How on earth did we end up thinking that we would owe $7K in the first place?

About a year ago, DH and I bought a house. Just a couple of months prior, we had a baby. So, I went to the IRS website and followed their instructions on how to calculate what to claim on the W-4. Taking into account the interest we would be paying on the house, the fact that we have a dependent, etc, I ended up claiming 4 for federal. I didn’t know one way or the other how that would truly affect how much we would be taking home each month.

A couple of months later, I got a new job and started making more than my husband. When I did the same calculations as instructed on the IRS website, I came up with zero. I didn’t think much of it; I claimed zero and sent my W-4 to HR. When I got my first paycheck, I didn’t understand why I was making only $300 more than my husband when annually I make $20K more. But I ignored the warning signs thinking that it was b/c our health insurance came from my salary, not his. Big mistake.

Imagine opening a W-2 in January, seeing how much DH took home and seeing how much he paid in taxes: $700. WHAT?! Only $700 of federal taxes were taken out for 8 months of working there? I was sweating bullets. Nonetheless, our accountant said to give him a weekend to look everything over and then he’d get back to me.

Long story short, he worked his magic; thankfully even though I used the SAME IRS instructions for calculating W-4 exemptions, I came up with zero. So that, along with our mortgage, donations, our dependent, and babysitting fees probably were able to compensate for my stupidity.

Moral of the story: always claim ZERO or ONE on your W-4 — better to get a refund at the end of the year than to get a few extra dollars every month and end up paying at the end of the year.

But you know, the saying is true: when it rains it poooours. We just found out the DH’s job may not be as secure as once thought. Upon hearing this, first thing we did was analyze how we would do financially without it. It didn’t look good. To top it all off, I went to my tax guy, praying for a bigger refund than last year, and left praying that we just didn’t owe anything. Turns out I claimed too many exemptions on DH’s W-4s and not enough taxes were being witheld. NO WONDER, I thought. I make considerably more than he does, yet our paychecks came out to be right around the same amount. I figured it was due to the fact that our medical benefits came out of my paycheck alone, it never occurred to me to check the paystub to see how much federal and state taxes they were taking out. Crap. Our accountant told me to give him until Tuesday. In the meantime, I am praying for a miracle, that my house, kid, babysitter fees, donations, etc. are enough to compensate for my stupidity. Tuesday we’ll know!

The past couple of paychecks have been used mainly to catch up on paying some utilities and also for unfortunate, unforseen, unwanted events. It has been discouraging, but I know once I make my first dent in my credit card bills it will feel liberating and motivate me to be more aggressive.

I’m torn though. I don’t know what strategy to follow. Every time I think I’ve decided on one, I go right back to contemplating it all over again. It’s really a no-brainer, though. We have one credit card whose balance is so high, that our minimum payments are around $350/month, and out of that $350, $220 goes just to our monthly interest! It’s insane. I would be crazy to not try to at least cut the balance in half fairly quickly. But on the other hand, we have a couple of lower-balance credit cards ($2K here, $4K there… etc.) that can be paid off in around 4 - 6 weeks; and just the thought of actually being able to eliminate one credit card completely and never have to make a payment on it ever again is oh-so-tempting.

If anyone is reading out there, what would you do? Pay off the smaller balances first? Or try to pay off the highest interest rate/balance card first? Hurry! I make my first payment tomorrow.

One of our cars decided to give us problems that totaled $400 to repair. And we just recently had to have it towed and repaired 2 months ago. Same symptoms and everything: check engine light and choking. Two months ago, the repair shops said it was some faulty sensor. We got it fixed, paid them $160, and prayed that was the end. Not so. This time, even though it was the same symptoms, somehow we were in dire need of new brakes, a new different sensor, and some other stuff. Why they didn’t catch these things the first go ’round, I have no clue. But yeah, to prove my point: it’s always SOMETHING. Not that my point needed proving. I’m sure you all can relate.

Last weekend, I spontaneously decided to try it. I told my husband to call the 800-number on the back of his Discover card and ask for a lower interest rate. When he responded with a blank stare I assured him that I was just testing something and that he was going to do what I asked whether it made sense or not.

I listened closely while he muttered the words, “lower”, “interest”, and “rate” and simultaneously prepared myself for disappointment, when I heard the words, “You can? Thank you!”

OMG. They lowered it by HALF. I should have done this months ago.

Another pay period has come today (Friday) and yet, none of that can go to credit cards. $900 of it must go to a stupid bill that I did not know about until two weeks ago. We get another $1880 paycheck on Tuesday, and yet again, that can’t go to paying down any ccs (credit cards) either.  We have a bill due on that SAME DAY for $2400, meaning that I have to save at least $520 from today’s paycheck in order to come up with Tuesday’s total. Wow. That’s leaves me with $200 until the next pay period.  And next period, is the worst because it’s the time of the month when my $2500 mortgage is due, my $650 car payment, and various consumer loan payments are due.  So again, I say, it will be another whole entire freakin month before I can even start thinking about credit cards. And another month before I can find my peace and sanity again. I just hope I have enough Xanax to last me until then.