I’m still thinking about paying off all of our debt with my husbands 401K. It’s so tempting. My brain tells me it’s probably not the smartest thing to do but my heart tells me that we should do it. If we did go ahead and do this, we’d have enough cash flow to live credit card free, using only cash. Here’s my list of pros and cons.

PROS:
Freeing up $3,000 a month
Less daily stress
We could save money and go on a CASH paid vacation
We wouldn’t feel poor anymore
We could buy clothes and shoes for CASH and not be worried about making payments
We’d be living again, versus just barely getting by
My husband would be able to actually spend some of the money he’s worked so hard for

CONS:
We’re tapping from our future
Tax impact???

I’m sure I’ll be adding more to the list.

Update 4/23/08 - I spoke with my husband about my plan.  He’s already aware of the 10% penalty and the income taxes we’d owe on the money.  He’s not against the plan but he’s not 100% for it either.  He said we’d talk about it when he comes home from his business trip.

I’m looking for comments good or bad, I can take it.

I’m drowning in payments here, I won’t go into all the nasty details but there are many of them and they are killing me. I barely have anything left at the end of the month. So here’s what I’ve been thinking about doing. I’m just not sure it’s the correct thing to do. I want to ask my husband to cash in a 401K that he has that hasn’t done anything in years. It has $22,000 in it. I’d also like for him to sell this dump truck that we have that’s worth $5,000 and is never used. I’m thinking, after taxes I might have $20,000 and I could pay off two loans freeing up $600 a month. Is this a good idea or a bad one?

I’ve also been thinking about tapping my husbands big 401K he has a very large sum of money in there. What if we tapped that to pay off all our remaining debt? We would be taking 20% of his 401K. Is this a good idea or a horrible one? Is it even possible to do this?

If we went ahead with both these plans, we could be debt free (I’m guessing) in a month or two. I would also be freeing up over $3,000 a month, $36,000+ a year. We could max out his 401K contributions and put money into savings.

If you are reading this please leave a comment good or bad and don’t tell me what you think I want to hear, tell me what you really think, it will be appreciated more than you know.

Thanks in advance.

Photo by Snappy Larry

Last week I made all four of my credit card payments online. I’m done for the whole month!

Before I started my Debt Reduction plan, I’d dread paying credit cards and I’d worry about them all month long. Sadly I also had no idea when payments were due until the statement would be show up in the mail. I was living in denial. I never thought paying off this much credit card debt could be this calming.

For those that are interested, here’s how much I owe and who I owe it to. The debt is all carried on three cards.

That doesn’t look very good in print does it? Makes me sick just thinking about it. I’m stuck for at least the next three years paying for stuff I got on sale or just had to have (and probably don’t even know where the stuff is or even care about the stuff now) and now I can’t afford to buy the stuff we NEED. I wish I’d had an idea of what I was doing to myself by racking up all this debt and the impact it would have on my life and my children’s lives. What’s done is done and all I can do now is take responsibility and clean up the mess.

This video should give us all a little hope. This couple paid off $51,000 of debt in eight months. I know that’s probably not possible for most of us but it’s still nice to hear. Someday that’ll be me calling into the Dave Ramsey Show declaring “I’M DEBT FREE!!!”

From The Consumerist

The Mom With $135,000 In Credit Card Debt Who Spends $400 A Month On Starbucks

“I love new clothes. However, I like getting rid of the clothes just as quickly to go buy new ones.”This lady who appeared on Oprah lives the life of a big house in the burbs, new cars, six beautiful kids, and spending way beyond her husband’s $5,000/month salary. Felice drops $400 a month on Starbucks, $240 on tans and manicures, and her children have no health insurance.

“I have six kids and I sell their toys sometimes just because I don’t like them.”

When money runs dry, as it often does, she takes out cash advances. She handles the family finances and hides receipts from her husband underneath a baby blanket in a drawer.

When I do shop, I do kind of get a rush. It makes me feel good… but afterwards, though, I get depressed. I’ll buy something even if I really don’t like it because I have to come out with something.

On page 5 you learn they’re on the brink of being totally financially destroyed with $135,000 in credit card debt, $1,700 a month for three cars, two mortgages at $685,000, and are two weeks behind on their mortgage payment. Before you make Felice out to be the totally baddie, the husband is just as culpable for not asking more questions and making sure the numbers add up. He even says that he would get credit card bills and not know where $10,000 of it came from.Suze Orman’s solution for them? Sell the houses and cars, move to Seattle, and for Mom to get her ass a job. Perhaps at Starbucks, since she likes it so much and they offer health insurance to part-time workers.

Keeping Up with the Joneses [Oprah]

************

I can’t believe this woman. First of all I don’t understand how she could juggle all that debt on $5,000 a month take home pay from her husband’s job. Her debt makes mine look tiny. Before I switched my balances around and lowered my interest rates I sometimes felt like I was just drowning in debt and I really hadn’t charged anything for years. Paying my credit cards, month after month, for stuff that I don’t even remember buying or better yet, have most likely thrown out makes me feel awful. I’ve never even been to a Starbucks and I don’t get any pleasure out of buying clothes, I tend to think about all the money I’m spending and it makes me feel anxious.

I wonder how she does it? I wonder if there is any hope for her? I’m sure if the people in my “real life” knew about the debt we’ve accumulated they’d look at me like I’m looking at this woman. I am really no one to judge her but I really can’t help myself, probably because on some levels I can identify with her. For the sake of her marriage, her children and herself I truly hope she can turn things around and get back on financial track.

I’ve been reading Dave Ramsey’s book, Financial Freedom and I’ve decided I need to beef up my emergency fund. I already have some money in a savings account but I’m thinking I should built it up a little so I have a little cushion in case when something comes up. So for the next few months I’ll be paying the minimum on my credit cards and putting some money in my savings account. With my credit card interest rates as low as they are now, after finance fees, I’ll still be paying off approximately $431 dollars of my debt per month. I should be able to put about $100 - $300 in my savings account per month. I’ll still be making progress towards becoming debt free and beefing up my savings account at the same time.

I know following this plan is going to set back my goal date of being credit card debt free but I’m also hoping that by doing this, should an emergency come up I won’t be reaching for my credit cards to help me out.

Just too clarify, I found this on youtube. I don’t have an answering machine.
This guy sounds pretty full of himself.

I have officially paid off $1,731 of my debt! That’s a whopping 4%!

I know I still have such a long ways to go but for the first time in YEARS I’m actually making some progress. I can’t tell you how great I feel about getting out of debt. I feel so full of hope. I’m sure it’s bound to affect other area’s of my life in positive ways, it just has too.

A month or so ago I signed up at mint.com. It’s a really cool FREE secure site that tracts all your credit card accounts and transactions in one place. You can also categorize all your transactions so you can see exactly where your money is going. You can also set it up to send you text message alerts if you have a payment coming up, unusual spending on any of your credit cards, or any large purchases. I love the site and can’t say enough good things about it.

According to mint.com I’m doing really well with my interest rates on my credit cards. Since January I haven’t charged any gasoline, hence the “?”. Here’s a snapshot:

Here’s what my credit card spending trends show for the month of March. The only activity on my cards has been financial charges. I’m so proud of myself!

I’ve never been so excited to pay bills in my life.  According to this debt reduction calculator, I’ll actually be free of this credit card debt in two years!  I could just kick myself in the head for not realizing that I could actually pay this off before.  Why’d I wait so long?  What in the heck was wrong with me?  I’ve been having some sort of credit card debt continuously for the last 20 years.  That’s just not right.  I consider myself an intelligent person but undeniably I have make very foolish financial decisions in the past.