Clarification about 401k situation

Just to clarify, if we could just get rid of this huge debt ($20k) we will be in a position where we are making more than we spend. We can afford to pay the $1,000/month for my youngest’s school if we scrimp. The problem is the $20k that’s hanging over our heads.

However, I am certainly going to look again where we can trim and pay some more attention to the advice on this list. Maybe I can work something out with the school if I can pay little by little?

Thank you for your advice.

You know I was thinking about your situation today and honestly, if it was me I would take $$ out of the retirement. My biggest concern is that you would allow yourself to fall into the same old habits that got you where you are in the first place. Know what I mean?

I could be wrong and I am sure others will let me know if I am…..LOL…but I can certainly understand your wanting to just pay the debt and be rid of it. How much longer would you have to pay the family loan?

As far as your budget is concerned, even cutting corners a little bit more could add up. For example, in my phone bill I realized we were paying for services (such as three way calling etc.) that we never used. So I had them turn those off. I also called up my cell phone company and had them take off other services I never used. Like the text messages. My provider now charges .20 per text. Their package costs $5 a month. I would have to text 25 times and I never come near that. So, I just pay the .20 when and if I text. Not much but if you add it up it will count.

Anyways – since I had re-thought what I had originally written I thought I should write again. 🙂

Innnnnteresting….. I appreciate your writing again. I have the exact same concerns, because we have “resolved” to change old habits but have fallen into debt again….. but at least it was less the second time around! So I would definitely need to figure out a safe game plan that we STICK TO……

Also I realized that between now and June we will be paying about $4000 toward this year’s tuition, leaving $13000 due, not the $17k I was figuring on…… So we’ll have to throw that in the mix…..

Unfortunately we are dealing with two new situations in the next school year: One child in public high school, and one child homeschooling, and we’re not sure how much all that will cost. So we want to estimate high…….

It just drives me nuts to spend all those extra thousands to get out of debt! BUT I guess it would be worth it if it means the END of the debt…..

As for the debt to my family, my wonderful brother loaned us $40k and said it’s his youngest child’s college fund, so we have 15 years to pay it back…… but we’ll pay more into it as we can.

Thanks again!

The ONLY way to get out of debt is to:

STOP BORROWING FROM ANYBODY FOR ANYTHING … family, friends, loan companies, credit card companies or anyone.

Cut up the cards, throw away every loan application, and save to pay cash, or do without.. If you still decide to get quick cash loan online – do your best to pay it off as soon as possible!

Then be sure you’re spending less than you’re earning and apply as much as possible to the debts.

God bless…

Re: Should we bust open a 401k to get out of debt?

The school may not be optional but you can’t afford it. I understand that I do not know the other info as to why you have to go to the private school but that line just jumped out at me. There’s always an option. We all have choices. Could be something personal that I am missing but that’s my thoughts.

As far as taking out of the 401k savings I would NOT recommend it. I would recommend that you halt any and all contributions which should free up some money.

I know that you “think” that you have shaved as much as you can but you would be surprised at the ingenuity that can be found in this group. I posted my info and received TONS of solutions. Most I had thought of but many I had not and I was able to trim some fat off a budget that I thought was already lean.

Part of the general understanding in this group is to spend less than you make. You aren’t doing that. Think about if you had cashed your check each week with no ability to obtain credit/loans. Once that money is gone…’s gone. End of story.

If you are serious about getting out of debt then you have to make some serious sacrifices and some really tough choices. In the end, it will be worth it.

Also, watch what Dave Ramsey answering your question:

Should we bust open a 401k to get out of debt?

Here’s the situation: Currently we owe our kids’ private school $17k for the 2005-2006 school year. They have been very patient, and while we’ve been paying $1600 every month for the kids’ education, that all just went to LAST year’s tuition, which just got paid off. We haven’t even STARTED paying this year’s tuition, even though the school year is over in two months. It needs to be paid and we can’t afford to keep making payments on top of what we need to pay for next year. This is a religious school and it is not optional for us. The $17k INCLUDES a substantial scholarship (three children). (Big comfort: Next year the oldest will start public high school, and the middle will homeschool, so the bill next year will be much lower–about $1000/month.)

On top of that we just found out we have to pay $2300 in taxes.

We have paid all the credit cards off by getting a loan from family, which we are paying back at the rate of $300/month until we can pay more, eminently reasonable.

We have about $60k in a retirement account–the only nestegg we have. We have very little equity in the house, not enough to take a loan off. We’ve shaved our budget as low as it can go.

The question is: Should we tap into the retirement account? We calculate that in order to get the $20k that we need to pay off the school tuition and the tax bill, we would need to take out $26k to cover taxes and penalties. $6k is an awful big hit to take, but it would eliminate all debt except what we owe family. We might be able to take a couple hundred a month and put it into a CD, in order to re- build some of our savings.

I should mention that at some point in the next ten years or so, we are expecting to inherit at least $100,000, and probably quite a bit more. Nothing to plan on, but nothing to ignore either. That will be able to be invested into retirement planning.

My husband thought that maybe we should take out another $5k to pay off an old car loan, so we can have that much more financial freedom, but I’m already VEEEEERY leery about taking ANYTHING out of our very last nestegg.

What do you think? Any and all advice would be SO appreciated, I really do not know where to turn and can’t decide on my own what to do!

Thanks so much!