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#181 of 369 Old 12-17-2007, 01:51 AM
 
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I have a complicated question to ask...

DH and I have been following the Dave Ramsey financial plan for 2 months now and in that time we have made and stuck to a budget for the first time in our lives!
This is our debt:
$2800 Amex Paid off this month
$5254 MC (5.9%)
$6424 Car (2.9%)
$8050 My student loan 3.9%)
$11293 Visa (13.9%)
$61000 DH's student loans (2.9%)

I am a musician and I sold my main instrument for $25K, just waiting for the check and I plan on paying off the credit cards, the car and then my student loans. I currently do not have to pay any minimum on the student loans so I am leaving that debt. I just found out that I may be receiving a large (30K) bonus from my work. That would go a loong way in paying down DH's student loans. On top of that we are expecting a large tax refund. So we have some big chunks of money coming in to help pay our enormous debt.

I have been taking any extra work I can get. The past 3 months I have been driving around so much taking extra gigs and spending many many evenings away from our wonderful 2YO. DH has not been doing this part- he often has a lot of free time and has not shown gazelle like intensity in regards to selling things or finding extra work. He has been 'looking into' taking some computer courses so he can have a second 'side' career (he is also a musician.) He has sort of tried to get students but not with any intensity. It is very frustrating to me because I feel a sense of urgency in getting things paid off.

So here is my big question, I was thinking of sticking my bonus money in a savings account and telling DH that I will match each month the amount of funds he pays towards his students loans. I feel like it is just too easy for him to ride on my hard work. By the way I originally had $63K in student loans and I made big sacrifices to pay it off down to $8K.

I know Dave Ramsey's deal is to act as a couple, one unit. But I feel as if I am enabling his semi-laziness if I put my hard earned bonus into his student loans .
Good idea or no?

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#182 of 369 Old 12-17-2007, 07:20 AM
 
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Originally Posted by phathui5 View Post
Purity Lake,

If you had extra money, you would put as much as you could towards your smallest debt (while making normal payments on the others) until you kill that debt off.

With regard to savings, I would leave the kids' savings where it is and just not add to it until the debt is gone. I would feel like it weren't really my money to take unless there were an emergency.
Thank you.
My husband and I have been going in circles on this topic.
He says if I took all their money and all my IRA, we'd be able to pay off the auto loan, the largest debt with the largest interest rate.

I said, yeah, but we'd still have both credit cards (the lower one is at a fixed rate), and we'd have no savings, I'd have no retirement (not that what I have is much for retiring on) and I'd have huge guilt about having spent my daughter's money. Not only that, I also thought, if we take their money now to pay off the auto loan, what would stop us from taking their money again to pay off some other credit card, and again, etc.

Other than $50 from my grandmother for each, and the $12 I've put in there a year or so ago, the only thing that has created their large savings is the PFD, a check in each of their names. So that is why I so strongly feel it is 100% their money, not mine to use when I feel like it.

Another point my husband made was that if we took their savings and my IRA and used them to pay off debt, we'd have only the $30 in our savings and we would then qualify for food stamps, since they only allow a max of $2000 in savings, even counts the IRA because I *can* withdraw from it.

And besides, every October my husband and I each get our own PFD's as well and I feel like we should simply count on our own money to pay off our own debts. It's not my daughter's debt, after all.

Oh, well, I'm sure you can all see I'm still going around on this one.
When I can't make up my mind, I don't do anything different.

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#183 of 369 Old 12-17-2007, 08:39 AM
 
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So here is my big question, I was thinking of sticking my bonus money in a savings account and telling DH that I will match each month the amount of funds he pays towards his students loans. I feel like it is just too easy for him to ride on my hard work. By the way I originally had $63K in student loans and I made big sacrifices to pay it off down to $8K.

I know Dave Ramsey's deal is to act as a couple, one unit. But I feel as if I am enabling his semi-laziness if I put my hard earned bonus into his student loans .
Good idea or no?
I think that could be a great motivator. My DH isn't totally on board yet we have managed to pay off most of our debt this year. I have to constantly remind him to write the checks, and sometimes he doesn't do it and spends the money on something else, but we have made great progress together. I think sometimes it is not any everybody-jump-on-board situation and you have to do what works for you and your family. For our family, I am the driven one and it works for us.

