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JerseySmarts.com

A Secondary Comment to Yesterday’s Student Loan Update

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After re-reading yesterday’s entry regarding my most recent student loan debt drop I couldn’t help but think that I should add a brief explanation of why the debt drop was only $1 thousand over the course of a month and a half. Well, it’s actually quite simple and no, it’s not because I purchased a new car in February that requires me to pay about $525 per month.

The reason why my student loan debt hasn’t dropped to a greater extent is simple – the United States government demanded my money. That’s right. Remember the $3,690 that I paid to the Internal Revenue Service a few months ago? That’s the explanation of why my student loan debt hasn’t dropped more than $1 thousand in the last month and a half. The government demanded my money and – like any good citizen – I had no choice but to pay.

One could argue that the several thousand dollars that I put down on my new car could have also gone towards reducing my total student loan debt. The difference between the money I owed to the IRS and this down payment, though, is that I had been budgeting to buy a new car so the money for the down payment was available. On the other hand, the IRS tax liability was a very quick turnaround and required me to tap into my savings account. Sure, I’ve got more than enough savings to take care of the tax liability, but I’m anal about my savings account and investments so I really hate tapping into them. I’ve been spending the last few months replenishing the money I had to withdraw for taxes (as well as my regular deposits into the savings account). That’s what happens when the IRS rapes depletes your free cash flow.

If I didn’t need a new car and the IRS wasn’t greedy for this working man’s money, my total amount of student loan debt outstanding today would not be $28 thousand. Instead it would be $18 thousand. In fact, I’d be less than 12 months away from totally eliminating the student loan debt once and for all.

But the government called and my car failed. Your classic one-two punch.

Bastards.

Tax Year 2011: The Tax Man Cometh… And He Wants To Get Paid!

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It was right about this time last year when I posted an entry on this blog discussing how I owed more in taxes for fiscal year 2010 than I already paid. Don’t get me wrong, I pay taxes just like every other working person via the payroll tax, income tax, sales tax, etc. However, last year was the first time where I actually owed more money to the government because of earning money from jobs outside of my primary employment.

In other words, I did pretty well in 2010 so I had to pay extra money to the government for doing so well. To put it simply, free tax filing sounds good right about now. In total, I paid $3,564 to the Internal Revenue Service and another $374 to the great State of New Jersey.

"You can pay me now or you will pay me later." - Irwin R. Schyster

Oh, you might remember that I used a picture of former WWE wrestler Irwin R. Schyster in last year’s post. Well, I thought that the picture worked pretty well and was entertaining, so considering that I just uploaded a post that talked about WWE bringing WrestleMania to New Jersey, I figured that it would be great to bring back Mr. Schyster for this year’s tax news. And speaking of this year’s tax news…

I owe both the Internal Revenue Service and the State of New Jersey taxes again for 2011.

You can go back and read last year’s entry to find out all of the different places where I draw income from (including advertising revenues related to this blog). You can also go back and read last year’s entry to find out some of the different side jobs that I perform each year (adjunct teaching, for example). However, I want to reiterate a point that I made last year: generally speaking, I want to pay these taxes.

There are a lot of people who spend a lot of time trying to find ways to not pay the government according to the tax laws on the books. Unless you’ve got big-time scratch (and I do not), then it makes no sense to go out of your way to hide income or gains from the government. They’ll find out and they’ll nail you for it – so pay your damn taxes. The reason why I’m generally okay with paying these extra taxes is because I made a good amount of money last year.

I mean it’s simple enough, right? You make more money than you pay taxes on so you have to pay taxes on that excess income. Generally speaking, what’s the problem with that? Sure, we can get into a discussion about whether or not I should be taxed at the rate that I’m currently taxed at (I would suggest that I should be taxed at a lower rate). And yes, we can get into a discussion about whether the government uses my tax dollars according to my will or in a manner that I find efficient (the answer is “no” for both of those items), but that’s not the point of this entry. The point is that you should all want to pay more in taxes because if you have to pay more in taxes, then you must have earned more in income during the previous year. Let me repeat that:

The more taxes you pay, the more money you earned.

Keywords: “more,” “money,” and “earned.”

While I think that it sucks and I might be annoyed that I have to send a check to the Internal Revenue Service for some $3,200+ and to the State of New Jersey for some $450+, I’m glad that I worked hard enough and earned enough money to increase my tax liability. Although I do have a bone to pick with the IRS over one aspect of my taxes (the student loan interest deduction), but I’ll get to that in an entry to be posted in the next few days). Also, this year I was better prepared for a higher tax liability because of being so shocked that I owed money last year. So I’m prepared to pay the government this year with very little impact on my regular cash flow.

