Okay all you budget gurus - Are we nuts?

[msmayor]

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.

This confuses me even more then. You said that you're hoping to recoup the money from the 401(k) in two years....yet here you say the maximum your DH is contributing is so low it won't make a difference.

If his current contribution is so low, then how in the world can you even hope to recoup the money in two years??

 

[Pigeon]

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.

Good grief. Deal with your children. If I had a 14 year old and in debt like you are, there is no way on earth I would shell out $5K for summer camp when your babysitting solution is staring you in the face. Make your kids suck it up. Come up with some kind of carrot/stick system that will enable them to manage. I've got a 12 year old, and I wouldn't pay for camp.

Seriously, you've got excuses for everything.

 

[*pixie*dust*]

I have to agree that it seems that you have already made up your mind. It sounds like several aspects of your life are feeling out of control to you. Your debt and your teens behavior are both fixable. You have had some great advice here.
Please consider some of the options before clearing the 401K.

Your qualitly of life in retirement is on the line here. I want you to have a comfortable, independent retirement. Please take these things into consideration.

Good Luck!

 

[cheshireqt]

You already received some great financial advice, the 401K is really not a perfect solution. Freezing the card at the previous rate really is your best option. You should keep pursuing the opt out, going up the chain. Don't let one person tell you no. If the answer is still no then see a consumer credit counselor. They should in fact negotiate a lower interest rate than what your were paying before the rate increase!
Re: having DS babysit. Just a thought that might work for you.
Last summer I offered to pay my children each a set amount with the caveat that they had to give a good report on each other. If they got a bad report, no $. I did this the first 4 times I had DS babysit (or rather had them "watch" each other) while we were at a party in the neighborhood or just needed a few hours to run errands. We discussed what they would save for and then I took them out to get what they had saved for over the course of "watching" each other. After that I did not offer $, and they did not ask. This has been a wonderful blessing during these crazy snow days we have had here in northern VA. For us it is not so much about the $ but about not having to call in favors for unexpected school closings or 'rock-paper-scissor' it for who has to stay home with the kiddos.
For the summer, I would still put the kids in some camps. Kind of like a one week on and one week off -or- put the younger ones in camp for the summer and the eldest in only 2 or 3 weeks of camp. I agree that it would not be worth it (or fair to him) to have DS watch the younger ones all summer. Your age spread is too much for them to really be good company for each other. But some savings are better than none, right? Good Luck!

 

[3boymthr]

This confuses me even more then. You said that you're hoping to recoup the money from the 401(k) in two years....yet here you say the maximum your DH is contributing is so low it won't make a difference.

If his current contribution is so low, then how in the world can you even hope to recoup the money in two years??

Yes we definitely made up our minds - we're doing it. The stress of the owed money is killing me.

I don't know if "recoup" is the right word. We hope that by eliminating the debt we will be able to save the money equal to what he had in his 401(k) in a couple of years. His contribution is low and we don't hope to recoup the money via his contributions to the 401(k) but via IRAs - both traditional and ROTH as well as straight out savings. If we're not spending over $1,000 a month in cc payment - then we can save that money.

To the PP with the comment on the kids - wow! you must have perfect children - I'm not getting into the particulars of the whole dynamic of their relationship - I have to do what is best of the health and safety of my children and leaving oldest DS in charge for more than an hour would be a very, very, very, very bad idea - thus I will be laying out a lot of money to keep them separated and safe while I am working.

 

[Planogirl]

Could you find someone to help with the kids? The camp sounds expensive.

I wish you well. Making these decisions is difficult, I know.

 

[msmayor]

Yes we definitely made up our minds - we're doing it. The stress of the owed money is killing me.

I don't know if "recoup" is the right word. We hope that by eliminating the debt we will be able to save the money equal to what he had in his 401(k) in a couple of years. His contribution is low and we don't hope to recoup the money via his contributions to the 401(k) but via IRAs - both traditional and ROTH as well as straight out savings. If we're not spending over $1,000 a month in cc payment - then we can save that money.

To the PP with the comment on the kids - wow! you must have perfect children - I'm not getting into the particulars of the whole dynamic of their relationship - I have to do what is best of the health and safety of my children and leaving oldest DS in charge for more than an hour would be a very, very, very, very bad idea - thus I will be laying out a lot of money to keep them separated and safe while I am working.

Except that it sounds to me like you don't even have $1000/month to send to the CC now....so I'm not sure what makes you believe that you'll suddenly have that much without the CC debt. You won't...you either have $1000 now to either toss at the CC debt OR put into savings. Getting rid of the debt won't magically make an extra $1000 per month appear. If all you've been paying against the debt now has been $300-400, then that's all you'll have to save after the debt is paid down.

 

[bettymae1121]

Yes we definitely made up our minds - we're doing it. The stress of the owed money is killing me.

I don't know if "recoup" is the right word. We hope that by eliminating the debt we will be able to save the money equal to what he had in his 401(k) in a couple of years. His contribution is low and we don't hope to recoup the money via his contributions to the 401(k) but via IRAs - both traditional and ROTH as well as straight out savings. If we're not spending over $1,000 a month in cc payment - then we can save that money.

I still think you should look into credit counseling first, CCCS can get that interest rate down to something a lot easier to manage,then you can pay off your debt without raiding your 401k.

