principal of the loan every month and it will also shorten the life of the loan.
The company plant was located in Breuberg, and my hotel was in Bad Konig. Both are small towns about an hour south east of Frankfurt. Since they are small towns, there weren’t too many people who spoke English outside of the hotel workers and the IT team at the plant. I was able to get to Frankfurt on the Saturday, and Stuttgart on Sunday. Then I talked my boss into letting me leave at noon on the following Wednesday to go to an auto museum in Sinsheim.
It was a cool trip – I *finally* got a stamp on my passport, which I’ve had for ten YEARS unused..
I may do a web gallery for all the pictures I took.
total shock that it was me. the bigger “something to talk about” was that a local tv person had the big “C” at the same time. If we asked about her health/needs, it was gossip, any reference to this friend from the same group was talked about. I guess in their eyes, someone with status–tv anchor, vs the teachers aide at a private catholic school that both their kids went to was different.
I remember I was required to have a cashiers check, but I had cash and was sent to get a money order as the post office was closer to the attorneys office than the bank.
It is just a little bit here & little bit there. It could be as little as a few dollars on up to what we can imagine. I think my problem is thinking about it before the situation has passed & gotten away from me. It will be a matter of me paying attention in the moment. Thanks for the inspiration!
Oh, as I was about to sign off I remembered how it’s the little things that matter. I remembered when dd was in grade school and dh and were both in school–him in graduate and me in undergraduate school. Dd had had back surgery & we were broke. One day I opened our apartment door to check the mail & realized someone anonymously dropped off a bag of groceries at our door. It was such a blessing! We never knew who dropped it off but God knows & that is what matters. They will be blessed for their generosity. Sometimes we think the small gesture we want to do won’t matter much in the scheme but let me tell you … that bag of groceries meant the world to us! Your small gesture could do the same for someone else.
They are always random and generally spur of the moment. Like paying for the driver’s license of a woman who found herself short of cash and her debit card was at home at the dl bureau. The glow in the dark necklaces for the kids at an event. Paying for the meal of the person in line behind me at an all you can eat buffet. Dropping off bags of feed at a pet shelter, just random things when I see an opportunity.
Then you purchase a money order and mail it to their debt collector with instructions it is to pay off the debt. Getting the account number is the hard part.
If you know who they owe, but not the account number you can also go this route. You get the money order, make it out to the company for the amount you want to pay for them, then you mail it to the individual with no return address with a type written note that says “You have been given a random act of kindness, pay it forward when you can” or something similar. Since the money order is made out to the company they will have to pay it to the company and they can follow through making sure it get credited right.