| Paying off Credit Card Debt |
|
|
|
|
|
mikeyp
New Poster
Cash: $ 0.45
Posts: 2
Joined: 15 Apr 2011
|
| Paying off Credit Card Debt |
 |
|
I have about $20K in Credit Card debt. I'm only able to pay the minimum balances every month so it's is going to be decades before I pay off that debt. I am young (33). My question is should I withdraw from my 401K to pay off this debt? I have $25K-$30K in my plan so I would pretty much wipe it clean. My thought process is being young, as long as I don't do this again (I'd cancel the credit cards) I have plenty of time to build my 401K back up again.
|
Fri Apr 15, 2011 11:46 am |
|
|
littleroc02us
Moderator
Cash: $ 205.35
Posts: 1015
Joined: 09 Feb 2009
|
Are you sure you can only pay the minimums? What else can you cut out in your budget? Can you take a second job? The sky is falling mentality won't get the debt paid off. Do you have anything you could sell on Ebay to get the ball rolling? All you need to do is cut out one of your smallest debts and the Snow ball effect will start. Good luck!
Romans 13:8 “Owe no man any thing, but to love one another: for he that loveth another hath fulfilled the law.”
|
|
Fri Apr 15, 2011 1:05 pm |
|
|
terrancebrandt
Full Member
Cash: $ 19.60
Posts: 93
Joined: 01 Mar 2011
|
Take another job to help you cover Credit cards payments. That is the fastest way to resolve it. It may be very hard to do but nothing is impossible!
-------------------------------
Check out our website and find the best options of our cheap life insurance.
|
|
Fri Apr 15, 2011 3:26 pm |
|
|
oldguy
Senior Member
Cash: $ 309.30
Posts: 1481
Joined: 21 May 2006
Location: arizona
|
|
|
|
quote:
My thought process is being young, as long as I don't do this again
There thousands of young people who have tried this and learned the hard way that it is a bad plan. Most end up with no 401k and they run up their cards again (they say that they won't but they do, it's part of the human condition  )
To start with, when you cash out a $30k 401k, you get only about $19,000 after penalties & taxes so it won't quite pay your loans. The other problem is that you don't recognize your credit card debt as loans - that is a bad mind-set for you.
Analize your budget, recall what the loans were for, and then make a new budget that has balance. The top two costs are your shelter and your transportation. If you are spending $25,000/yr for shelter and $10,000/yr for transportation, that $35,000 cost represents about $50,000 of your before-tax salary. That would be OK if your salary is $100,000 - but not OK if your salary is $60,000. So start by fixing those two cost items so that they are in balance with your income stream.
|
|
Fri Apr 15, 2011 4:14 pm |
|
|
Adriennebanker
New Member
Cash: $ 1.45
Posts: 7
Joined: 05 Apr 2011
Location: NY
|
Your plan sounds promising, however, you'll never know when you'll run into more financial troubles. Personally, I think the best move for you right now is to get a better paying job. If you really can't get one, get another job. You really can't wait for money to trickle in and douse your fire with it, what you need is a bigger firehose!
Secure your future by participating in a Solo 401K today.
|
|
Fri Apr 15, 2011 4:32 pm |
|
|
clintdavis
Member
Cash: $ 2.55
Posts: 12
Joined: 05 Apr 2011
|
Hey Mikey, I definitely wouldn't cash out your 401k. However, I would stop any contributions to your 401k until you can clean up this debt mess.
Work the debt snowball. Check out this blog post about working the debt snowball: http://bit.ly/f0e4yh
You need to focus on knocking out your smallest debt balance. Then, you free up enough wiggle room to start paying extra toward the next smallest debt.
But you have to be very intentional or you will be paying on these cards forever. Sell some stuff...ebay, craigslist, amazon, garage sales. Work extra hours or get a part time job. You need to break the log jam, and free up some of your income so that you can start making some headway with these credit cards.
You're thinking the right way. Cut up the cards, and never ever borrow money again. Be done with it! You can do it!
Thanks for sharing!
In Freedom,
Clint
http://www.daviscoachingsolutions.com
clint@daviscoachingsolutions.com
|
|
Fri Apr 15, 2011 4:57 pm |
|
|
mikeyp
New Poster
Cash: $ 0.45
Posts: 2
Joined: 15 Apr 2011
|
Thanks for the advise so far. So to add some more prospective, I'm also a VP of a software company and have a 6 figure salary. I got into this trouble through a series of bad investments and bad advise through a financial adviser who was more interested in lining his pockets I didn't have a six figure salary when this mess started. I have a few loans that come due this year, one of them a school loan, one of them a small home loan. Those will free up about $330/mo. I'm refi-ing the house to free up another 300/mo. In december, my kids day care expenses will drop by about 70/wk to 155/wk (currently at 225/week). So by the end of the year, I'll have an additional ~800 or so available without paying off credit card debt. I guess I'm just looking to get the CC debt paid off, cancel the cards and be done with them. If I do that and everything else goes as planned by this time next year, I'll have nearly $2K/mo of disposable income to reinvest. Thoughts?
|
|
Sat Apr 16, 2011 1:04 am |
|
|
FinTech
New Member
Cash: $ 0.60
Posts: 3
Joined: 10 Jul 2010
Location: Florida
|
| Mike yp - credit card debt |
|
|
Since your debt is overwhelming even at $20,000 and that it will take years to pay off paying the minimum, you should consider an alternative means to absolve this debt. There is a better way.
