Okay all you budget gurus - Are we nuts?

[minnie1928]

If your job is that uncertain with regard to hours, are you looking for another job? To me it sounds like this one may be on it's way out and you should find to find a replacement before that happens. I'd also defer locking in the summer camps until the last minute. Who knows what can happen between now and then.

 

[DisneyMomma81]

I have to pay for summer camp up front and it's non-refundable an expense of about $5,000 for three kids - we do rec camp ($150/wk/kid) and boy scout camp which are the cheapest options available. All my free cash right now is going into an account for this expense.

Why do the boys need to attend camp?!?! Perhaps they could spend there summer at home enjoying their free time with each other ~ that won't cost you anything! Perhaps it's time you look for a new job ~ how scarey dealing with the cut in your hours!

 

[crisi]

Do you NEED a card to live on?

Don't forget too- is it possible you will need to file bankruptcy?

I'm not a fan of bankruptcy, but I think that its important to look at things from the perspective if "what happens if I do end up filing for bankruptcy." I'm no expert, but if your 401k is protected, you don't want to risk that. You don't want to risk anything that is a protected asset. A lot of people make things worse for themselves by avoiding bankruptcy - and cashing in assets that would have been protected.

Is your situation sustainable long term? i.e. are you bailing the Titanic with this withdrawal.

 

[3boymthr]

We have done a withdrawal before - we cashed out my 401(k) to buy land so we're aware of the pitfalls of the penalties and taxes - years ago, before we had kids. Yes, we looked at selling the land but with the current real estate market it's not worth what we paid for it and none of the land in the area where it's located is selling - anything listed has just been sitting and sitting and sitting and sitting, plus the land has lost so much value that selling it won't put a dent in our debt.

This is his current job so hopefully we'll be able to withdraw without too much issue. I know we'll pay penalties and he probably won't be able to contribute for a while. Our contingency plan for not being able to contribute was to put the money aside that he would be contributing to put into an IRA.

The kids are too young to stay home on their own all day. Well, oldest DS isn't but we don't want to put him in temptations way. Too much time alone for a teenager means trouble KWIM? He can't babysit for more than half an hour or so as we have control issues between him and the other kids - they just won't listen to him.


Another job might be an option, and I have my resume out there but I'm not exactly in what you would call an easily tranferred position. Plus, I work PT - mother's hours about 15 minutes from my home. This saves me in commuting costs and after school care for my kids during the school year. 99% of jobs in my industry are FT and most of the few positions available are about a commute of 1 hour or more from my home. I really really lucked out finding this position - I literally fell into this job - they called me not the other way around. If I were to go FT I would be adding expenses of about $250/wk for after school care plus the wear and tear and gas - in my last position the gas, used to run me about $55/wk and that was before prices exceeded $2/gallon. That added to the stress of working FT with three kids - one of whom has learning disabilities and needs a lot of my time in help - is why I'm desparately hoping to stay where I am.

I know this isn't necessarily the best decision, but I was wondering if you folks could think of any negatives that DH and I hadn't already thought of and so far you haven't. One of the things that brought us to this decision is that if I end up not working then using his 401(k) to pay off the debt won't be a choice unless we declare bankruptcy - not a decision we want to contemplate as long as we have funds somewhere. Plus if I end up laid off not having this debt will mean we can live off his income alone until I can find something else.

 

[3boymthr]

I'm not a fan of bankruptcy, but I think that its important to look at things from the perspective if "what happens if I do end up filing for bankruptcy." I'm no expert, but if your 401k is protected, you don't want to risk that. You don't want to risk anything that is a protected asset. A lot of people make things worse for themselves by avoiding bankruptcy - and cashing in assets that would have been protected.

Is your situation sustainable long term? i.e. are you bailing the Titanic with this withdrawal.

Yes, things are sustainable long term if we do the withdrawal. We'll owe basic utilities plus insurance, rent and car payment. All covered by DH's income. It would be tight on just his income but sustainable. If I'm working even 2 or 3 hours a week we'd have money to spare for extras.

