To Pay Off Debt… Or Not

Plumbing Repairs

The last couple of weeks have been very emotionally exhausting.

Let me tell you why…

First of all, the house we’re renting had a kitchen faucet leak for a couple months. We hired a plumber to fix it in June. The fix only last for two weeks. Then the leak returned.

We’re not talking an annoying “oh, I’m losing water” leak. We’re talking about a “clear out everything under the sink and mop up the half-bucket of water” leak.

It was frustrating to say the least.

The trouble is my landlord is really a homeowner who rented out his home. Since he lives in another state, it’s difficult to get things fixed. He usually asks me if I’ll do the fix myself.

In this case, I finally did.

I bought a new faucet from The Home Depot, got some new plumbing tools, and asked my brother to come over to help.

A couple hours later, we had pulled out the old faucet and put in the new one.

Fortunately, colder weather is setting in. Because a couple of the sprinkler heads aren’t functioning properly either. And I don’t really want to mess with it.

The point: Logically, it makes sense to continue renting; emotionally, I’m ready to be a homeowner again.

So my wife and I have been seriously looking at buying a home.

We found one last Friday and made an offer on it. We’ve gone back and forth a few times, but haven’t agreed on price yet.

Who knows. We may walk away from the deal and see what happens.

Anyway, as I talked with my wife yesterday (our 9th Anniversary!), I mentioned why it might make sense for us to use our funds to pay off debt and continue renting until 2009.

1. If we pay off debt, our credit score will rise, hopefully giving us a lower interest rate on our mortgage.

2. By paying off debt, we could increase our monthly cash flow by $500 to $750 a month by 2009. (Which makes buying a home easier on the pocketbook.)

3. Since I’m self-employed, I will have a new tax return I can use to get qualified for a mortgage. Since my income is up this year, we will be able to extend our home search to homes that are slightly more expensive. (Right now, I’m qualified for a mortgage based on my 2007 tax return.)

4. By waiting until January to buy a home, I’ll be able to pay my 2008 taxes without worrying about a larger home payment. (I have to pay taxes by January 15; usually about $12,000 or more.)

So that’s the story.

I really want to move out and buy a home. I’d love to be in a place where I knew I wasn’t going to have to move in a few months. A place that actually feels like home. (My current house doesn’t feel like home; it feels like my landlord’s home.)

On the other hand, there are some clear benefits of waiting. Possibly better selection and lower prices. (November and December of 2007 saw some of the biggest drops in home prices and sales volume.)

If you were in my shoes, what would you do?

Is the Government Being Nice to Me?

Rebate CheckI’ve pretty much ignored everything about the upcoming tax credit… until now.

That’s because on Tuesday night I paid a visit to my CPA to wrap up my personal taxes. I still owe the government $1,228.00, so we needed to finalize the paperwork and get the payment out.

Before I left, he said, “Here’s good news,” and he passed a sheet of paper over the desk.

It was an estimate of how much I’ll receive when the economic stimulus tax rebate payments are made this coming May/June.

The estimate says I’ll receive about $2,100.00. Which is really ironic since I’m cutting a check to the government right now for twelve hundred bucks.

I sincerely doubt the rebate has anything to do with showing benevolence to taxpayers. It’s really U.S. politicians’ last-ditch effort to save themselves and the Fed-run economy.

So the government gives and the government taketh away, depending on what self-serving goal they’re trying to accomplish.

I try to stay emotionally uninvolved in these things. Rather, I do whatever is required to avoid audits, penalties, and jail time. (I have been audited, and it’s no fun.)

On the positive side, assuming cash flow is good when the rebate comes, I’ll be able to use 100% of it for reducing my debt. I’m looking forward to that.

My $10,000 Tax Bill

Tax BillIf you read my post about financial setbacks, then you already know my tax bill this year was $10,167.00. When I found out what I would have to pay in early January, I didn’t have the means of paying the bill. And so I prayed that God would provide the money.

Long story short, God provided and He gets all the praise.

You see, I’m not very good at moving mountains. But God is. Heck, he created the mountains!

My tax bill had to be paid in three separate payments: $312 to the unemployment office; $2,000 to the state department of revenue; and $7,855 to the federal government.

I wrote the checks for the first two payments earlier this month. But it was not until Wednesday (January 15, 2008) that I went down to the Wells Fargo to pay my federal tax bill.

I wrote a check out to Wells Fargo for the full amount. The bank then forwarded the money to the IRS. The amount was so large, the bank teller had to get approval from her manager to put the money through.

The good news is I paid for nearly 100% of my taxes with cash on hand. I borrowed a few hundred dollars from my line of credit, which I intend to pay back before the end of the month.

Two lessons learned (again):

  1. Plan better to pay my taxes in 2009.
  2. Always trust God, no matter what.