DR would probably say you have a big communication problem in your marriage but sometimes I don't think things are as simple as he makes them out to be.:

Nice bonus and congratulations on all your hard work!
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#184 of 369 Old 12-17-2007, 09:38 AM
 
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Nolansmom I woud pay off every debt and then do you already have a 6 month emergency plan in place ? I would do that after all the pther debt is paid but that huge school loan . Then I would start working on the school loan . It could take yr to pay off 61 thousand dallors and you may need a 6 month emergency fund befor you pay off that school loan .

Have no Idea if I am making sence I have 3 kids talking to me at the same time .
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#185 of 369 Old 12-17-2007, 11:41 AM
 
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Originally Posted by ~Purity♥Lake~ View Post
So, does this include my auto loan, or is that something different?

I have 3 debts (not including unpaid medical bills).

So, my question is, if I have extra money (which I don't, but if I did), which one of these three bills do I pay extra on?
Which one would I pay off second?
Yes, that would include your auto loan.

DR says to pay off the lowest balance first regarless of interest rate. Just so you can see the progress sooner. But, Suze Orman recommends to pay off higher interest rate first, to save on interest charges. I tend to agree with her. Since the CC debt is not a fixed rate, I would try to get that down first. Since you are paying 3% every time you move that around, it adds up. Then I would work on the auto loan, then the fixed rate 3.9 CC last. But that is just me.

The savings is a personal decision, I would probably do it if you are good at saving, and put your debt snowball into the savings after debt is paid off. Don't touch the retirement. I made that mistake, now I have nothing but a huge tax bill!
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#186 of 369 Old 12-17-2007, 12:09 PM
 
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Here is another question.
My mom and others have suggested I take my daughter's savings to pay off debt.
Currently they have $4,600.51 in a one year CD collecting interest of 5.195%.

My lowest debt is $4,398.68 at a fixed interest of 3.99%.
the minimum payment is only $89.

I'm earning more interest on that savings than I pay in interest on that debt.

So, it doesn't make sense to use that savings to pay off the debt.
Don't forget you are also paying income taxes on the 5.195% you are earning. So if you are comparing the two, you have to figure your actual amount of earned interest is much less.

But when you pay debt you get a guaranteed return of your interest rate and it is not less any taxes.

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#187 of 369 Old 12-17-2007, 03:29 PM
 
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Nolansmom I woud pay off every debt and then do you already have a 6 month emergency plan in place ? I would do that after all the pther debt is paid but that huge school loan . Then I would start working on the school loan . It could take yr to pay off 61 thousand dallors and you may need a 6 month emergency fund befor you pay off that school loan .

Have no Idea if I am making sence I have 3 kids talking to me at the same time .
This is a great idea, stash it away as our emergency fund. I think I will open a savings account through our money manager so that if we have to get at the money we will have to go through him. I am planning to pay of the student loans in 2 years, possibly earlier if DH gets off his butt and earns some more money. I think it is better to have to really work to pay off a large debt like the student loan rather than pay it off with a big lump sum. I think he will feel really good as he writes out a check each month to that student loan knowing it is his perseverance and hard work that is getting rid of it.

alleyoop-yes we do have a communication problem. It is getting better (we are in couples counseling). DH has come a long way, a few months ago he would not even agree to live on a budget. He has been living as if he deserves to buy _______ because he has a good job and that if the mortgage company will give us a loan that we can afford the house. It is hard to change one's attitude about money but the DR book has convinced him that being conservative about money is wise. He has always made me feel bad about being frugal but now he sees that it is a better way to live. So, one thing at a time I guess!

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#188 of 369 Old 12-17-2007, 04:45 PM
 
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On BS 1.5: I added $74 to our sell the truck fund. So it's at $371.12/$5000

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13yo ds   10yo dd  8yo ds and 6yo ds and 1yo ds  
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#189 of 369 Old 12-17-2007, 05:49 PM
 
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PurityLake: I agree with the PPs, I wouldn't touch the kids' savings accounts or your retirement account. Our kids have 529 college savings plans, and we are continuing to contribute to them as well as DH's 401K while we are working on getting ourselves out of this hole.

Nolansmum: When I read your first post, I thought that you'd really be setting yourself up for "me vs. DH" problems by keeping your money to yourself and refusing to share. But after reading your followup, I don't think it's a bad idea. A 6 month emergency savings account is a great idea!