 

[wdwfan16]

I would not take the 401K money out. I would stop adding to the his 401K and using that money (less taxes) to pay off the cards. I would only reduce it to the level that the company matches it.

 

[bumbershoot]

You want people to come up with negatives you haven't thought about. People are offering other, more positive, ideas for you to pay things off without doing something you KNOW is negative.

One of the reasons we want to pay this off now is because of the uncertainty with my job situation. While I could work all my scheduled hours, if this summer is anything like last summer, there is also a very good possibility that there will be weeks this summer when I work an hour or maybe two or not at all (reducing our income by about $700/wk ). I have to pay for summer camp up front and it's non-refundable an expense of about $5,000 for three kids - we do rec camp ($150/wk/kid) and boy scout camp which are the cheapest options available. All my free cash right now is going into an account for this expense.

If this job is on its way out, the kids won't need to go to camp because you will be home. Have you run the numbers of that scenario with your new salary level?

Just realized...

These are what the llnoe.com people would call storm clouds, where you need to be saving your extra money in the bank, until you get a better job. This is the time to NOT be putting extra towards the CCs, actually.

 

[wdwfan16]

I would not pay for the summer camp. Find a teen who can babysit when you need her for the hour or two and then more on the other weeks. It will not cost you $5K.

 

[dzorn]

Do you own a home?

Is it possible to get a home equity loan to pay off the debt? At least then you would have a reasonable int rate.

Not sure what equity rates are currently, but I am certain they are less than the CC!

Never replace unsecured debt with secured debt, not a good idea.

Cut up credit card. Opt out of rate increase. Cancel future 401K contributions and put all toward debt.

Denise in MI

 

[minnie1928]

You want people to come up with negatives you haven't thought about. People are offering other, more positive, ideas for you to pay things off without doing something you KNOW is negative.

If this job is on its way out, the kids won't need to go to camp because you will be home. Have you run the numbers of that scenario with your new salary level?

Just realized...

These are what the llnoe.com people would call storm clouds, where you need to be saving your extra money in the bank, until you get a better job. This is the time to NOT be putting extra towards the CCs, actually.

I agree. I'm also troubled by the statement that they have taken from the 401k previously. 401k accounts are for retirement, they are not traditional savings accounts. Once you get past this mess, however that is accomplished, I think you need to re-evaluate the 401k contributions. Perhaps do a 50/50 split between a 401k contribution and a deposit to a savings account. You are shooting yourselves in the foot, several times, by running to the 401k for funds.

 

[kwhite1022]

Well in light of the new information, that youve taken from a 40lk before, and dont see the issue with that....youve already made up your mind. You dont really want advice...which has been good and positive. Anyone willing to still send kids to camp at the kind of cost you are talking...while swimming in debt, is not ready to face the reality of whats really going on with their finances. I fear for what it WILL take to make you realize some real changes and hard decisions need to be made. Best of luck.

 

[englishteacha]

I would look into other options other than $5K for summer camps, as well. That seems incredibly high to me.

 

[Minniemama350]

I have not read every post, but it seems to me that you need to talk to Consumer Credit Counseling or a similar program that can help you make smaller payments but actually pay things off. I'm with the others that are questioning the kids going to camp. I understand you don't want your kids to suffer, but it will be better for them in the loong run to have parents who are not so in debt. We have been in debt before. It makes eveything in life harder. Do yourself and your family a favor by taking the "bull" by the horns and getting rid of your debt. Go to CCC and get some help with managing this debt.I wish you sincere luck.

 

[apnep]

I have to agree with the previous posters. You have already made up your mind about taking from your 401K. You've done it before. What is to say that after you pay off THIS debt and then having not really changed your spending habits get back into debt again? Nothing has really been solved.

Why spend $5000 on summer camp for the kids when you don't have that kind of money? If you aren't working but a few hours anyway then why are spending for daycare? You should be at home with the kids! That just doesn't make sense.

