401k?

[Kerrie]

If you had enough in your 401k to pay off all your debts but would lose 1/2 of it due to taxes and penalties, would you?  I think I have figured out that not only would it save us as far as stress goes but also it would take the $800/month that I am now paying to various cc companies that is mostly getting us nowhere fast and enable us to save it.  One of our cc says on it that if I keep on paying what I have been it will take 108 years and we will pay $245,000 total.  That would also help us to pay a cc that is now in collections and I have a summons for (see a post from a few days ago).  Would you do it?  Why or why not?  I've only really thought of this today.  I know that in talking to DH in the past that he will be dead set against it.  I don't know how else we are going to pay off/down our debt.  Without a *huge* influx of money it just does not seem possible.

[sewaneecook]

Nope, I wouldn't.  Those who haven't struggled to pay off the debts and simply take the easy way out usually find themselves back in debt again.  However, if you have to scale back lifestyle, take on extra jobs, sell anything extra, and make a lot of sacrifices to pay off debt, valuable lessons are learned and getting back in debt is much less likely.  Retirement accounts are heavily taxed and there are huge penalties for withdrawing early.  Not a very wise way to spend money. 

My ILs are a perfect example of what not to do.  Nearly 20 years ago they bought a house for $60K, continued to spend more than they made, took out extra mortgages, and 15 years after buying the house they cashed out ALL of their 401K to pay the now $80K that was owed on the house!!!  Now, 5 years later, they are in their mid-60s, will never be able to afford to retire, still spend more than they make, and haven't learned how to pay off debts with hard work and sacrifice. 

Debt doesn't accumulate overnight and getting out of debt doesn't happen instantly either.  Learn from mistakes and do all you can to correct the problem so that those mistakes don't happen again. 

[Denvergirlie]

I would not cash out a 401K either, unless I was in danger of being homeless.

Have you cut your budget to bare bones? taken part time jobs? Sell everything but the kids?

best of luck

[Kerrie]

Well, it turns out that it doesn't matter anyway.  We cannot take the money out while DH works at his current job and he's certainly not going to quit to get the money so I am back to square one.  I just don't know what to do? :(

[sewaneecook]

Sell things in a garage sale, on Craigslist, on Ebay or Amazon.  Cut back on ALL extras, make food from scratch, make your own soap and laundry detergent, stop all non-essential spending, put all extra money toward debt, take an extra part-time job, sell your hair, grow your own veggies, donate plasma, make gifts for birthdays and other holidays, cut out cable TV, line dry clothing, get creative on ways to cut back and spend less.  There a lot of ways to do it.  One line from Dave Ramsey I like is that you have to get mad at the debt before you are willing to make the sacrifices to make the change to get rid of it.  It sounds like you are close to being mad ... let that work for you!  Good luck, you CAN do it!

[Kerrie]

Thank you for the suggestions.  I guess I am just not mad enough yet?  I can come up with reasons (see: excuses) of why many of the things you listed will not work.  I called the cable company earlier today to cancel.  I have had many yard sales over the years so really do not have much to sell.  The last time I did a yard sale I made about $35 and put in more hours of work than I would like to think about.  I already cook from scratch and feed my family food that I would rather not to save money.  I don't have enough hair to sell.  The plasma idea is a good one.  I do not like needles but I could get over it. I use my dryer much more than I should and that will be stopping today.  I have 2 clothes lines that I have to start using.  I have also been using more warm/hot water for washes so that will also be stopping.   I don't really have much non-essential spending.  I am really going to sit down and make this work I just don't know how.  I put everything I could think of down on paper yesterday and once I added it up, I had more outgoing than incoming.  What I don't understand is that we have been surviving.  Our credit ran out months ago so I have been paying the minimums on our credit cards, paying our bills and just seem to make it all work. I did find a link to a budget report on dave ramsey's site so I'm going to print that up and use it.  I don't know how to figure out some of the stuff though.  Like how do I budget for electricity when it changes month to month?  As for bringing in more money, well, I've been trying.  I babysit kids in my home.  I have been looking for more kids but have had no luck.  I cannot get a job outside of the house because once I pay for childcare, I would not make anything.  DH already works as many hours as he can.  He is gone m-w 7-10, th 7-6 is his schedule but he usually stays and works ot and f he is scheduled off but if there is work to do, he goes in for more ot.  So I also cannot get a job m-f evenings because he is not home and I would run into the childcare issue again.  There are weekends but last summer I tried it and I was only making $38/weekend every other weekend so we decided that it just was not worth it.  Maybe I need to reconsider that.  I think the biggest things are get a cc that is in collections and I have received a summons for taken care of and work out a budget and just keep track of every cent.  I just don't know how to get ahead when we are barely staying afloat.  I am a stress case and the easter candy has taken a hit because of it. :(

[Kerrie]

Okay.  From what I am reading the Red Cross does not pay for donations?  Is there somewhere else to give?  How do I find out?

[TiredX2]

If you are spending more than you are bring in and that is with only paying the very minimum on your credit card debt, have you considered bankruptcy?

I'm sorry you're going through this!

[MsFortune]

Agreed - maybe bankruptcy is an option? If you feel comfortable talking in here, can you talk about how much your debts are and where you are financially? I can understand if you do not want to get that details on a forum.