I dunno, what would Dave Ramsey say?

[wovenwonder]

When you take a loan from your 401K, you have to pay taxes on the money twice. (You pay back the loan with after tax money, and then the money is taxed again when you take it out of the 401K at retirement). So it's not a good idea! Better to get a second job!

She is going to pay that same amount back with after tax money no matter if it is paid to the credit card company or to her 401k account. Either way, she is using after tax money to make the payments so that isn't really a good argument.

 

[Microcell]

Thank you all so much, I kind of figured that not touching it would be the case, but I was listing a couple of Fridays ago to Dave and he was telling someone something that made me unclear on his stand, but thinking back they must have been about to declare bankruptcy!

I am really excited for her to read the book, and I think it will come clear for her. She is finally at rock bottom I think and cutting out things she *thinks* she needs will go a long way!

 

[extremesoccermom]

As a true Dave follower I am sure he would say NO.

He would tell her to stop paying into the 401k.
Make a budget and stick to it.
Sell everything she can on ebay or garage sale and
Get a second job.
Pay off the credit card after you have completed Step 1 - $1000.00 in the bank.

 

[ajh88]

My friend just bought The Total Money Makeover and is having it shipped and wants to take money from her 401k (she works for an auto company and can take out loans from her 401k) and pay of a credit card because she cant make the minimum payment...

I didn't know what he would say because she wouldn't be penalized.. Her job is as stable as any in this economy..

I second what extremesoccermom said!

Unfortunately, you can't *make* someone have a money makeover - they have to get there on their own. Perhaps she could try calling the credit card company to see about settling (yes, I know it would hurt her credit at moment, but would be considerably better than falling further behind or bankruptcy).