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Started By
Message
re: Postponing 401k contributions to pay of debts
Posted on 11/11/13 at 12:28 pm to SmellslikeKevinBacon
Posted on 11/11/13 at 12:28 pm to SmellslikeKevinBacon
quote:
i feel like the card never goes away
quote:
i am not willing to sell either to free up money
quote:
So now I am getting serious about it
1
Posted on 11/11/13 at 12:44 pm to SmellslikeKevinBacon
quote:
i agree i feel like the card never goes away. I was not responsible with it when i first got it and ran it up. Then I realized my mistakes and paid half of it off. then my car broke down and I put the repair bill on the card, which was just about equal to what i paid off. I have been making minimum payments while paying off other small debts the wife and I have. It seems like the balance doesn't move though. So now I am getting serious about it.
When you get this CC paid off, you need to get an emergency fund in place so you don't end up in the same position again when the next hit inevitably comes.
Posted on 11/11/13 at 12:58 pm to SmellslikeKevinBacon
quote:
I'll look into that. I did not realize that the CC company would be willing to do that.
They know that you could pretty easily look into a competitor's card that has a sweet teaser rate. So call them, it doesn't hurt a bit to ask. They will pull your credit score but this doesn't count as a "hard" pull since you have an existing line with them. Provided you haven't been late in the previous six months your chances are at least decent. They probably won't cut it below 10% but that is still money saved for you.
And if they won't, consider shopping around for another card with a low "teaser" rate. Use that one to pay your bills but keep writing big checks to the high rate card to pay it down ASAP. Just don't use it as a reason to spend more, you can't do that. I suggest setting aside a fixed amount, one that is slightly larger than you feel comfortable with - and send the high-rate card a check as soon as your paycheck clears.
So long as you have an unused balance on a credit card, you don't need an emergency fund. Pay off the used balance as quickly as possible first. If your car breaks down or some such you can charge it back up, but there's no point in paying interest until you actually need the money. Having an unused line of credit is enough until you get more paid off.
Like I said though, nothing beats free money so get that employer match. Worst case is that you'll be paying 19% interest so you can get a 100% return. So long as you pay your bills on time this is still a great deal for you.
Posted on 11/11/13 at 1:10 pm to foshizzle
quote:
So long as you have an unused balance on a credit card, you don't need an emergency fund.
foshizzle, what's your line of thinking here? It sounds to me he clearly doesn't have enough funds to cover anything "bad" that may happen to him, so when that hit comes, he puts it on his CC and gets hit with 19% interest. Then he has to pay 19% off for months at a time over and over again.
I agree with you mostly here that a lot of people put WAY TOO MUCH in a low-interest account for "emergencies," but this guy sounds like he has little wiggle room at all if he is in this position.
For me, personally, I have enough money to put these things on my card to get the rewards, then immediately pay it off because I have money. It doesn't sound like he does though.
This post was edited on 11/11/13 at 1:11 pm
Posted on 11/11/13 at 2:09 pm to foshizzle
You have to think beyond the "free" money aspect also. There is a real cost to passing up the opportunity of making a tax deferred investment.
Posted on 11/11/13 at 2:19 pm to LSUTOM07
The issue isn't money, it is paying the debts off quicker. i have two reasonable vehicles with reasonable notes. I'm not going to sell a vehicle so I can pay off the debt. then once the debt is paid up I will want another car. that just doesn't make since to me. I could see if the notes were putting me in a bad spot, but they aren't. 'm just looking to pay off all my debts as quick as possible. I am not having financial hardships.
Posted on 11/11/13 at 2:21 pm to SmellslikeKevinBacon
quote:
I am not having financial hardships.
So why can't you pay off your credit cards immediately instead of having them "hang over your head" for months at a time?