You need to protect your assets and most importantly, your income. Here is some advice of what to avoid.
You should run as fast as you can from any debt settlement or debt consolidation program. They are very costly, extremely ineffective and can leave you exposed to lawsuits.
First of all traditional debt settlement has well over a 70% failure rate, mainly because they provide you no protection from the creditors. They offer to settle your debts for average of 50%, they charge you 15% of your debt as a fee, then you pay income tax on the cancelled debt. When all is said and done you are back to at least 85% of what you started with in costs out of pocket. What did that accomplish for you? All during that agonizing 4 or more year process your credit is in the tank, precluding you from moving on with any of your financial goals. That's a long time to be exposed to lawsuits.
In debt consolidation you are trading an unsecured credit card debt for a secured debt backed by an asset such as your home. That is the worst possible financial blunder ever offered in the credit industry. This could cost you your home.
Bankruptcy? That should be out of the question when your major financial dilemma is unsecured debt.
Eliminating the impractical programs through logical analysis was easy. So what could possibly remain as a viable solution? Keep in mind that after all you have been paying the creditors high interest for years on your own money and not seeing the light of day…the principal just doesn’t seem to go down. That’s the way they want it to keep you in debtors’ prison.
There is an alternative to all of the above which is an all-inclusive means to satisfy the obligation of the debt where everyone wins. During the process you are completely protected, including every asset you own plus your income.
You can empower yourself with a unique method that enables you to pay off those accounts for 10 cents to 20 cents on the dollar. That means you can save 80% to 90% off on the balances your creditors say that you owe. You can be debt free in about 18 months, be protected from creditor liability lawsuits, saving you many thousands $$$ in out of pocket costs, no tax consequences and your credit will be restored at the end of the process. Do your research. Just Google "credit card debt resolution" or "zero credit card debt" and you can learn more about this tried and truly effective method which was authored by an attorney with more than 30 years experience in debt and tax matters.
Mike Kohl
Certified Debt Resolution Consultant
|
|
Sat Apr 16, 2011 1:15 am |
|
|
cccfree
Full Member
Cash: $ 7.80
Posts: 51
Joined: 08 Mar 2011
|
I would agree that you should really look into getting a 2nd job or finding someway to maximize your income.
Debt Settlement Scam | Credit Counselors
|
|
Tue May 10, 2011 9:55 pm |
|
|
eastmn
Senior Member
Cash: $ 81.20
Posts: 393
Joined: 04 Apr 2010
|
You might consider trying to dispute and settle the debt, try to reduce the principal on the basis of unwarranted abusive interest hikes, double cycle billing, fees, payment shifting to high rate balances, foul collection practices, and resulting damage$ (credit score, reputation, pain/suffering). The disputed adjustment should not be 1099 taxable, because it's disputed. Of coarse, get everything in writing "first", before payment (binding). I saw one case where they agreed to settle the debt if it would be permanently removed from his credit report. You may also want to hide where the settlement money is coming from (family or church) in order to hedge risk and increase the odds.
http://www.youtube.com/watch?v=IM0DhBj-5y8
Last edited by eastmn on Mon May 16, 2011 4:14 am; edited 1 time in total |
|
Wed May 11, 2011 1:27 pm |
|
|
onebrokejoke
New Poster
Cash: $ 0.40
Posts: 2
Joined: 15 May 2011
Location: Seattle
|
First tool you will need is a cutting utensil or a nice hot fire to throw those plastic slave cards in.
|
|
Sun May 15, 2011 9:54 pm |
|
|
Pat Morris
New Member
Cash: $ 0.80
Posts: 4
Joined: 26 May 2011
Location: Massachusetts
|
I would strongly recommend against withdrawing from your 401K.
You indicate that you will have some additional money available in the relatively near future. I would continue to pay the minimum for the present, and as soon as you have additional money available, I would put every cent on the card with the highest interest rate, until you have paid them all off.
Have you considered asking the credit card companies to reduce your interest rate?
Patricia S. Morris, Esq., CFP
Personal Bill Paying Services, LLC
http://personalbillpayingservices.com/blog/
|
|
Thu May 26, 2011 3:54 pm |
|
|
ttammie98
Member
Cash: $ 3.20
Posts: 16
Joined: 23 May 2011
|
If you withdraw money from your 401k then you will have to pay the penalty and taxes. If it were me I would not do it. I would only contribute to 401k to get the company match and use the rest of my money toward the debt.
How To Stay Out Of Debt
|
|
Fri May 27, 2011 7:26 am |
|
|
Adria.John
Preferred Member
Cash: $ 32.60
Posts: 162
Joined: 20 Apr 2010
Location: UK
|
Well, I cannot even begin to tell you how many times I have seen this happen over my years of working in this industry and it's very sad. This is why in my opinion a debt consolidation loan is the riskiest and the worst option to use when trying to get out of debt.
Loan Expert!
Loans Fast | Pay Day Loan | Fast Payday Loans
|
|
Mon Jun 06, 2011 11:54 am |
|
|
paulaYoung
New Poster
Cash: $ 0.40
Posts: 2
Joined: 20 Feb 2011
Location: Alice, TX
|
My mom is also suffering with the same problem on her debt on credit cards. She recently joined Ebay and earn extra money there. It could really help you a lot if you will have another source of income so you could pay not only the minimum.
country inmate search
|
|
Tue Jun 07, 2011 1:41 am |
|
|
|
