Debt Dumpers - 2017

[ruadisneyfan2]

Honest question:

I know a 401K withdrawal is not a "great" idea.

But we're early-30's - DH could take out a sum from his 401k (approx. 30% of its current value) and we could put that towards a debt that has a 10.19% interest rate.

Our current track has us paying off our 4 debts (including the high interest one) December 2019. If we withdraw that $$ from the 401K, the pay off date would move up to June 2019, and we would save $7804 in interest.

We still have 30 years of working, investing in the 401K with 5% matching.

Would like some honest thoughts? Thank you.

Well my honest opinion is that I'd never touch a retirement fund unless I was homeless and living in a cardboard box.
Anything that is an easy fix of a debt problem doesn't fix the underlying problem which is not living below one's means.

I know I repeat myself often but paying off debt truly is so similar to losing weight. The quick fix there would be liposuction but it still does't teach the person how to stay lean so chances are good that the weight will be gained back.
If one loses the weight by cutting back calories and exercising, a major lifestyle change, they lose weight and have learned how to keep it off.

This is not to say that doing a balance transfer for a 0% Promo is a bad thing as long as you continue to keep paying it down with gazelle intensity, as Dave Ramsey would say.

DR recommends to people to stop funding their retirement accounts. I can't bring myself to do that but it is something to consider and you wouldn't pay any penalties for doing that.

 

[Imagineer5]

Well my honest opinion is that I'd never touch a retirement fund unless I was homeless and living in a cardboard box.
Anything that is an easy fix of a debt problem doesn't fix the underlying problem which is not living below one's means.

I know I repeat myself often but paying off debt truly is so similar to losing weight. The quick fix there would be liposuction but it still does't teach the person how to stay lean so chances are good that the weight will be gained back.
If one loses the weight by cutting back calories and exercising, a major lifestyle change, they lose weight and have learned how to keep it off.

This is not to say that doing a balance transfer for a 0% Promo is a bad thing as long as you continue to keep paying it down with gazelle intensity, as Dave Ramsey would say.

DR recommends to people to stop funding their retirement accounts. I can't bring myself to do that but it is something to consider and you wouldn't pay any penalties for doing that.

We've made the necessary changes, which is how we're planning on (and have been staying on track for months) paying off the debt by 12/19. Just trying to make that end date come even sooner lol.

Not funding the 401K doesn't change too much - 1 month in our debt payoff plan (well, 6 weeks) but taking into account matching & tax savings, we're wasting $$ by doing that.

 

[DisneyMandC]

It's a good morning in my house. It's Friday, both of us were paid, and I received an e-mail that my PSLF payments were updated. I am now 22 payments down, 98 to go for forgiveness!

We also received a very generous gift from a family friend last night. Since we have 17 acres (approximately 6 of it cleared), we have a lot of grass to mow. We were paying someone to do it last summer, but obviously that's quite pricey. Our friend had a riding lawnmower she was selling for $800 that sells new for $1700 and only has 85 hours on it. We told her we wanted to buy it from her and she told us just to take it for free! She replaced one plastic piece that broke off recently for $50 so she said we could pay her for that and that's all she needed, we just need to come pick it up at her house. We are so grateful! Even if we had paid her $800, the lawnmower would have paid for itself in only a couple of months based on how much we were paying for lawn care, but this is even better! We have been very blessed to have some wonderful gifts from family and friends recently, and I'm hoping we have an opportunity to pay it forward soon.

In other news, has everyone seen the news on HH Gregg going out of business? Not sure if they're all over the country or just east coast area. It says they are selling off their inventory so I'm wondering if there will be some good clearance sales as it appears as though all of the stores in my state are closing. While we aren't desperate for a new oven, it would be nice to have one. The previous homeowners left their old oven, and while it is a nice convection oven, only about 2 of the 4 stove burners work, and then only on close to high heat. Since this is a three paycheck month for us both, I may set part of one paycheck aside and see if anything is on a good deal. We have three stores in my area, so I don't know if sales are on a store-by-store basis or not, but I'm thinking it may be worth it to bounce around to them and see what they have to offer.

 

[Jen and Ashwin]

It's a good morning in my house. It's Friday, both of us were paid, and I received an e-mail that my PSLF payments were updated. I am now 22 payments down, 98 to go for forgiveness!