Posted on 11/11/13 at 2:27 pm to Teddy Ruxpin
I don't like the idea of having a credit card at all. i have proved over time that I am not responsible enough to have one. I do have a small bit saved away ( a little over a $1000). I put $200 a month into a savings for stuff like car repairs and stuff. I would love to have more cash saved and that is why i am trying to pay off this debt quickly. That way I can save more of my income instead of paying bills with it.
this is how I would like to be except not having to put anything on a card, pay cash. It sucks that no one really taught me the importance of saving and debt when I was younger. Now i see the importance. i know way to many people that live beyond their means and while I do in a since I do not want to. I see how it can end badly.
quote:
I have enough money to put these things on my card to get the rewards, then immediately pay it off because I have money. It doesn't sound like he does though.
this is how I would like to be except not having to put anything on a card, pay cash. It sucks that no one really taught me the importance of saving and debt when I was younger. Now i see the importance. i know way to many people that live beyond their means and while I do in a since I do not want to. I see how it can end badly.
Posted on 11/11/13 at 2:31 pm to Teddy Ruxpin
I am just getting to a place financially where I can start taking care of the card. When I first got the card I wasn't. I should have never have applied for it. Call it paying for past mistakes. I pay all my bills on time, have been paying all extra money on debts. i'm sick of all the money we make going to pay off debts. I'm trying to fix it now. Even once i pay bills and such I put a little in savings and leave us enough in the checkbook to do some things if wanted to.
The thing that hurts us the most is not having a good savings. Things have come up that put us behind schedule numerous times on getting the debts paid off. We're trying we just need to be more disciplined on saving.
The thing that hurts us the most is not having a good savings. Things have come up that put us behind schedule numerous times on getting the debts paid off. We're trying we just need to be more disciplined on saving.
This post was edited on 11/11/13 at 2:34 pm
Posted on 11/11/13 at 2:41 pm to SmellslikeKevinBacon
$1000 is a good starting point for an emergency fund. Once yuo have yuor debts paid, you will want to increase that.
You said you are "kinda" doing the Dave Ramsey plan. I think his method will work very well for you. But you need to commit to doing it as fast as possible and I would recommned sitting down and reading his book.
You said you are "kinda" doing the Dave Ramsey plan. I think his method will work very well for you. But you need to commit to doing it as fast as possible and I would recommned sitting down and reading his book.
Posted on 11/11/13 at 2:43 pm to LSUtigerME
quote:
Since your employer contributes 4%, put in at least the 5% to match it. If you can't live without that money, put it in "after-tax" get your match, then withdraw your contribution. That way you still get your match by basically contributing nothing. Take the free money when it's available.
As for the rest of the strategy, pay off the CC ASAP. Don't contribute extra to any of the others until it's paid off. As for the others,
I'd consider going back to 401k before paying them off. Student loans should be tax deductible, and interest rates are low enough that you should be able to outpace them.
Does your employer offer a Roth 401k? If so, I think the withdrawal rules are similar to the ROTH IRA and you can withdraw contribution amounts without penalty.
Posted on 11/11/13 at 2:47 pm to SmellslikeKevinBacon
1 - contribute the 5% to get the match
2 - pay off the CC debt as aggressively as possible
3 - not as easy of a decision as the other two, but i would pay off the other loans since its a guaranteed 6% return
2 - pay off the CC debt as aggressively as possible
3 - not as easy of a decision as the other two, but i would pay off the other loans since its a guaranteed 6% return
Posted on 11/11/13 at 2:47 pm to Chris4x4gill2
I have read his book. I use most of the information. I have gotten off track in the past but I am back on it now. There are somethings we disagree with when it comes to his plan, like selling your car to speed up the process. My wife doesn't like the snowball method from smallest debt to biggest. She thinks we should pay off from highest interest rate to lowest. I can see her point, but we stuck to the Dave Ramsey snowball. We have a budget, it is not a strict budget, but it is a budget.
Posted on 11/11/13 at 2:48 pm to kennypowers816
quote:
1 - contribute the 5% to get the match
2 - pay off the CC debt as aggressively as possible
3 - not as easy of a decision as the other two, but i would pay off the other loans since its a guaranteed 6% return
I think this is going to be my plan.
Posted on 11/11/13 at 3:17 pm to kennypowers816
quote:
3 - not as easy of a decision as the other two, but i would pay off the other loans since its a guaranteed 6% return
I know what you're trying to say, but saying it this way sounds like broken window fallacy-esque.
