MBNA GONE!

Got the eStatement for my account at their website and they got the MO for the guitar.

I only owe a $35.31 balance (It was $11.80-something, but I guess their interest got snaked in before the payment got there…) and I have that set for being paid tomorrow.

Then that is another bill out the door for good! YAY!!!!!!!

Anyway, Thought you’d like to know, even though this is not the Barclaycard people, I have one less debt to fret about per month.

Yeah, I think ‘hehe’ sent that (You are the same?) Anyway, I do feel good now. Will be able to sock it off to JUNIPER now and tell all of them to go to the theological place of Eternal Punishment.

401k for people who are not of age to pull it out without penatly

I have yet to hear Dave Ramsey recommend using the 401k for people who are not of age to pull it out without penatly. The reason is, that if you compute the penalty, the tax, etc, you find yourself essentially paying an excorbitant interest rate.

What many 401k participants, desperate for money, may forget is the cost of taking a financial hardship withdrawal. A $10,000 withdrawal does not equal $10,000 in your pocket.

“If you are under 59 1/2, you will lose 35 percent to 45 percent of the withdrawal in taxes and penalties,” Benna said. “You need to think about that.”

For example: suppose your tax filing status is married filing jointly and you earn $60,000 a year. That means your income falls in the 27 percent tax bracket.

If you take a $10,000 hardship withdrawal to pay for your child’s college tuition, you will owe $2,700 in federal income taxes and an additional $1,000 to cover the early withdrawal penalty. You’ll be left with $6,300, or less if you also owe state income tax.

Taking a hardship withdrawal can also result in longer-term pain — a less generous retirement.

Take the example of a person who, starting at age 30, contributes $5,000 a year to her 401k plan. At age 40, she buys a house and takes a $10,000 hardship withdrawal for the down payment. Let’s assume her portfolio generates an average annual return of 8 percent. By retirement at age 65, she will have $793,094. Had she not taken the hardship withdrawal she would have had $861,584, or $68,490 more.

A $10,000 withdrawal may seem insignificant today, but over time it can mean a lot. The trouble is making up for it in the account.

Tapping into the 401k should always be the last resort.

My 2 cents worth.

I don’t know about 401(k) s to venture a guess

If you live in an excellent public school district, it sounds foolish to pay for private school. I’m from New York City. Several schools such as Bronx High School of Science, Stuyvesant, and Hunter College are harder to be admitted to than a private school. I was raised with a lower-income ghetto education. I worked hard. Several elite private colleges awarded me scholarships. The difference in class between public and private school grads was shocking. It’s not only a matter of basic knowledge.

The self-confidence and sophistication is hard to replace. If I had children, I would scale down my house, etc. before I messed with their birth right – a good education. Friends of mine have barely squeezed by paying for private tuition. Not very relevant. I suppose I am awed that people will sacrifice for their children.

I know what you’re talking about me. We all do what we can for the kids, but I don’t think that any amount of sacrifice can give them the self-confidence and sophistication that kids from wealthier families have. The school and even the freedom from financial worries are only a small part of it.

People raised on royal jelly are different to the core and they approach life from an entirely different point of view. I grew up in a very upscale community and while we were merely part of the struggling middle class, we felt like we were dirt poor because of what our friends were like. Yes, it’s better to be the stable boy for the royal family than a migrant worker, but you still will never think of yourself as much more than a slave even if you do manage to get into Oxford.

Withdraw from 401k to lower expenses and debt? Long!

Hi, I hope someone can help me sort this out. I posted some time ago and got a lot of good encouragement!

The bottom line is, we barely make enough money to cover our expenses. Any house repairs, car repairs, etc. are a huge ordeal. I’m trying to get on track by establishing a separate savings account into which we can deposit a little each month to cover big expenses like car repairs, but we have so little extra to do this.

So one idea I am tossing around is to take a chunk out of the 401k from my husband’s old job to pay off some of our secured and unsecured debt.

We currently have $67k in the 401k; that’s the only savings we have.

We have two cars that we’re paying off; on one we owe $5k, the other is $10k. Selling them off might barely get us what we owe, so that wouldn’t work, as we wouldn’t be able to buy replacement cars. We do need the two cars. The car payments total $723/month.

We owe Discover card $5k which we are paying at $200/month.

We have a debt of $12k to our children’s private school which we are paying off at $400/month.

The total of these debts is $32k. The total monthly payments on all this is $1,333.

The way I see it, if we withdraw $32k plus another $4k to pay the penalties and taxes, we would be able to put about $800/month into long-term savings and CDs or retirement accounts, and have another $500 to cover our monthly expenses including big-ticket items.

Does this make sense, or am I treading into dangerous ground here? The 401k is currently earning about 4%+.

I’d really appreciate a reality check. Thanks a lot!

I think you should rethink making a 401k withdrawl. You’re taking a huge opportunity cost of what the money could become if you left it invested. I’m concerned that you’re only making a 4% return….there must be more investment options than the rate you’re getting which sound like a guaranteed account.

Please don’t take offense at my honesty because I’d rather tell the truth than try to pacify you. Though I have limited information, it appears that you have some “lifestyle” issues, e.g., private school. Proper education for children is a high priority for any good parent but at what expense?

A 401k withdrawl seems to be a quick fix for you. Have you examined how you ended up in debt?

It may be a little painful but why not make a family game out of additional ways that you can cut expenses. If you’ve cut back all you can and you’re still barely making it, you need to go after the dollars and downsize. For some, this means moving to a smaller home, etc. Americans are infected with an inability to delay gratification – we try to acquire the things in our 30s or 40s that it took our parents 30 years to acquire.

Food for thought…

Being a Fan of Dave

Getting out of debt and staying out of debt is the same issues as loosing weight and keeping it off. It is hard work and takes life long changes

You are looking at a lifestyle change driven by a change in values. Fully understanding your spending and where and when and why is more important then increasing your income. Increasing your income will in the short term help you get out of debt faster but it won’t prevent you from going right back down the same rat whole when you finished.

If you are following Dave’s and Mary Hunt’s and many many many others in the financial health field you understand that it is not about how much; it is spending in a deliberate planned fashion and saving in a deliberate planned fashion. It is about being in control of your money rather then letting your money control you. It is about spending only a percentage of your income saving a percentage of your income and planning for those events that happen to most like unemployment, divorce, health problems so that you don’t self destruct and end up in the welfare line when life happens as we all know it will.

If your truly following Dave and the rest then you don’t spend a penny until you have your monthly budget and allocated your money to your envelopes and have money to spend. If you have a week to the next pay check and no money then you go hungry for a few days and try to do better next month. But if being a Dave Ramsey fan means having his poster on the wall but your credit cards still in your wallet your probably not ready to truley change.

Step 1: Cut up all credit cards and start using cash and don’t apply or accept any new offers of credit and get off the Junk mail and phone lists by writing to:

Mail Preference Service
Direct Marketing Association
P.O. Box 9008
Farmingdale, NY 11735

Telephone Preference Service
Direct Marketing Association
P.O. Box 9014
Farmingdale, NY 11735

Or go to
http://www.dmaconsumers.org/offtelephonelist.html
http://www.dmaconsumers.org/offmailinglist.html
And for emails
http://www.dmaconsumers.org/

Only when you have your budget and snowball payment schedule can you truly evaluate your need for more income. If you don’t know how much 60% of your income is or how long it will take to pay off your unsecured debt paying 20% of your income to it then you have a lot of work to do.