Why hold onto to a plot of land that is just sitting there? How much can you get for it? Maybe that can help? You need to get rid of all the excess stuff first before you drain your husband's retirement. It seems to like you have a lot of excuses and just want an easy way out.

Good luck.

 

[wthchristi]

Hmmm. No easy answers on the 401K. But summer camp suggestions- if you have a daughter try girl scouts. they have excellent community day camps for reasonable. If you are doing residential, check out community camps rather then council camps. Both are excellent, but community is often half the cost. Sometimes you can volunteer at day camps for a great discount. Boy scouts may be similar?

My 8 year old girl scout is going to 1 week of community residential, 1 week of day camp and 1 week of council residential camp and my 10 year old boy scout is doing 2 weeks of residential as well as a collection of short trips this summer. The total cost of all being around $600 dollars.

Of course, my daughter has sold a LOT of cookies, my son has participated in multiple fundraisers and I am committed to volunteering a week this summer. The kids are getting awesome experiences for a fraction of the cost of some camps.

Also, most activities have financial aid available for those who are struggling. May be something to check out?

 

[3boymthr]

To address the question about camp. There may be days/weeks when I have to work the whole day/week and I won't know until that day if I have work - sometimes it will be minute by minute - I will be reporting to work each day unless told not to. $5,000 for three kids for the whole summer is actually very very cheap for daycare around here (most camps cost about $200/wk/kid). The recreation department summer camp must be paid for in April. I would hire a sitter full time if I could find one but it's not an easy prospect as there aren't that many kids available who are reliable and willing to work. I currently have two girls who do babysit for me on school vacations like next week and I will be paying them $10/hour but they aren't available most days in the summer as they have jobs working - guess where - the summer camp I send my kids to.

We bought the land outright hoping to build a home on it but circumstances resulted in that not happening - there is still hope that someday we will be able to build a home there. The land is worth about $15-20,000 if we could sell it and we would lose about $15,000 - so far other lots in the area have been listed for over a year and have not sold. We're holding on to it in the hopes that the value will recoup.

ETA - we have changed our spending habits - we pay cash for everything now unless it's mail order, even then we use paypal linked to our checking account if possible, if not we pay using our visa debit card or using our discovercard to get a discount which we pay off right away. I have the ability to direct deposit into multiple accounts on my paycheck and will be sending the money directly into an ING savings account I'm hoping to recoup the money from the 401(k) in less than two years.

 

[DisneyMomma81]

Your oldest is 13 ~ why can't he be the "baby sitter" ~ I prefer child care provider - you don't have any babies. How old are the girls that sometimes help?

 

[msmayor]

To address the question about camp. There may be days/weeks when I have to work the whole day/week and I won't know until that day if I have work - sometimes it will be minute by minute - I will be reporting to work each day unless told not to. $5,000 for three kids for the whole summer is actually very very cheap for daycare around here (most camps cost about $200/wk/kid). The recreation department summer camp must be paid for in April. I would hire a sitter full time if I could find one but it's not an easy prospect as there aren't that many kids available who are reliable and willing to work. I currently have two girls who do babysit for me on school vacations like next week and I will be paying them $10/hour but they aren't available most days in the summer as they have jobs working - guess where - the summer camp I send my kids to.

We bought the land outright hoping to build a home on it but circumstances resulted in that not happening - there is still hope that someday we will be able to build a home there. The land is worth about $15-20,000 if we could sell it and we would lose about $15,000 - so far other lots in the area have been listed for over a year and have not sold. We're holding on to it in the hopes that the value will recoup.

ETA - we have changed our spending habits - we pay cash for everything now unless it's mail order, even then we use paypal linked to our checking account if possible, if not we pay using our visa debit card or using our discovercard to get a discount which we pay off right away. I have the ability to direct deposit into multiple accounts on my paycheck and will be sending the money directly into an ING savings account I'm hoping to recoup the money from the 401(k) in less than two years.

You're going to lose a lot more than $15,000 cashing in the 401(k). Between the taxes and the lost growth of the funds removed, and the length of time it will take you just to re-save to the point you're at today you're probably well over $15,000 in lost money.