Posted on 11/11/13 at 3:36 pm to Teddy Ruxpin
quote:
foshizzle, what's your line of thinking here? It sounds to me he clearly doesn't have enough funds to cover anything "bad" that may happen to him, so when that hit comes, he puts it on his CC and gets hit with 19% interest.
My line of thinking is that it is much better to use cash to pay off a debt that costs 19% per annum than to save it at 1-2%.
A key point here is that if an emergency actually does happen, he can charge it. When it actually happens and the money is needed, *then* pay the 19%. Before that happens, use free cash to pay off high interest debt is a no-brainer.
Until then, pay it off ASAP. Get some breathing room immediately. Provided the OP can charge it back up again there is no reason to pay 19% interest so that money can sit idle in a savings account that pays < 5%.
The above assumes that paying off a balance increases available credit, of course.
Posted on 11/11/13 at 3:46 pm to foshizzle
(no message)
This post was edited on 11/11/13 at 4:03 pm
Posted on 11/11/13 at 8:22 pm to SmellslikeKevinBacon
quote:
i am not willing to sell either to free up money. I drove a beater for 5 years before deciding to get a jeep and by my wife a new car. It's just that I have been having this credit card debt hanging over me for a long time and i am sick of it. So I came up with a schedule to get rid of all debt minus the mortgage. We are doing ok with our current income on paying off the debt. We had other debts that we have paid off. These are just he last of the debts we owe and I was thinking about how I could speed up the process even more.
You'd rather short your retirement than get out from under a car loan on a depreciating asset?
quote:
i folllow Dave Ramsey's plan somewhat.
"Somewhat" might be a little too strong here.
Posted on 11/12/13 at 7:18 am to Ace Midnight
i would rather not short my 401k, I was merely asking the question to see if the people of this board thought it was a good idea or not. I'm still on the fence on whether I would do it or not. i appreciate all the advice I have received on this, but selling cars and buying junkers in cash is not something we are willing to do.
We like our cars. It may be a depreciating asset but the loans are manageable. Both notes are under $400 a month. The only debts i have left to pay off are a $4500 credit card bill, about $15k, in student loans, and two car notes that are both about $16k. To me the debt i small. i manage it fine, i was just thinking to short my 401k temporarily to make the process faster. i could go one as is and have all my debts paid off in two years, or i could short my 401k for a bit and pay off all debts in a year and a half or less.
I agree with this statement, i used his snowball method to pay of all of the debts I have paid off so far. I don't agree with selling the cars. It is not necesary at this point in my life. I am not struggling to pay these bills. I understand the idea of why some people may want to do it, but it is just not for us. Once the current vehicles are paid for I will follow his idea of paying cash for the next one and paying cash for everything.
We like our cars. It may be a depreciating asset but the loans are manageable. Both notes are under $400 a month. The only debts i have left to pay off are a $4500 credit card bill, about $15k, in student loans, and two car notes that are both about $16k. To me the debt i small. i manage it fine, i was just thinking to short my 401k temporarily to make the process faster. i could go one as is and have all my debts paid off in two years, or i could short my 401k for a bit and pay off all debts in a year and a half or less.
quote:
Somewhat" might be a little too strong here.
I agree with this statement, i used his snowball method to pay of all of the debts I have paid off so far. I don't agree with selling the cars. It is not necesary at this point in my life. I am not struggling to pay these bills. I understand the idea of why some people may want to do it, but it is just not for us. Once the current vehicles are paid for I will follow his idea of paying cash for the next one and paying cash for everything.
Posted on 11/12/13 at 7:28 am to SmellslikeKevinBacon
You will not have these debts paid off in two years. I am fairly confident you will have increased your total debt by that time.
Not trying to flame, but I have known several people with your mindset that want to pretend like they are going to get out of debt. They never do, and always rack up more.
Not trying to flame, but I have known several people with your mindset that want to pretend like they are going to get out of debt. They never do, and always rack up more.
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