And that’s a good thing… because nobody wants to open their door and find Irwin R. Schyster waiting on their doorstep looking for a check. No thanks!

Summing Up 2011 in Terms of Student Loan Repayments

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Some people with seemingly insurmountable student loan debt spent a good portion of 2011 crying about their debt burden and whining that their dream job wasn’t waiting for them when they graduated. They are in the same “nowhere land” that they were when 2011 started. Other people saddled with insane amounts of student loan debt occupied areas around the nation and accomplished absolutely nothing of significance in the process unless you count spending taxpayer dollars on excessive cleanup and security measures as significant. I opted to spend 2011 focusing on dramatically reducing my remaining student loan debt to a manageable level that would perfectly position me to eliminate the debt in 2012.

Where the student loan burdened crybabies and occupiers failed, I succeeded.

When 2011 began I had $54,385.85 in total student loan debt remaining payable to the United States Department of Education. When 2011 ended I had $34,911.14 in total student loan debt remaining (still payable to the USED). The reason why I share these numbers is because I want people out there with incredible amounts of student loan debt to know that you can defeat your debt and you can do it without the dream job or the six figure salary. You can defeat the debt by working hard and giving up many of the luxuries of life until you can afford them.

I’m not going to recount my point of view on these topics because I’ve done so over and over again in 2011 (and prior years). However, what I thought would be helpful is if I put together a brief list of links to other student loan entries from 2011 that focus on certain topics related to repaying student loan debt.

Personally, I think that the last entry linked above is a really good one. If you have a few minutes and you haven’t read that one yet, then I recommend giving it a go. Here are some other interesting tidbits regarding the repayment of my student loans in 2011…

  • Daily Interest. When 2011 began I was accruing $6.71 every day in interest alone. Today, my student loans accrue $4.30 in interest on a daily basis. It’s not great, but I’ll take a $2.41 reduction in interest accruing everyday! Over the course of a year, that’s $879.65 saved in interest alone. Still think that it’s not worth it to drastically overpay your monthly bills?
  • Principal Repaid. In 2011, I repaid a total of $19,474.71 in principal.
  • Interest Repaid. In 2011, I paid a total of $2,133.68 in interest. Also, because the tax code is written to reward lazy people with a redistribution of wealth from those of us who work their asses off (i.e. people who aren’t rich, but still work like crazy to earn enough money to repay their debts), I won’t be able to count the full $2,133.68 as a tax deduction. Why? Simple – I worked too hard in 2011 and earned too much money so my eligibility to count the $2,133.68 as a tax deduction is nullified. Think about that – I worked extra hard to earn extra money that I did NOT keep or stick into an account somewhere. Instead, sent that money to the government to repay this loan and that same government is going to penalize me for that hard work in repaying their loan by not allowing me to count the $2,133.68 as a tax deduction. Now tell me how this government is working in the best interests of the hardworking middle class again???

Look folks – either you get busy repaying your debts or you get busy occupying public space and/or crying and whining about something that only you can really change. Getting busy repaying your debts works – my experience proves that time and time again. Bitching and moaning about how your debt is someone else’s problem isn’t going to get you anywhere – the public displays of childishness proved that throughout the latter half of 2011.

Here’s to pushing harder than ever to have my student loans totally repaid by the end of 2012!

These Debt Drops Are Good, But They Should Have Been Greater…

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Last month, I wrote about dropping my student loan debt from $53 thousand to $52 thousand and then this past week I wrote about dropping from $52 thousand to $51 thousand. And while those drops are good and bring me ever closer to breaking through that $50 thousand barrier, they should have been much greater. Unfortunately, my success in 2010 ultimately resulted in an inability to make greater student loan payments today.

And it’s simple, really – in fact, I already wrote about it on this blog. You’ll remember at the end of February when I wrote about the fact that I’m going to owe taxes this April 15th. Hey, it is what it is, you know? And while I’ve been able to reduce my total taxes owed by about two hundred bucks (I forgot that last year I opted to not receive a portion of my state refund because I figured that this was coming), I still owe a lot of money in taxes this year.

A few weeks ago I received a really nice check for teaching at the all-online college. It was the type of check that if I didn’t have this level of student loan debt, I would probably take half of it and put it away in a savings account and then use the other half to update my wardrobe and spend a weekend away on vacation somewhere. However, I have student loan debt so whenever I come into a financial windfall the first thing that goes through my mind is, “Oh wow! I can pay down a lot of student loan debt with this money!”

