Comments on: Cleaning Up My Balance Sheet

By: retireby35

retireby35 — Wed, 24 Jun 2009 17:09:41 +0000

I know that you had previously stated that you try to pay your mom back the annual gift tax exemption amount each year (~13,000 this year I believe) so that no gift tax would be incurred. But I was wondering even if you paid more would you actually get in trouble with the IRS? Seeing how you owe your mom that money it seems like they wouldn’t penalize you for returning it.

By: Smartgirl

Smartgirl — Mon, 15 Jun 2009 05:15:58 +0000

I’m with IMHO and Spirit Weath – you should continue to track your debts, regardless of the creditor’s contacting you or not…. you say the business ceases to exist… is the business you had different from the one you are doing now?? In addition, your food budget is high…. I can feed myself for less than $125 p/mo.

For me, I only have fast food once or twice a month (I budget $10) and it has been SO LONG, I can’t remember the last time I had a fancy coffee at a Starbucks… oh.. come to think of it, I can… it has been over 9 months… and prior to that, it was 8 months.

It is great you are chipping away at the debts…. one thing you should do is work with your mom and set a goal (agreement) for on how much you will have repaid by the end of the year. I think, given you monthly business revenue, it would be easy for you to do the following for your mom:

* contribute the maximum ($5000) to her IRA (Roth preferably)
* between $10,000 and $15,000 to a savings account

I don’t think it would be unreasonable for you to have a goal of paying your mom $15,000 to $20,000 by year’s end. If your mother is self-employed or if she has a small side business that has anytype of revenue, I would encourage that anything you provide in repayment go to a SEP self-employment retirement plan rather than a traditional savings – this way her earnings can grwo tax free until she retires and starts taking distributions.

Following this year, your goal should be (at minimum) $30,000 per year until she’s repaid in full. According to my figure, you’d have this paid off in just under four years….

By: Spiritwealth

Spiritwealth — Sat, 13 Jun 2009 20:08:42 +0000

Your food budget is very expensive for one person, IMO. I feed two people on $200/month, sometimes less (includes toiletries too). I'm hoping to cut that down even more with my urban garden. I've been really busy with my recession garden . What do you think the average consumer spends on groceries and toiletries per month? I'm wondering now...

By: will knight

will knight — Sat, 13 Jun 2009 18:30:23 +0000

when i read your blog title, i sang ‘cleaning out my balance sheet’ to the tune of eminem’s ‘cleaning out my closet.’

hahaha sorry i got a good laugh at myself. i dont know if you listen to eminem.

By: carmen

carmen — Sat, 13 Jun 2009 17:30:19 +0000

good luck! ive been reading your blog for a while and i agree that u should take care of your mom first since that’s such a major cause of stress in your life.

By: FutureShock

FutureShock — Sat, 13 Jun 2009 12:54:04 +0000

Hang in there. Keep chippin’ away at the stone. You got the right idea. Take care of your Mom first.

By: imho

imho — Sat, 13 Jun 2009 03:15:53 +0000

DK – one thing is confusing – you mention above that your business has ceased to exist in all but paper, yet you have often referenced your employee. Did you set up a separate business for what you have your employee working on now?

While I agree with your focus on paying the IRS, your mother, your student loans and your car first, I would respectfully propose that you reconsider dropping the other debts from what you are tracking. Even if you put is all in one category called other, you should track it, using the most recent amount you can. There is too much temptation in not tracking it to have it out of sight, out of mind, and slowly and gradually you will change your mindset about whether you owe this money. You are a principled person. You know you owe the money so don’t hide it from yourself or others or your reality. I know this is MUCH easier for me to write than for you to do, but being principled and ethical is not always easy. Please think about how you approach this.

As always, you have readers rooting for you. As someone much older who just started a business, your persistence and discipline regarding getting up and working from home every morning are an inspiration to me. Thank you.