As for me, we got $ from DH's grandma for Christmas, and we came in under budget for our Christmas gifts so I added a little bit more to our EF: 389/1000

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#190 of 369 Old 12-17-2007, 06:05 PM
 
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Yes, that would include your auto loan.
DR says to pay off the lowest balance first regardless of interest rate. Just so you can see the progress sooner
But, Suze Orman recommends to pay off higher interest rate first, to save on interest charges. I tend to agree with her.
I like Suze Orman's theory better.
I'd rather pay less than think I'm making more progress.
I wouldn't feel I was making more progress at all, just because the lowest balance was paid first, because I know how much I pay in interest each month on all three.

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Since the CC debt is not a fixed rate, I would try to get that down first. Since you are paying 3% every time you move that around, it adds up. Then I would work on the auto loan, then the fixed rate 3.9 CC last. But that is just me.
My first credit card with the lowest balance has a fixed interest rate of 3.9%.
So I assume you are referring to the second card, my husband's debt, with the temporary interest rate of 3.9% carrying the highest balance of all three.
Then if I paid any extra on that first, to pay it off, then the auto loan, even though it would take longer, I'd end up paying a huge amount less in balance transfer fees and interest.

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The savings is a personal decision, I would probably do it if you are good at saving, and put your debt snowball into the savings after debt is paid off. Don't touch the retirement. I made that mistake, now I have nothing but a huge tax bill!
Well, I think I've decided I won't touch my IRA.
I'm still in turmoil about touching my daughters' savings.

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PurityLake: I agree with the PPs, I wouldn't touch the kids' savings accounts or your retirement account.
Our kids have 529 college savings plans, and we are continuing to contribute to them as well as DH's 401K while we are working on getting ourselves out of this hole.
My daughters' savings are in a 1 year CD collecting a 5.195% APR, then it goes into the savings connected with that CD in October when the PFD is direct deposited into their savings account.
Then I roll over that new, larger amount back into a 1 year CD.
So, how does that compare to a 529 college savings plan?
I assume the 529 is ONLY for if they go to college, and if they don't use it for college, it's gone.

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#191 of 369 Old 12-17-2007, 06:24 PM
 
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Katreena, I just wanted to say that I agree that you shouldn't touch your kids' money, since it is theirs, not just, say, money you put away yourselves for them. Also, if you absolutely need it later, you will still have it to use, because of course, it is better for your kids to have food on the table, heat, and a roof over their heads than money in the bank. At this point, when those things are covered, I would leave the money there for them. I think you would feel better about that choice.

I also agree with paying off your second card first, because you have to move it around and it has a variable interest rate. I would also rather ACTUALLY save more than think I was doing well because one was gone. I think that advice only makes sense if the smaller debt is very small and gone very quickly, or if you have trouble remembering to pay them all and want less bills to remember.
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#192 of 369 Old 12-17-2007, 06:38 PM
 
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Thank you, dealic, you just confirmed my gut feelings on this.

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#193 of 369 Old 12-17-2007, 06:43 PM
 
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I assume the 529 is ONLY for if they go to college, and if they don't use it for college, it's gone.
No. The money earns interest tax-free as long as the withdrawals are made for qualified educational expenses. If the money is withdrawn for non-education purposes, it is still there, but you will have to pay taxes on the earnings and a 10% penalty. But the money is always there.

It is also important to consider that now education beyond high school is vital to get a job. Even if it is community college or trade school.
I can only imagine how important it will be in 15-20 years.

I am always troubled when I read things on here about college savings not being necessary because kids might not go to college. Every kid I knew who decided not to go to college at 18 ended up struggling to pay for classes themselves by the time they were 20 or 21 and realized that they needed some additional schooling in order to get a decent job. It just really is not possible any more to graduate high school and get a good-paying job without some sort of post-secondary training.

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#194 of 369 Old 12-17-2007, 07:05 PM
 
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No. The money earns interest tax-free as long as the withdrawals are made for qualified educational expenses. If the money is withdrawn for non-education purposes, it is still there, but you will have to pay taxes on the earnings and a 10% penalty. But the money is always there.

It is also important to consider that now education beyond high school is vital to get a job. Even if it is community college or trade school.
I can only imagine how important it will be in 15-20 years.

I am always troubled when I read things on here about college savings not being necessary because kids might not go to college. Every kid I knew who decided not to go to college at 18 ended up struggling to pay for classes themselves by the time they were 20 or 21 and realized that they needed some additional schooling in order to get a decent job. It just really is not possible any more to graduate high school and get a good-paying job without some sort of post-secondary training.
Thank you for the info on the 529.

