Apr 07 2008

I’d like a big, tax-free raise–wouldn’t you?

I love the point that Clever Dude made in a post earlier today. Essentially, if you want to give yourself a big, tax-free raise, pay off your dang debt!

Sure, it’s not always easy to get out of debt, depending on the debt load you carry and your income.

But, when you aren’t paying $200/month to Citi, $150/month to your student loans, $300/month for your car…suddenly, my fictitious example person has an extra $650 per month that’s no longer going toward debt.

How much money per month and per year can you free up, if you weren’t paying off debt? Crunch those numbers!

Instead, that money can be used for emergency savings, saved over time to buy a car with cash, invested, or it can even be used to increase your basic standard of living. And, it can give you a pretty good peace of mind to know that, hey, we really can live reasonably well off $18,000 per year take-home pay, instead of requiring $22,000.

If you hate your current job, but it pays the bills, imagine the freedom you’d have to switch to a more satisfying career–even if you have to take a pay cut. If you don’t have debt, that pay cut could be a non-issue.

Our debt is a monthly car payment. Once we get rid of it, we’ll free up a good chunk of my husband’s take-home pay–more than 10 percent!

So, once we get rid of our car payment, it’s like my husband just got a big raise, without us having to pay taxes on it.

I like it!

The thought of having $10k in the bank and a paid-for car by year’s end keeps me motivated to stay on track with our attempts at living frugally and saving every last cent. I’d love to be able to stretch Shane’s check even further, and getting our car paid off would be a great thing–for our stress levels as well as our bank accounts.

We’re going to stick to the plan of getting our six-month emergency fund together as quickly as possible, and after that, I think we’ll take nearly the same intensity to get rid of our car loan once and for all. I crunched some numbers, and in the best-case scenario, we can have that puppy paid off by early 2009.



6 Responses to “I’d like a big, tax-free raise–wouldn’t you?”

  1. This is a great point. I think about this every time I go to pay one of my loans–gosh, won’t it be nice when this is gone, and I’ll have an extra $200/month? Of course, nothing to do about it now but wait for that magic day!

    Erin’s last blog post..Sunday Hangover Cure #11

  2. I gave myself a tax free raise last year, when I got serious about cutting my bills down. I am over $600 a month on food, $600 a month on cars. ( When my lease was due, I gave back the car and got a car with no car payment).

  3. This is a great point! I am looking at what amount i should over pay my car payment in order to reduce the time its taking to pay it off. So far, my rough estimate shows that if I were to double it and bite the bullet, it would cut my term in half! Thats a significant amount, especially when that money could be going towards something besides paying for interest on a product that is losing value.

    Ben’s last blog post..Visa Gift Card Lab Has Custom Logos

  4. It definitely is exciting to think about how much easier life will be when the debts are paid off…right now I just have a truck note and mortgage note. With one more year left on the truck, that “pay-raise” is looking closer all the time. There’s is 10 years on the mortgage, but time seems to move quickly anyway, and maybe we can pay larger notes on the house once the truck is paid off…we’ll see. It’s fun to think about, isn’t it?

  5. That would be pretty amazing. I don’t think it’ll happen for a while, but it’ll be so exciting when it does! :)

  6. I just wanted to make a note…I saw on the Disney channel the other day. They were in a “green” house. In order to conserve water in the toiler, the woman did not buy a special device, she merely placed an empty two liter bottle in the tank.

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Hey! I'm Kacie, wife to Shane and mother to Jonathan (7), Vivienne (5) and Amelia (2) . I write about my family's finance: how we save money, improve our spending, and plan for the future.

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I'm adopting a much slower-paced posting schedule, and treating this as a hobby blog now.

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