We also received a very generous gift from a family friend last night. Since we have 17 acres (approximately 6 of it cleared), we have a lot of grass to mow. We were paying someone to do it last summer, but obviously that's quite pricey. Our friend had a riding lawnmower she was selling for $800 that sells new for $1700 and only has 85 hours on it. We told her we wanted to buy it from her and she told us just to take it for free! She replaced one plastic piece that broke off recently for $50 so she said we could pay her for that and that's all she needed, we just need to come pick it up at her house. We are so grateful! Even if we had paid her $800, the lawnmower would have paid for itself in only a couple of months based on how much we were paying for lawn care, but this is even better! We have been very blessed to have some wonderful gifts from family and friends recently, and I'm hoping we have an opportunity to pay it forward soon.

In other news, has everyone seen the news on HH Gregg going out of business? Not sure if they're all over the country or just east coast area. It says they are selling off their inventory so I'm wondering if there will be some good clearance sales as it appears as though all of the stores in my state are closing. While we aren't desperate for a new oven, it would be nice to have one. The previous homeowners left their old oven, and while it is a nice convection oven, only about 2 of the 4 stove burners work, and then only on close to high heat. Since this is a three paycheck month for us both, I may set part of one paycheck aside and see if anything is on a good deal. We have three stores in my area, so I don't know if sales are on a store-by-store basis or not, but I'm thinking it may be worth it to bounce around to them and see what they have to offer.

The hhgregg website had a news release from yesterday that said, "hhgregg, Inc. today announced that as part of its turnaround efforts, the Company plans to close three distribution facilities and 88 store locations in order to reallocate resources to align more closely with its strategic goals to improve liquidity and return to profitability."

 

[DisneyMandC]

The hhgregg website had a news release from yesterday that said, "hhgregg, Inc. today announced that as part of its turnaround efforts, the Company plans to close three distribution facilities and 88 store locations in order to reallocate resources to align more closely with its strategic goals to improve liquidity and return to profitability."

Oh ok, I thought they were all going under, I guess just because every store in Virginia is closing. Either way, hopefully they'll have some good deals. I can't imagine they will consolidate all of their inventory into their remaining stores with 88 stores closing altogether.

 

[ruadisneyfan2]

The general financial advice is to never raid your 401k if there are any other options. That is because you pay a 10% penalty on money that you withdraw and you could miss out on good market returns. An article I read gave this example:

If you had $10,000 invested between Dec. 31, 1993, and Dec. 31, 2013, it would have grown to $58,332 if it was constantly invested in the S&P 500. If you missed the 10 best days during that period, the investment would have grown to only $29,111, almost half of the amount if you simply left the money untouched. By missing the 20 best days, your total is reduced to just $18,140.

It is possible you would save money on interest, but loose even more money on lower investment returns. The market is currently at an all time high. I don't think I would want to pull my money out now when investments are doing so well.

Paying off your debts 6 months sooner doesn't seem worth the 10% penalty and the risk of lower returns.

ETA: I am also early 30s and the longer my money can sit, the better off I will be for retirement. Compound interest and investment returns are the best tool to ensure a better retirement, so investing early is easier than waiting until later. Depending on how long it takes you to recoup that 30% of your savings, it could reduce your overall retirement fund by a huge amount.

Very well said. Much better explanation than my answer. Lol

 

[Imagineer5]

Very well said. Much better explanation than my answer. Lol

You both helped me see the other side of things, and look at it from a much broader perspective, so thank you! We'll just keep on chugging along.

 

[jenm2878]

First, baby update. Had an ultrasound yesterday and everything is good. DH was able to be there. He got to hear the heartbeat. He is convinced he can see the baby's face, though it is still so small (.94 cm) there really isn't much to see except a tiny blob. I have been officially discharged from the fertility clinic and have an appointment with an OB in 2ish weeks.

DH and I have our Norwegian Fjords cruise in May and we had kind of decided that we were unlikely to take any big trips in 2018 and just wait for Disney in Spring 2019. But I would still like to plan for the possibility of going somewhere. And then I thought, maybe we could go to Wisconsin for a week. We could take the ferry from Muskegon to Milwaukee, spend a few days in Milwaukee, maybe a few days in Madison and also go to Frank Lloyd Wright's Taliesin (DH really wants to do this). I haven't really been back to Wisconsin in a while and would love DH to see where I went to college. If we went in August or even Sept., then baby would be around 10-11 months. Is this reasonable or completely crazy? It would probably be pretty budget friendly, especially if I used hotel and credit card rewards to book our hotel.

