using roth ira to pay car off smart way.

[investingnoob]

dont know much about taxes. I've never had a house to write off. Before I lived with parents so I couldn't write anything so i usually got maybe $200 back...supposedly I made too much with nothing to write off which makes me get nothing back.

[jIM_Ohio]

Originally Posted by investingnoob

dont know much about taxes. I've never had a house to write off. Before I lived with parents so I couldn't write anything so i usually got maybe $200 back...supposedly I made too much with nothing to write off which makes me get nothing back.

IIRC your original problem was cash flow- you wanted to take money out of a Roth to pay down the car...
but you would not withdraw from cash to pay down the same debt- and you do have the cash to pay off the car.

In the same discussions, it might appear you have too much house- but if you get rid of the house, you don't have the cash to pay off the car...

so I believe the best thing for you is to find the most financial efficient solution (even if its not the best solution).

Tough to find that solution without knowing how much house is going to change taxes though- this might give you a 5k per year annual raise (it might only be $1000, but it might be $5000 or $10,000).

Nothing is set in stone if you "project" the tax return for 2011, but it should give you an idea if a large windfall is coming your way and I believe it would fix some of the cash flow issues which started this thread.

1) Focus on income
as I posted before, list income sources (rent vs W-2 vs mialge reimbursements) as separate line items. Each of these items has a cost and risk associated with it, so count them separately so you know the magnitude of each risk.

2) Focus on expenses- total expenses is the key, not which account they are paid from, or why the expenses is incurred. Create sub categories for expenses if you need to keep track of details...

at minimum you need to compare total income to total expenses and get that to balance month over month. Paying off the car should help this as well.

3) Focus on debt- in general when cash flow is tight, keep debt to a minimum and if you do incur debt, keep it short (meaning finance it for 12-24 months) to make sure you can truly afford what you finance.

4) Focus on taxes- there are tax implications for owning a home, there are more tax implications for renting- you might want to take a tax course in the fall to learn the details. While you may not have planned to claim the rental income, its very possible claiming it gains you more in refunds than it does cost you in taxes owed. You need to know how to do the math to check.

[investingnoob]

Ok well seeing as I did get to much house but I'm not selling it for 3yrs so I don't pay $8k back to government.
I can do this, things will be tight, ill just have to budget and track income and expenses.

I'm 99% sure I'm going to just pay my car off with my savings. My saving will take a hit but ill save in interest and get the monkey off my back. I could just get liability on the car now that its paid off, but it is blue booked at $15k so I probably should keep full coverage.
Thanks for your time and advice jim.