It would make far more sense to sell the land and take THAT loss.

If you are convinced you can recoup the 401(k) money in less than two years than you can afford to simply make the monthly payments on that debt...plain and simple.

 

[3boymthr]

I found out tonight that I'm past the point that I can opt out. The notice was apparently sent a while ago with an opt out deadline of November. Obviously it went to my spam and got deleted. Sometimes being green can be a big fat

To answer PP question - the girls are 16 & 18 - two sisters and they're great with the kids - altho they're not really "girls" - the oldest is headed off to college in the fall. Oldest DS is actually just turned 14 and I'd love to have him babysit and save myself the money - unfortunately, he and the middle child have a running battle going - what I like to call WWIII. I can't leave them alone for more than a few minutes at absolute most an hour and then only if the TV is going on a show negotiated before I leave.

You're going to lose a lot more than $15,000 cashing in the 401(k). Between the taxes and the lost growth of the funds removed, and the length of time it will take you just to re-save to the point you're at today you're probably well over $15,000 in lost money.

It would make far more sense to sell the land and take THAT loss.

If you are convinced you can recoup the 401(k) money in less than two years than you can afford to simply make the monthly payments on that debt...plain and simple.

Our calculated immediate and quantifiable loss at our current tax rate with the penalty is about equal to what we'd pay out in interest for this year alone maybe equal to part of next year (tho I don't really consider the income tax as a "loss" as I'd be paying that anyway even if we waited til retirement to access the money). Yes, I know we'll lose money on future earnings which is significant, but also intangible - as we could also lose money which has happened to us before - and I'm definitely not earning 28.99% interest.

I've thought about have DH stop his 401(k) witholding and applying it to the debt but I don't know if it would really make a difference. At his current company, DH has a very low maximum that he can contribute (3%) which if we were to roll it back into his paycheck, after the increased payroll taxes, works out to be not enough to make a huge dent in our debt - it wouldn't even cover the increase in interest - it would take years and years of not contributing for it to help. He also doesn't get company matching contributions so we're not losing out on money that way it's all our money - 100% vested.

One thing I should point out while I do work part time - I'm VERY highly compensated. Which is why my not working all my hours is such a concern - we're not taking several hundred dollars difference in pay each month we're talking potentially several thousand dollars difference and this also factors into why I don't think cutting DH's 401(k) contribution would help offset the difference - his weekly contribution equals about two or three hours of my pay.

We can afford the payments as long as I'm working at my current take home but if I have a couple of weeks where I don't work more than an hour or two then we'll be in big trouble. As it is most of my pay goes for paying off our debt and the rest is going into an account to pay for daycare expenses this summer.

ETA - if I thought we could sell the land quickly at close to what we paid, I might seriously consider it even with the loss, but there's no way it will sell quickly. There have been no sales of similar lots in the area. It's an a depressed area. Nothing in the area is selling. We'd be lucky to sell it for $15,000. In a year or two we might be able to sell it, but not now in this economy in this real estate market. I should note that the land we own is in a remote area and it has no improvements - there is no water within miles, nearest electric is miles away, it is on a dead end dirt road reachable only with 4WD and the back half of it is swamp. Most of the parcels surrounding it are owned by hunters or corporations.

 

[minnie1928]

So, let me ask this...you are highly compensated on an hourly basis. If, in a perfect world, the debt and childcare were not around...would you be able to live on DHs salary alone? What I'm trying to assess is will you be able to divert most of your current salary to the debt? If that's the case, if you throw all the money you can at the debt you should get the principal down and therefor get the monthly payment down.

And back to the 401k contributions...while I understand that it might only be a small amount each week. Small amounts do add up, and at this point it can't hurt.

If you are for the most part, certain about pulling $ out of the 401k, I would take out the bare minimum. Could you pull out enough to pay half the balances? Perhaps that would be enough to give you the breathing room you need, while helping minimize the total cost of the debt (interest + taxes/penalties + lost investment gains).