My new wife and I have a bit of a dilemma with debt, and I don't know what to do. I am 30, she's 28. We have been married since July of this year. I work. She does not work, because she has no means currently to get to work (She needs driving lessons, vehicle adaptations, lifts for the vehicle, etc). We're working on that aspect.

Anyways, from the wedding and a few other things.. we have alot of montly expenses to make minimum payments on our credit cards, which we're in over our head on.. to the point where other critical bills are starting to slip and I cannot afford health insurance for her (my company only covers me). I have a few options available to me.

1. I had a rollover account from a 401K that I could cash in. After penalties and taxes, I would have enough to totally wipe out that debt and wipe the slate clean. Pros: High Interest credit card debt is gone. Cons: I just wiped out my retirement account.

2. I have a large antique radio collection that I have lovingly restored and some pieces took years to find and collect. I also have a small collection of Lionel trains, I also have several R/C aircraft - these are all hobbies of mine. If I sold basically everything I own, I could make a 'dent' in the debt.. but probably not come that close to paying everything off. Pros: I made a dent in the debt, retirement account is untouched Cons: Well, there goes any hobbies I enjoy for now; still doesn't take out the montly minimum payments; etc.

3. Get another job - I am working on installing a plow in my truck. I could do side computer work locally for homes and such doing small consulting jobs.
Pros: It definitely would help with the minimum payments, it eventually would help get rid of the credit cards Cons: Even less time at home (My current job has me out at a minumum of 50 hours to an average of 60 hours a week).. this might stress our marriage a bit only seeing my wife 30 minutes a day (which happens often anyways due to my current job).

Right now option 1 looks like the 'easy' way out, but I'm not sure it's the best way out. Sure, it would get us immediately out of debt. I could afford health insurance for my wife, and we could then work towards building that back up again, getting in a house, etc. My brother in law says "which is more important.. having a collection of radios, trains, having a truck or is a better financial situation more important?" - a.k.a. sell all worldly possesions. This is a tough one for me. I guess it would be immature to keep them. A hobby is a luxury item I suppose, just 'toys', but it is a great source of enjoyment. Not to mention selling it would only make a dent, not eliminating the problem altogether. Finally getting another job or finding a source of income could work to eliminate the debt eventually, I just fear it will be taxing on our marriage. I've already had a few weeks where 4 nights out of the week I was out of the house from 7am til 12:30 after midnight. Not good if you have a wife who essentially is stuck in the apartment and can't leave on her own.

I don't know if it's a good thing to air all this out in public. I hope I didn't reveal too much, I tried to keep it pretty general without getting into too much information. My wife and I aren't sure of the best path to take, I figured I would see what other wiser people with more experience might think. Thanks,

 

Is it possible to get a Back loan at a lower % to pay off all the other debts?

A loan interest rate will be less than credit card rates.

 

I know it seems like a bad idea, but why not cash in the 401K? You are young enough to restart it after paying off your debts and if you can afford to stick enough back into it, you could (if you are careful) start putting back a good amont of money for retirement.

 

Ya I think cashing in the 401 is a good idea ,because youll be out of debt and can start fresh .2nd job would be testing a new marriage been there done tha t hope you can decide on what to do good luck

 

Give the offers from credit companies that offer the super low rates on balance transfers a shake. Paying 2.99 on just one balance will knock down the principal a lot faster than paying 10 and 12 percent on 2 or 3 cards. BE SURE to read the fine print on those transfer offers though , some low rates only last a year !! Check your state disability / social security compensation boards, there may be some help there for your wife. Sell some of your toys, keep the most dearest, that way you have something to go to and distract yourself at the darker hours in your life. And as said above, you are young enough to start 401 k over, get it out and use it, bankruptcy is not cool for someone just starting out as you are . And pray a lot, if that is part of your life. Best wishes to you and yours, all jmo

 

Why not do a little of everything? Sell most (not all) of your toys, do some side work that can be done from home (a snow plow could be a tax write-off for your truck if you make it a business), and then get all that debt into one large loan. Something about touching your retirement sounds like a bad idea, especially if you have that much already...that's only a "quick fix", allowing you to potentially get back into the same debt problem again.

 

Don't cash in the 401k!!!! It makes no sence... do the math on that money appreciating at say 8% a year until you retire. Then look at the last few years of gain (assuming that it takes you a few years to get out of debt, I am compairing the few years you have to "suck it up" and pay off the debt and the last few years of appreciation of your 401k) of your 401k. I guarantee you the money you made in intrest those last few years will far out weigh the interest you are paying on the credit cards.