Based on the ages of your kids, it sounds like you're in your 40's. You'll be retireing about 20 years if you want to retire at 65. That's not a whole lot of time to save when you're starting from zero. And don't forget, you have kids that will be starting college soon. If you are catching up on retirement savings, this means you won't be able to help them pay for school. Are you okay with that? Or are you going to find yourself paying tuition and putting off retirement savings even longer?

I totally get that the CC debt is stressing you NOW, and that retirement seems oh so far away. But you really need to step back and see the big picture, IMO.

 

[DisneyMomma81]

Good grief. Deal with your children. If I had a 14 year old and in debt like you are, there is no way on earth I would shell out $5K for summer camp when your babysitting solution is staring you in the face. Make your kids suck it up. Come up with some kind of carrot/stick system that will enable them to manage. I've got a 12 year old, and I wouldn't pay for camp.

Seriously, you've got excuses for everything.

Agreed ~ what's a 16 year old girl gonna be able to do to control a 14 year old boy, he's old enough to be able to help you out with his younger siblings. That's a pathetic exscuse no way would I pay for child care for a 14 year old, heck I'd worry about him getting into "trouble" with the girl.

 

[ceecee]

No way would I be spending $5000 on camp! Pay off the debt with that and if absolutely necessary, hire a sitter for the two younger ones. Since your hours may be cut, you could be home yourself and it may not be needed anyway.
Have a heart to heart with your 13 year old....it's time for him to grow up and accept some responsibility. Explain your financial situation and enlist his help, he may surprise you.

 

[ShannonMB]

OP, I know you said the opt out on your CC time frame has passed, but if you negotiated with one of those debt relief companies mentioned, then the debt wouldn't be increasing each month (from what I understand), and the rates would probably be much lower. I imagine your credit takes a hit doing it, but sounds like you're planning on using a lot less credit in the near future, anyway.

If you could put every cent YOU make toward the debt, it sounds like you could really put a big dent into it quickly. I totally understand the childcare dilemma, because I've dealt with it all of DD's life. $150 a week per kid over the summer is a pretty decent rate. People are dramatizing "sending the kids to camp when you're in this mess", but as we know, it's the same price as any other day care (or less!). So I know exactly what you are talking about there.

BUT, I would challenge you to come up with another solution. Just pretend you ONLY have DHs income (as you are sending every cent you make to pay the debt). I agree with having the heart to heart with your kids and explaining the situation. Then maybe there is a family with a SAHM who wouldn't mind being the "checkpoint" for your kids a couple times a day for a small fee. Maybe look in to babysitters.com or one of those sites where college age kids are looking for a gig just like yours that isn't a whole lot of hours but a little bit of income for them. I personally will be working every Sat, Sun, and Mon (DH is off on Mondays) all summer to avoid spending $2000on childcare. That's practically a Disney trip, and I'm sick of spending it, and looked outside the box to avoid it. I'm a hospital nurse, and my supervisor was all for me working extra weekends. I know not everyone has that option, but just saying that exploring some non-traditional options might help you.

Then, if the time comes that you are truly not getting the hours at work to adequately pay the debt, then you could consider the 401K option. It just sounds like you guys still have some options and aren't at the point yet where you'd need to do that.

Sorry so long!

 

[PEANUT1]

my 2 cents..

Don't take from retirement...you don't want to burden your children someday to take care of you because you didn't plan for the future..trust me I know. My parents didn't make great financial decisions and now my sister and I are paying the price..and we really resent them for it.

 

[minnie1928]

Don't take from retirement...you don't want to burden your children someday to take care of you because you didn't plan for the future..trust me I know. My parents didn't make great financial decisions and now my sister and I are paying the price..and we really resent them for it.

Perhaps we could form a support group...my parents are/were financial train wrecks and now I'm helping the clean up. I agree with the resentment...

 

[lovebuzz]

I am going to agree with going to CCCS they will be able to negotiate with the creditors for you. Some will even go down to 0%. I had about that much in CC debt. I paid $775 a month for I forget how long. They asked me what I could afford to throw at it and that is what fit in my budget. It took me awhile and now I live on a cash basis. It is doable. Just go talk to them. You do not have to take it, just hear what they have to say. It is nice to know what all of your options are.

Another thing about summer camps. The cub scouts have a day camp that anyone could attend. It usually is from 8:30-3:00. Ours is $85 for the week and if you can not afford to pay that may waive that fee for you. The boys have alot of fun. I'm sure your younger ones would like it.

 

[nunzia]

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.

That's great advice. To me, the camps are a huge un needed expense right now. You may be able to even find a decent home care facility that allows drop in care for the occasional times that you work. Then you can also look for another job with more stable hours for later. Since yu are going to be home most of the time all summer, I don't see why you should shell out 5K for camps...

 

[maggieusa]

The op is going to find her self in the same situation with lots of credit card debt in a few years and when they retire they willl wish they had the extra money from the 401K its a cycle and I really do not think they will break it.

 

[mrsklamc]

It appears OP is SO overwhelmed by the credit card debt she is unable to care about retirement right now.

Even if she can recoup what is in there right NOW in a few years, she will never make up for what she WOULD have made leaving the money alone.

But, it seems the decision has been made. Like other posters I find it disconcerting that they have done this before, BUT the sad fact is they are ahead of most just by having retirement savings at all.