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Smithee Debt Update, February 26, 2010

This article was written by in Debt Reduction. 7 comments.


It’s been a couple of weeks since I shared details of my push to get rid of the credit card debt. I’ve been diligently taking out exactly $100 from the ATM to spend from Saturday morning through Friday night. That’s just for daily, personal purchases that don’t contribute to the house as a whole, though. As I suspected, it hasn’t left me with many opportunities to do something nice for my wife, and this past fortnight has forced me to keep mentally reminding myself of a few things.

It can’t all be tasty

It’s still not second nature for me to think of my weekly $100 as partially being spent on boring and annoying things like gasoline and haircuts, to say nothing of clothing. I tend wrongly to assume on a Wednesday that, “oh, I still have $50 for lunch this week,” when it’s really closer to $20.

I also really want to be the kind of husband who frequently brings home flowers, but it just doesn’t seem practical, yet.

No month is going to be normal

It seems like there’s always something abnormal showing up to make the budget be a little off. Earlier in February I paid another $200 for Level 3 Improv classes, so I had to remember to make a credit card payment of $450 for March 1st instead of $650. (I’m making payments on the higher, newer debt at a rate of $1,300 a month, but doing it twice a month to help bring the interest down more.)

It’s also sort of vacation season. We did a fantastic job this past weekend in San Antonio not going hog wild with the spending, but it’s still a tendency of mine to want to whip out the plastic when confronted with temptation, especially if I’m drinking. There’s another mini-vacation coming up in Austin during SxSW, where we have a tradition of meeting our old-school nerdy blogger friends.

Stop cheating!

Okay, so even though I used my debit card recently at Starbucks, it was because it was after the time I was supposed to go to the ATM, but I hadn’t made it there, yet. When I did find an ATM, I managed to find one that would give me $90 instead of $100.

But here are the things that got added to the newer card since February 13:

  • MyFax – $10 – I almost never use this online fax service, but it seems like a really handy thing to have. I’ll make a to-do to decide one way or the other
  • Mozy.com – $9.95
  • Toll roads – $40
  • Web hosting – $22.89 – this number fluctuates a lot, primarily because I have more domains than I know what to do with, and I can’t ever bring myself to cancel them.
  • FedEx Kinkos – $8.29 – this was actually for work, so I should get it reimbursed. I almost never pay for things on behalf of my employer, so I’m not even sure what form to use, if form there be. New to-do.
  • Cinematic Titanic – The Alien Factor – $9.99 – there it is. I spent $10 that I shouldn’t have on a goofy, fun movie. I’ll have to remember to find the $90 ATM again tomorrow.
  • iTunes – $1.09 – Ack, I did it again! I couldn’t resist buying the Metallica song “Wherever I May Roam.”
  • Mobile phone bill – $95.36 – this is $10 more than usual because of the Haiti thing.

So, I had two moments of weakness, but I have a way to make it up to myself. The particularly annoying thing about this past fortnight is that I had to get another haircut after just 10 days, because the first time I sought out a proper manly barber, he did a terrible job, and two days ago my head looked like a dirty blond helmet. I don’t know, I think his eyesight is going, because the straight razor performance was abysmal, too.

What about the legacy debt?

For paying down the legacy credit card, I’ve only been using “extra” money: the cash that comes in from jobs like writing here. This year I switched payments from my name to our little corporation, and the corporation just got paid for the first time. What I’m supposed to do now is have the corporation pay me a “reasonable salary” and then use that money to pay down the credit card.

Does anybody have advice for figuring out what a “reasonable salary” looks like?

Credit Card Debt Totals Change
Legacy Debt $944.95 +10.28
Newer Debt $4,657.71 -247.61

You can cheer me on and/or witness my money minutiae on Twitter if you want to.

Updated February 27, 2010 and originally published February 26, 2010. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @ConsumerismComm on Twitter and visit our Facebook page for more updates.

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About the author

Smithee formerly lived primarily on credit cards and the good will of his friends. He is a newbie to personal finance but quickly learning from his past mistakes. You can follow him on Twitter, where his user name is @SmitheeConsumer. View all articles by .

{ 7 comments… read them below or add one }

avatar Erica Douglass

Several comments!

First, you can find me in the blogger’s lounge at SXSW chatting up a storm about my new startup. Hope to see you there!

A reasonable salary in terms of a corporation just means this:
1) Make sure you can cover all your corp expenses first
2) Pay yourself more in salary than you do in dividends
3) Remember salary is taxed at a higher rate than dividends
4) You CAN just pay yourself and then divvy it up later–at the end of the year–but ask an accountant about this before you pull money out.

If you don’t use the online fax, can it–you can always send a few pages for free with faxzero.com

“I also really want to be the kind of husband who frequently brings home flowers, but it just doesn’t seem practical, yet.”

Is your wife the kind of woman who wants you to bring home flowers when you’re in the middle of paying down debt? Discuss this openly. I don’t like flowers, so I’m the weird one here. Richard and I didn’t trade gifts or do anything for Valentine’s Day and I’m totally happy with that decision. Which of the four love languages does your wife speak? (If you don’t know, pick up that book and figure it out…it’s worth it!)

-Erica

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avatar Smithee ♦1,358 (Quarter)

Erica, can you make some reasonable salary recommendations using percentages? For example, when I was getting paid myself (vs. the corporation), I’d use 50% and set the other half aside for taxes.

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avatar Dad is in the House

I can definitely second the “no month” is normal point. It’s depressing but true. I guess you just have to slow down and stay focused.

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avatar Wade

I had myfax for a while – when I cancelled – they emailed with offer for $4.95/month and send me the same offer every 3-4 months trying to get me back.

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avatar RW

Cancel the myfax and use faxitnice.com for sending and efax.com for receiving. Then you only get charged for what you use (faxitnice).

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avatar Liz

Reasonable salary –

First, know your net income. Salary should be based on net income, not gross. You’ll need to know how much tax your corporation is likely to owe, and who is paying the payroll taxes on your salary – you or your company.

Then, you need to keep a portion to reinvest in the business. 30% of net income might be good.

As sole owner, you can pay out whatever is left as your salary. If you want to be conservative, you can pay out 50% and retain the rest as a liquid reserve. Once your liquid reserve is built up, and you have a relatively predictible income stream, you may increase your percentage.

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avatar Smithee ♦1,358 (Quarter)

Thanks for your help, Liz. I don’t know my gross income or my net income, and I don’t think I will know either until the year is over. I don’t think my business has any expenses, and for the moment, I can’t think of any way of re-investing in the company.

It’s not a sole ownership, it’s a regular corporation, with my wife and I as its two officers.

Does that information change your advice at all?

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