As soon as it hit my account, I assigned each penny to debt. Resulting in two paid-off cards and a significant chunk of the next card in my interest-based snowball plan. In one month, thanks to taxes, I have paid-off a quarter of my credit card debt and increased my overall net worth by about $5,000.

Could I have done this over time by keeping more of what I earn each pay day? Sure. Would I have – probably not. The bulk payments allow me to remove myself from the equation. It’s much easier to be disciplined one day and assign payments than be disciplined 365 days a year and ensure that the extra few dollars in my check make it to a credit card. Also, I can’t begin to express how motivating it is to knock down the debt load so significantly in the span of a few days. I have about $14,000 left to go and freedom from debt seems more attainable now than ever.

The money is now as good as spent. In my head, I’ve already separated it between building my emergency fund, paying off some credit card debt and adding a small amount to my vacation fund.

As I type this, I can hear some people come to a screeching halt at the “vacation fund” reference. Here are my thoughts:

Yes, I know that in the current economy I probably shouldn’t be thinking of spending money on vacations.

Yes, I realize that money may serve me better by being added to my emergency fund or debt payment – especially since I recognize that my job may be on the chopping block.

But, I need something to look forward to and when vacation does roll around, I want to make sure that it’s something I’m prepared for. And, honestly, if I need the money it’s just in another savings account growing and waiting for a use.

I love taxes (for now at least).

Just to check, I delete the first W2 – letting the 2nd stand alone – and then it says that I’m owed a refund of $673.

I am so confused. Separately, my W2s show that I’m getting refunds – combined I owe almost $200 to the government.

This has to be a mistake, right?

—-
UPDATE: So I scheduled a meeting with a CPA to review my tax situation. Hopefully, everything works out. He said it may just be that I’ve entered a different tax bracket, but I don’t think that’s the case since I still make under $77,100 a year. At the very least, maybe he can show me a few areas where I can make some additional deductions or help me plan for 2008.

Most of it went to paying off a credit card – my snowball plan has changed drastically since transferring a lot of my debt to recently opened 0% cards. That’s for the next post though.

But the rest of it went to bumping my “Income Security Account” (a.k.a. Emergency Fund) to $1000 status. I will still make my small monthly contributions, since I figure it can’t hurt and I barely notice the money is being taken out of my account anyway. Frankly, I’m just relieved that my Emergency Fund is up to a decent/recommended amount. Especially considering the alarming number of people out there that don’t have any money saved up “just in case”.

For my state return, which will be around $400, I’m planning to put about half of that towards my Christmas Gift account and the rest will help me get down to Florida for my buddy’s bachelor party in a few months.

And yes…again…I know it’s probably better to not get as many refunds or as much of a refund back at the end of the year. But there’s something therapeutic about these lump sum allocations that is worth the time missed. Maybe I’m alone on that.