I recently setup two Roth IRAs with Tradeking.com. After some debate, I have decided to withdraw $8000 from my savings account so that I can fully fund both IRAs for 2006. While I dislike the idea of depleting my emergency fund, I HATE the idea of missing out on 2006’s contributions. If you’ve ever wondered, here are the Roth IRA contribution limits for the next few years:

The limit for 2006 is $4000. (The fiscal year for contributions runs from April to April, so I have until April 17, 2007 to make my 2006 contributions.) My wife has a Roth, I have a Roth, so our COMBINED 2006 contribution limit is $8000. I sent in $800 last week, and I just transferred $7200 from my ING Direct account to my checking account. I will now send two checks for $3600 apiece to Tradeking, one for each Roth IRA.

I will work VERY, VERY hard to re-fund my ING Direct Savings account. I will treat this depletion of my savings account like a “debt” to myself. I will use my trusty “debt reduction” techniques to “re-pay” myself.

(If you are thinking about opening a brokerage account, I really like Tradeking. I’ve found that their customer service is pretty awesome. Read this post over at My Money Blog about how to get $100 for signing up with Tradeking.com.)

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I used Dave Ramsey’s “Snowball Method” to get out of debt. Basically,
you list your debts “smallest balance-to-largest balance,” pay your
minimums, and then pay extra towards the smallest debt balance.
This method focuses on the “psychological impact of getting rid of
those smaller debts.” There are several OTHER methods for debt
reduction. The MOST popular method is to list your debts “highest
interest rate-to-lowest interest rate,” paying your minimums, and then
paying extra towards the highest debt balance. This method focuses
on the “math” and results in paying the least amount in interest rates.
Whichever METHOD that you use, getting out of debt is about
paying your minimums AND paying EXTRA towards your debts! Personally,
not only did I send in EXTRA PAYMENT, I sent in MULTIPLE EXTRA
PAYMENTS PER MONTH. Here are two VISUAL AIDS which might help
you to “see” how these EXTRA payments work.

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After paying your monthly minimums, simply send in an additional payment, at the end of the month. In our example above, the family makes $3000 per month, receiving one paycheck during the first week and the other paycheck during the second week. As you can see, after budgeting, they have $400 “left over”. But, what if something happens and their monthly “estimates” are incorrect. Perhaps the electricity bill is $50 MORE than they estimated. What does our family do now? Well, if they sent their “extra” payment in at the FIRST of the month, then they have to “find” $50. BUT, if they wait until the END of the month, then they can simply send in $350. So, waiting until the END of the month is a ” better” technique, right? Well… check out the chart below for a SLIGHT modification which might offer a “third” technique.

Using the “third technique” of making MULTIPLE EXTRA PAYMENTS every month, you get the BEST of both worlds! First, you get to decrease the amount of interest that you are paying. Why? Interest is charged on your DAILY BALANCE. The sooner your payment is applied to principal, the less interest you pay on your debt. Second, because your extra payments are smaller, you have more control, should your budget estimates be wrong. In our second chart, our family plans to send in $400 in extra payments, but they spread those payments over the final 3 weeks of the month. So, if they get “stuck” in week 5, they can simply send in an extra $150, instead of $200.

Here’s my original post about making multiple payments. Read it for even MORE details.

A few more thoughts:
IF you make multiple payments, be sure to use online bill pay through your checking account. Do NOT use the credit card company’s website! Why? Most (All?) Credit Card companies limit the number of transactions that you can initiate from their sites. Plus, who wants to give a yucky credit card company access to YOUR checking account?!? Not me. Also, if you write checks and mail them, you’re paying $.39 PER extra money. That’s just throwing good money after bad!

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For those of you who are fans readers of No Credit Needed, now is the time to show some love.  Free Money Finance is running an NCAA-like contest among personal finance bloggers, and TWO of my posts have made it to the SWEET SIXTEEN.  Please, please, please take a second and go over to this post at Free Money Finance and vote for my two posts.   In game 2 my post is labeled Make Multiple Debt Payments  Every Month.  In game 3 my post is labeled Avoid 10 Common Debt Reduction Mistakes.  Please take a second and leave a comment (your vote) over at FMF.  Also, you might want to read the posts themselves.  All of the posts that have made it this far in the competition are informative.

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March has been a VERY busy month here at No Credit Needed. But, I’ve also managed to update my other sites. Here are some of the highlights, organized by site.

No. Calories Needed: (This is my weight loss blog. I track my progress and talk about my diet and exercise.)

Here are my “non-vain” reasons for losing weight, and I’ve refocused after being sick.

NCN Podcast: (This is my podcast site. I record a podcast two or three times a month. Check out my southern charm!)

Here’s a link to my latest podcast. Items discussed include my recent media attention and my personal finance goals.

NCN Network: (The NCN Network is a place where like-minded people gather to share their personal finance goals.)

I’m updating some of the features over at the Network. Check out the latest chart updates.

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I have just finished filing my federal and state income taxes.  I used an online tax filing site, Free Tax USA.  I like their interface.  (I am not an affiliate of Free Tax USA!  I just like their service.)

After creating a user name and password, I was guided through a step-by-step process, entering my contact information, income information, deduction information, etc.  I chose to file electronically.  The entire process took less than two hours.  If you choose to file electronically, you will definitely need a copy of your prior year’s return.  I live in Georgia, so I chose to file my state tax return as well.  I ended up paying $19.90 to file my Federal and State returns.

I always print out 3 copies of my tax returns and I save PDF copies on my hard drive.  I keep 2 copies at home and 1 copy at work.

I will receive a total refund of about $2000.  I am surprised that my refund will be so high.  I ended up with a few “unexpected” credits and deductions.  While it is a bummer that I “loaned” the government this much money, I’ll be sure to put the refund to good use.  Most of it will be deposited in my Roth IRA, but a small portion MAY go towards the purchase of a new printer for our home office.

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