I hope you didn't think I was saying I don't think college savings are important, because I wasn't.
I didn't have money for college, even though I was working two jobs right after graduating high school, and I qualified for financial aid, I didn't have the $6,000 I needed to attend, and neither did my parents.
That is a huge reason for me to not touch my daughters' savings.
I know they're only 2.5 and 15.5 months, but if they already have $4,500 now, I imagine by the time they are 18, it will be quite a sizable amount and will easily fund their college, even with the way college prices have continuously increased year by year.

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#195 of 369 Old 12-17-2007, 09:28 PM
 
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ETA: Don't touch any retirement savings. You should never take anything out of a 401(k) or an IRA unless it is the ONLY way to avoid a foreclosure or bankruptcy.
Especially if you are in a retirement system that offers health insurance to its members ... it may be your only chance when you retire.
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#196 of 369 Old 12-17-2007, 09:30 PM
 
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Especially if you are in a retirement system that offers health insurance to its members ... it may be your only chance when you retire.
A retirement system that offers health insurance?
What system is that?

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#197 of 369 Old 12-17-2007, 09:35 PM
 
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A retirement system that offers health insurance?
What system is that?
Well, I'm vested in the KY state retirement system (before marriage and kids) and once you are vested, upon retirement, you can get your health insurance through the state. Maybe that's only a government thing ...
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#198 of 369 Old 12-17-2007, 09:39 PM
 
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Well, I'm vested in the KY state retirement system (before marriage and kids) and once you are vested, upon retirement, you can get your health insurance through the state. Maybe that's only a government thing ...
Yeah, that could just be by the state, or through the company.
I'd never heard of anything like that, but I've never lived in Kentucky, either.
But good for you for having it.

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#199 of 369 Old 12-17-2007, 09:51 PM
 
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I assume the 529 is ONLY for if they go to college, and if they don't use it for college, it's gone.
http://www.savingforcollege.com/

Has a wealth of information about saving for college and compares 529 plans. The info can be overwhelming, because each state offers their own 529 plan, and you don't need to live in that state to enroll in the plan. But I found the above site to be helpful when I was investigating options a few years ago.

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#200 of 369 Old 12-17-2007, 09:55 PM
 
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There is a college plan here, but it requires they go to UAA and I don't like that kind of limit on their potential future education.

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#201 of 369 Old 12-17-2007, 10:18 PM
 
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I was thinking of cashing in some simple IRAs and a 403b I have to pay down some debt. I would still have money in the teacher's retirement system. Why is this always bad? I have 30-35 years until retirement to put it back and I would still have the main retirement. I have credit cards with upward of 29% interest. I want to pay them off.
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#202 of 369 Old 12-17-2007, 10:23 PM
 
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I was thinking of cashing in some simple IRAs and a 403b I have to pay down some debt. I would still have money in the teacher's retirement system. Why is this always bad? I have 30-35 years until retirement to put it back and I would still have the main retirement. I have credit cards with upward of 29% interest. I want to pay them off.
Well, it sounds like in your case it wouldn't be all that bad because you would still have the teacher's retirement system to fall back on.

Me, the small $4,120 is ALL of my retirement and I'm currently a SAHM, and that 401 k was through a job from back in '98. I was working from 1988 through 2005 and that one job was the only job that offered a 401k, so if/when I ever return to the work force, there is no guarantee I would be able to get a job that offers a 401k plan.

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#203 of 369 Old 12-17-2007, 11:04 PM
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Dh's retirement comes with health ins too. Actually a better plan than they offer them while working!

Katreena, could you take the money out, and then hide it? So you could get food stamps? I don't mean, like hide it under the bed, but put it in a safe deposit box at the bank, or in an account under an alias?

When we were desperate, I never mentioned our annuity, and don't know if I should have. As I said, I didn't consider it real money. Till now.

What's a PFD?
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#204 of 369 Old 12-18-2007, 10:54 AM
 
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I have a complicated question to ask...

So here is my big question, I was thinking of sticking my bonus money in a savings account and telling DH that I will match each month the amount of funds he pays towards his students loans. I feel like it is just too easy for him to ride on my hard work. By the way I originally had $63K in student loans and I made big sacrifices to pay it off down to $8K.