Honestly, the younger the baby the easier it is to travel. With both my boys we took a trip when they were 3-4 mths old and again at 10-11 mths old. It was so much easier at 3-4 mths! By 9-10 mths old they are crawling/pulling themselves up and both of my kids screamed when we tried to put them in strollers because they wanted to be on the move. If you have an early walker, they may not be super tolerant to being strapped in a car/stroller for too long.

Also, the absolute best advice I can give is to buy a stroller that reclines all the way back and has a large canopy. That way you can try to keep the nap schedule going even if you are out and about. On our last vacation we switched to the sit n stand so my 2yr old could ride and the 5yr old could sit when he was tired. I didn't realize that the seat barely reclines so the 2 yr old didn't nap at all. That got ugly fast! COngrats by the way!

 

[Eureka]

Where do you plan on parking your car??? It's a fortune in NYC to park.

We'll plan on leaving it at the hotel and just paying whatever they charge per night. When we went to Toronto last year it was pricey too, but we just factored it into the whole experience cost. That's why we want to stay in the city, so we can walk and use public transportation.

 

[DrummerBoy523]

But we're early-30's - DH could take out a sum from his 401k (approx. 30% of its current value) and we could put that towards a debt that has a 10.19% interest rate.

terrible idea. When you pull out money, you'll be assessed a penalty AND you'll have to pay additional tax on the distribution - you could end up paying 35% interest to pay of a debt of 10.19%. That makes absolutely no sense.

 

[DrummerBoy523]

DR recommends to people to stop funding their retirement accounts. I can't bring myself to do that but it is something to consider and you wouldn't pay any penalties for doing that.

He only recommends this temporarily while you are on baby step 2 I believe. But, you have to put that money towards debt. His entire goal is to get you out of debt as fast as possible. A lot of people have a hard time getting out of debt, and I see the hesitancy of stopping 401k contributions, but it will just take a person longer to get out of debt.

 

[dayvewc]

The hhgregg website had a news release from yesterday that said, "hhgregg, Inc. today announced that as part of its turnaround efforts, the Company plans to close three distribution facilities and 88 store locations in order to reallocate resources to align more closely with its strategic goals to improve liquidity and return to profitability."

Oh ok, I thought they were all going under, I guess just because every store in Virginia is closing. Either way, hopefully they'll have some good deals. I can't imagine they will consolidate all of their inventory into their remaining stores with 88 stores closing altogether.

I worked retail for more years than I want to have to admit to before I became a teacher, and then worked retail as a second job for too many years to make ends meet on a single teachers salary, but .... every company that I have worked for that closed stores did clearance sales to get rid of inventory. It apparently costs more to send a crew to try to repack the inventory onto a truck and transport it somewhere new than it does to just take the loss on extremely marked down items. If you think you might need something that they sell in the next 2-5 years (especially since you mentioned stove I'm guessing large appliance store - I'm not familiar with hh gregg.) it will probably be worth looking at. Even the couple of stores I worked at that just moved (across town, or across the parking lot at the strip mall) tended to start stocking the new store and selling out of inventory at the old store, then the last day or 2 would have the massive mark-downs before the new store officially opened. I would guess that if they are closing all the stores in the state that there will be some good sales.

 

[bare_foot_mama]

Hopefully 2017 is our year too! We have been working on a cash only budget for the past year but still sometimes fall back on our cards. We made a lot of sacrifices to help- going down to one car for our family was the biggest so far. We saved up enough to take our 5 year old to Disney for the first time in May, so right now I am saving for our food budget, souveniers, etc. I feel a little guilty taking a break from paying down debt to do something fun and am balancing that by committing to a cash only Disney budget. Once we get home I am back to snowballing- currently using Dave Ramsey's financial peace.

 

[ruadisneyfan2]

Hopefully 2017 is our year too! We have been working on a cash only budget for the past year but still sometimes fall back on our cards. We made a lot of sacrifices to help- going down to one car for our family was the biggest so far. We saved up enough to take our 5 year old to Disney for the first time in May, so right now I am saving for our food budget, souveniers, etc. I feel a little guilty taking a break from paying down debt to do something fun and am balancing that by committing to a cash only Disney budget. Once we get home I am back to snowballing- currently using Dave Ramsey's financial peace.