Some might consider that pathetic, but when you’re stifled with student loan debt you just want to get rid of it as soon as possible.

However, when I received that nice check for the online teaching, I couldn’t even be excited about it. Why? Well, I received that check and immediately knew that all of it would be wasted on the government because I owed just about as much as that check was worth in taxes this year. Let me tell you – that’s a shitty feeling. It’s a shitty feeling knowing that these several thousand dollars that I really should be using to pay down this student loan debt is going to, instead, be wasted on bullshit government programs or inconsiderate assholes who are milking the system (and don’t cry me a river about all of the people who need the government subsidies because I see the assholes who milk the system on a daily basis in the Neptune/Asbury Park/Eatontown area of Monmouth County).

It sucks.

So while these debt reductions have been good and I’m proud of reducing my student loan debt, I should be paying down even more than I can write about here. Unfortunately, the government has managed to get in the way.

And it really sucks.

Tax Year 2010: Time To Pay The Tax Man…

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Last night I spent about four hours putting together my tax forms for 2010. I use the Deluxe version of H&R Block at Home (which, by the way, I downloaded this year instead of buying the disc – no complaints from me about the downloading process). And even after using H&R Block’s software, spending those four hours pouring over different tax forms, and giving my taxes an incredible number of reviews it appears that 2010 is the first year since I’ve been filing returns where I’m actually going to have to make a tax payment. Well, I’ll have to make two payments – one to the State of New Jersey and one to the Internal Revenue Service.

Alright, so WWE alumnus Irwin R. Schyster isn't actually getting my money, but you get the point!

According to the tax software, I owe the great State of New Jersey $525 while I owe the IRS some $3,686. In total, I owe $4,211 in additional taxes for last year. Sure, I have a few more reviews to make on the various tax forms (my taxes are really complicated – see the next paragraph), but I don’t think that these numbers are changing too much.

The reason why my taxes are increasingly complicated is because of all of the stuff that I “do.” In fact, if you’ve been reading this blog for a while then you know that I bitch every once in a while about being too busy. Well, that hectic schedule carries over a similar craziness when it comes time to do my taxes. You see, I get some W-2 forms (my day job and teaching at the local college), a bunch of 1099-MISC forms (teaching at the online college, a few for certain types of income earned from Usable Web Solutions, etc), a 1098-T form for the classes that I was able to take for free last year at the local college, two different student loan interest deduction forms (one from the USDOE and one from NJHESAA), a Schedule C for my website company, a Schedule C for the other small business that I started for the online teaching and grant writing, a 1099-B for proceeds from stock sales, etc, etc. It gets ridiculous after a while.

If I didn’t have such a good handle on all of this stuff (I think), then I’d seriously consider getting myself an accountant to do this work for me. But I think I have a good grasp on what’s going on with my funds, so I’m confident in this return. But to get back to the point…

I already pay my taxes. Just like the rest of the working world, my company deducts my tax obligation through my paycheck and – just like the rest of the working world – I get sick at how much money gets taken out of my paycheck for taxes each pay period. However, I’m fine with paying an additional $4,211 in taxes for last year. Why? It’s simple, really.

I made a good amount of money last year.

Look, folks – I’m not writing this entry to brag or toot my own horn or anything because I’m not bringing in the big bucks by any means. However, think about what you’ve read on this blog for the last year or two: I work at a day job, I’m an Adjunct Professor at the local college, I’m an online instructor at a very well-known online college, I’ve owned a successful and profitable small business for 5 years, and I contract for some low-level consulting and grant writing jobs for local nonprofit organizations. I work like a madman! And, obviously, one of the end results of that type of work schedule should be an increase in a guy’s annual income and, thankfully, that’s how it worked out for me last year.

I WANT To Pay These Taxes
But the reason why I wanted to share the fact that I’m paying a lot of taxes for last year’s income is because I want to pay these taxes. That’s right – I want this additional tax liability which is over and above the taxes that I already paid last year. Why do I want this increased liability? Because when you pay more in taxes, it means that you’re making more money and everyone should want to increase their annual income. Of course, most folks won’t have a convoluted tax return like I have where certain revenue streams deduct federal income taxes and others don’t, but just remember the lesson here: the more money you make, the more money you’re going to owe.

It’s okay to owe a few tax dollars at the end of the year – it means that your income is going in the right direction. Good luck on your tax returns this year, everyone!