I know Dave Ramsey's deal is to act as a couple, one unit. But I feel as if I am enabling his semi-laziness if I put my hard earned bonus into his student loans .
Good idea or no?
No, I do not think this is a good idea. Like you said it your self, being married is a group venture not individual. Marriage counciling would be helpful in helping the two of you get on the WE track. The way that you stated 'matching' him immediately made me think how I would treat my boys. From the husband perspective will he be empowered to win? Why is he reluctlant?

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#205 of 369 Old 12-18-2007, 10:56 AM
 
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Katreena, could you take the money out, and then hide it? So you could get food stamps? I don't mean, like hide it under the bed, but put it in a safe deposit box at the bank, or in an account under an alias?
What's a PFD?
That would be fraud! Please don't try to skirt the government. If you have money use it wisely.

Be well,

Shane - Homeschooling mom to three boys (12, 1-, 8) and living the open life with my husband.

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#206 of 369 Old 12-18-2007, 10:58 AM
 
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I was thinking of cashing in some simple IRAs and a 403b I have to pay down some debt. I would still have money in the teacher's retirement system. Why is this always bad? I have 30-35 years until retirement to put it back and I would still have the main retirement. I have credit cards with upward of 29% interest. I want to pay them off.

It is bad because of the tax ramifications. You would need to set aside at least %40 of the money to pay the taxes and penatilies. Dave does not recommend cashing out retirement funds unless you are faced with forclosure.

Be well,

Shane - Homeschooling mom to three boys (12, 1-, 8) and living the open life with my husband.

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#207 of 369 Old 12-18-2007, 11:24 AM
 
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Sugar and sun, can you take a loan out on your 403B's? I would do that if you are paying 29% interest on your credit cards. There will be no way to pay off CC's with that high of a percentage rate. If you cash it in, they hold back 20% for taxes then you automatically loose 10% in penalties. You claim it as income for that year, so what you actually pay in taxes is based on your income tax rate. So if you don't make that much money, you probably would come out ahead. Can you apply for a personal or consolidation loan that has a lower interest rate?? I would look into that option as well. 29% interest is just too much.

Education savings. I like the Coverdell ESA's better. From what i read they seem to have better flexibility, and you can use it preschool and elementary education now, but that may change if nothing changes in congress by 2010. I plan on sending my daughter to a Montessori preschool, so I would be able to use it for that, that is in 2010 so I hope they extend the bill.
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#208 of 369 Old 12-18-2007, 11:35 AM
 
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Sugar and sun, can you take a loan out on your 403B's? I would do that if you are paying 29% interest on your credit cards. There will be no way to pay off CC's with that high of a percentage rate. If you cash it in, they hold back 20% for taxes then you automatically loose 10% in penalties. You claim it as income for that year, so what you actually pay in taxes is based on your income tax rate. So if you don't make that much money, you probably would come out ahead. Can you apply for a personal or consolidation loan that has a lower interest rate?? I would look into that option as well. 29% interest is just too much.
This is so not what Dave Ramsey would recommend in his plan. This is all the 'math' talking. Yes, you can pay back your credit cards. Call them and negotiate a better rate or surf it to a lower interest card. This is not optimal. It took a while to get this debt it will take a while to get rid of it. You can do it!

Be well,

Shane - Homeschooling mom to three boys (12, 1-, 8) and living the open life with my husband.

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What's a PFD?
I think it is a check from the oil drilling revenues that they pay to the residents of Alaska if I am not mistaken.
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#210 of 369 Old 12-18-2007, 11:42 AM
 
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This is so not what Dave Ramsey would recommend in his plan. This is all the 'math' talking. Yes, you can pay back your credit cards. Call them and negotiate a better rate or surf it to a lower interest card. This is not optimal. It took a while to get this debt it will take a while to get rid of it. You can do it!

Be well,
Well the math doesn't lie. Paying 29% interest is financial suicide. Yes, definitely try negotiating a better rate, or apply for lower rate cards. If that doesn't work, then try a personal loan or consolidation loan at a better rate. If you have bad credit and none of that works, then look into the loan from the 403B's as a last resort. But definitely exaust all other options first. I do have a lot of CC debt to the tune of $51K, but it is mostly all 3.9%, so about the same as inflation (unless we go into a recession in 2008 as they are predicting, then inflation would rise).
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