I too feel guilty when we take breaks and do fun things but I always jump right back in the game, usually with renewed strength.

5 is a wonderful age. omg, I miss those days so much!

 

[bare_foot_mama]

I too feel guilty when we take breaks and do fun things but I always jump right back in the game, usually with renewed strength.

5 is a wonderful age. omg, I miss those days so much!

She is SO into the idea of Disney World and no idea she's going. We are waking her up the morning we leave and surprising her somehow. Worth it already!!

 

[hmack]

I went in the basement this morning to check on our home heating oil supply and found that the tank was on "E". Darn.

I ended up leaving a blank check with my dad, who lives right down the street, and asked him to find someone who could deliver oil today. (can I just say here how much I love my dad?) I called him during the day and he said that he was unable to find anyone who could deliver without charging a $75 fee for one reason or another.

Dad found oil somewhere and poured some into our tank manually. (yep, the man's awesome) $50 worth to get us through the weekend and a dealer in town agreed to deliver 100 gallons on Monday for $209.90. That's money I wasn't planning on spending, especially the $50.00 as i normally buy 100 gallons at a time.

It's been years since I've been caught with a tank that low, but I definitely learned my lesson on checking more often.

But through it all, I am glad I checked this morning. It's forecasted to be in the single digits tomorrow and today I'm envying all of you who live in a warmer climate and have turned off your heat for the winter.

I'm also thankful that we built up our savings a bit so we have the $259.90 on hand. There was a time, not too long ago, that buying oil meant going without something else or putting off paying a different bill.

 

[Eureka]

Oh ok, I thought they were all going under, I guess just because every store in Virginia is closing. Either way, hopefully they'll have some good deals. I can't imagine they will consolidate all of their inventory into their remaining stores with 88 stores closing altogether.

I heard that too. I'm in Maryland and I think mine will be closing. Maybe it's mainly DC area?

 

[bcwife76]

DH finally got his T4 so we filed our taxes tonight. CRA has a quick turn around so we should have our refund deposited within 2 weeks.

In other news I emailed the lawyer handling my dad's estate. Haven't heard from him since the end of September when the big chunk of the inheritance came in but 20% was still held back for creditors and taxes. I looked online and they filed a notice to creditors on November 3rd, with a cut off date of December 15th (for anyone to contact them if he owed them money, which we don't think he did) so that was 2.5 months ago. Since it's tax time I was hoping the taxes were already filed but apparently the executors are still waiting for some receipts. So taxes won't be filed til the end of this month or possibly early April (they have til April 30th). Once that's done they need to apply for something called Certificate of Compliance which could take another month. So I'm looking at May or June (or even later) before the remaining balance of the estate is divided up. Feels like it's been dragging on for quite a while but that's how it is. Death and taxes .....

 

[ruadisneyfan2]

He only recommends this temporarily while you are on baby step 2 I believe. But, you have to put that money towards debt. His entire goal is to get you out of debt as fast as possible. A lot of people have a hard time getting out of debt, and I see the hesitancy of stopping 401k contributions, but it will just take a person longer to get out of debt.

I agree 100%.
If I could stop taking vacations I'd be out of debt faster too but that is a weakness of mine. I've been at baby step 2 for longer than I should be.

 

[piccolopat]

Honest question: I know a 401K withdrawal is not a "great" idea. But we're early-30's - DH could take out a sum from his 401k (approx. 30% of its current value) and we could put that towards a debt that has a 10.19% interest rate. Our current track has us paying off our 4 debts (including the high interest one) December 2019. If we withdraw that $$ from the 401K, the pay off date would move up to June 2019, and we would save $7804 in interest. We still have 30 years of working, investing in the 401K with 5% matching. Would like some honest thoughts? Thank you.

I don't recommend withdrawing from your 401k. You are only talking about paying off your debt a few months earlier. I would look for other ways to spend less or generate more income and put that money towards your debt first. You will lose a lot by withdrawing as you will incur an early withdrawal penalty and have to pay taxes on that amount. 30 years seems like a lot of time to save but it really isn't when you think that saving during those 30 years has to be enough to support you for the next 30 years. Using a 3-4% withdrawal rate at retirement, you will need to save $1,000,000 just to generate $30-40,000 income in retirement. That's not much when you consider what inflation will do to those numbers over time.