So that being said, how do you get rid of the debt? Do you have kids? Doesn't seem as if you do from your post, so the answer is in selling the antiques and hobby stuff (once you have kids, if you plan to, those "worldly" things won't matter much to you) and then depending on how fast you want to get rid of the debt, get the second job. Because if you do have kids and still have the debt... that will put more stress on your marraige than you can imagine.

Trust me on the 401k though... call Clark Howard and ask him the very same questions, see what he says.

http://clarkhoward.com/

Scott

 

I'd go with ejpreston's suggestion - or even just cash in just part of your retirement along with the outside work and selling off the hobby. I would get the health insurance as soon as you can, that's a risk not worth taking. A simple slip and fall by my 5 year old last summer ran up almost $50K on my family plan last summer.

 

If you have a house, see about getting a home equity line of credit. The interest rates are much lower than your credit cards.

Without knowing specific numbers, it's tough to say whether or not to cash out the 401k. If there's $5k in there, it's an easy choice, do it. If you're talking about $50k, it becomes a lot harder.

I would hesitate about selling the hobby stuff, because then you're basically sacrificing your happiness for your creditors. That's never a good tradeoff. You'll regret it for a long time to come.

I would also recommend against the second job. It's no fun to be rich but lonely.

Try calling up each of your credit companies, and tell them you have a very attractive transfer offer from another credit card, and you're considering moving over your balance unless they'll lower your APR. That will cut your rate. You can save quite a bit of money that way.

On the plus side, you're young enough to rebuild the 401k if you have to. I'm 29 and I haven't saved a dime yet for my retirement. I've had some other financial things to deal with, though.

I wouldn't advise bankruptcy. When the credit cards are the worst part, it's better to just stop paying them. The perks are no court stuff to file, no court dates, no lawyers, and you credit is only hosed for 7 years. With a bankruptcy, your credit can be hosed for 14 years.

 

I would seriously look into talking to someone that specializes in debt restructuring. You may find someone that can extract what you have, make lower payments, and make it all or partly tax-deductible! Seriously, before you go and take a hit on the 401K talk to someone.

Question to anyone: can you declare chapter 11 bankruptcy with his assets? Is the 401K preserved? If so, this may also be an out. Seriously. Recovering from that is alot easier than rebuilding your 401K.

Do you own a house? Can you take a home equity loan out to pay off your debts? Home equity lines are really low interest, payoff in 10 years, and tax deductible to boot. I use them for everything...buying cars etc...

 

Check to see if you can take a loan against your 401K. I did this a few years back. Helped me out of dire straits, and through weekly payroll deducts, I eventually paid myself back to my 401K.
Good luck.

 

401k - NO No NO no nonononononoonnoonononononononononono NOOOO
Hobbies - Sell a little
Another Job - It would help

Whatever you do, don't do, really seriously do not touch your 401k! That would be an even worse mistake. Everyone reading this, there are going to be some that will Pray, and you get through, just work with those interest rates on the credit card!


Bryan

 

I agree, do what it takes to get the health insurance.

The measly $5000 that someone refered to as a no brainer to take out will be worth...(at 8%)

$43,135 at year 58
$46,585 at year 59
$50,313 at year 60

those last 2 years are worth $7,178.

Whereas if you take it out and somehow put it all back by the NEXT year, you will have lost $3,728!

and if you get it all back in 2 years from now, you will have lost $7,178.

The true effect of compound intrest is understanding that one year on the back end is worth far more that 1 year at the beginning.

jmho

Scott

 

plowing snow is a tough way to make a living. you go out at all hours. in a storm you might work for days straight. if your customers are on contract and gas goes up you have to eat it. and no contract, no snow, no dough. its hard on your truck

guys that do this have landscaping and construction companies.. they need something to pay the trucks in winter. they have regular customers that need them in summer and pay good money. it's a business. to them if they smash a sprinkler head or take out your retaining wall it's work for spring. with a little bad luck you might get sued when you nick somebody's garage door.

if you want to do this best of luck. my advice is try and offer the best service and charge good money so you can make the most from each customer. customers are hard to find especially if there's a lot of competition. some company might do my driveway for 250$ for six months. but he has lots of trucks and hundreds of customers. five houses on each street he's making money.

but they can't offer good service. they don't have enough guys, it slows down the trucks. a guy that does the steps and the driveway is starts closer to 100$/month or more if you can get a few big customers that really want good prompt service.

 

Don't cash out the 401k. With penalties and taxes you could lose up to 40% of the 401k money.

Check out http://www.daveramsey.com/

He has a daily radio show on AM and internet streaming about being debt free. Budget is the key.

I havn't read/bought his books or anything but I do tune in his show on a regular basis. He offers sound advice.

I can't comprehend some of the callers with 50,000 credit card debt, 150,000 mortgage and 50,000 in car debt and wonder why they can't pay the bills on a 50,000 gross income.