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I guess have to look at it as $100K vs $108K in a 20-24 yr time span.
What ?????
$5,000 now would be $27,000+ in 25 years that you have lost (compounding at 7% annually).
Also your goal of $100,000 is ridiculously low, unless you have a pension (a great one) or a trust fund, $100,000 in 25 years is about the same as $55,000 now (assuming relatively low inflation rate like we've had the past 25 years).
So, unless you have a great pension (most don't) and Healthcare paid for in retirement (the vast majority don't) currently you need more than $1,000,000 to fund a decent middle-class retirement. 25 years from now it will probably be more than $2,000,000 needed.
Put on your big boy panties, get a second job to pay off your credit cards, and have a little bit of self-control !!
While I agree OP should not dip into his retirement account, I think that ^^ is terrible advice. There are other ways to chip away at debt than not paying at all and letting one's credit go down the drain.
Like another poster said - transfer balances to a zero percent interest card (when that term runs out, do it again) and get a part-time job and dedicate those funds to paying off bills (from previous threads, I know that OP is married and has no children - both of them could make some extra cash to eliminate this debt).
Credit scores are extremely important. Higher interest = bigger debt. Poor credit scores can affect one's job prospects, their insurance premiums, their ability to rent, etc.
IMO, credit scores are just like retirement funds in needing to be protected.
Figure plan is cash out $5500 from 403B
Pay off 1 credit card with the $5000
Then put $200 down in course of 8 months and then $4500 end of December/January.
Increase my contribution from 3.1% to 3.6%
Then once done with Nursing School increase contribution to 5% and set up a Roth IRA account.
This is one area where Dave Ramsey and I diverge. It's a retirement fund and you've already saved $3K. 35 years from now, at 7% (average stock market growth), that will be worth $27K. Is it worth it to lose that? Also, if those funds are pre-tax funds, they will add $2,500 to your taxable income. plus add a $250 (10%) tax penalty for early withdrawal.
So as of right now I have $3000 in my 403B. If I can take 2500 after the penalty it would allow me to apply to a debt consolidation loan. From there can pay off my bills in 24 month period.
Now in 2 years will make a 1.5% an hour increase in pay
I can contribute more and build my 403B up in a 24 yr time span.
Do you think it be smart to withdraw from my 403B appreciate the insight.
No, it's almost certainly a horrible idea, for lots of reasons:
1. You lose the benefit of compounding. $3000 over 24 years turns at a pretty conservative 6% rate of return will turn into $12,146. That's not a lot of money. But it's even harder to make up for it in the future when you have less time for it to compound. If it's hard for you to save and pay debts now, don't assume it will be easier in the future.
2. You're treating your 403b like a savings account. It isn't. A 403b is a long term pot of money. If you get in the habit of treating it like a savings account once, you are prone to do it again.
3. By dipping into the 403b, you're not getting at the root cause of how you got into $3000 credit card debt. There could be lots of reasons for that. The main categories include:
--Not paying attention to spending and spending too freely on wants instead of saving some money regularly in a savings account.
--Caring too much about what friends and family think regarding spending and lifestyle expenses.
--Having fixed expenses that are too high for your income (too much car, too much house, rent too high for your income).
--Not having good relationship boundaries (you give too much to family members, friends, bf/gf when you can't afford to. Or you may have a spouse who will not cooperate with a reasonable spending plan).
--Not having a solid and realistic career plan that will enable you to earn more money over time.
^^Many people would rather avoid dealing with these above problems because they are difficult and aren't fixed quickly. Instead, they dip into their retirement plans. Financially successful people don't do that. They face the hard problems head on...and they fix them, even if it takes time and significant effort. They treat debt like an emergency and they do what it takes, within the bounds of ethics to get rid of their debts as quickly as possible (other than, perhaps, a modest mortgage with a low interest rate). They don't look for quick fix solutions like dipping into their retirement plans to pay off credit card debt.
And by the way, a 1.5% pay increase in 2 years isn't going to fix your problem. It's just not enough extra money to do much of anything. If you're honest with yourself, you know that's the truth. It's just simple math. You need to find ways to reduce spending and increase your income (more than just 1.5% in 2 years).
I would take these steps:
1. Stop contributing to the 403b for now and use that money to pay off the debt.
2. Start writing down every penny you spend, either on a yellow legal pad, an Excel spreadsheet, or on one of those web sites like You Need a Budget or Mint.com.
3. After a month, take a look and see how much you've spent in every category. Most people don't know where 20% of their spending goes. If that describes you, take some or all of that spending and put it toward your debt.
4. Work extra hours or find a side hustle/job to earn extra money.
5. A lot of people do 0% balance transfers on their credit cards. If you have half decent credit, you can probably apply for such a card. They do charge an annoying 3% balance transfer fee. The key is to
Then put $200 down in course of 8 months and then $4500 end of December/January.
Increase my contribution from 3.1% to 3.6%
Then once done with Nursing School increase contribution to 5% and set up a Roth IRA account.
A 5% savings rate, while certainly a whole lot better than nothing, is really not enough for a decent retirement unless you have a great pension (which I wouldn't count on. Even people who have them are going to find them "reformed"--i.e. with less benefits than they expected, because in many cases too much was promised).
5% plus maxing out a Roth is better, but it really depends on what percent of your income that adds up to. It all boils down to the percent of your income that you save. If you want a decent retirement in your 60s, that means you need to consistently save 15% of your income over a 35 or 40 year period without raiding it. Obviously, that means you need to save at least another 5% in cash savings accounts on top of that for other expenses (emergency fund, next car, etc.).
It seems impossible now, I know. But if you are going to be a nurse, you will be able to afford to save at least 20% of your income if you commit to doing so. See this article on retirement math. It all comes down to the % of your (after tax) income you save. If you're saving 20% of your gross income, plus maybe get a 3% 401k match, you'll be in good shape. But if you're only saving 5% to 10% of your gross income, that's probably not gonna cut it.
Everyone including me says NO. Hope the OP is sincerely asking for advice which is all NO, and has not just made her mind up. Once more, NO for all the reasons already listed. Just get a part-time job for a year or so to help pay it all off sooner, for heaven's sake.
So as of right now I have $3000 in my 403B. If I can take 2500 after the penalty it would allow me to apply to a debt consolidation loan. From there can pay off my bills in 24 month period.
Now in 2 year's will make a 1.5% an hour increase in pay
I can contribute more and build my 403B up in a 24 yr time span.
Do you think it be smart to withdraw from my 403B appreciate the insight.
Are you able to BORROW from your 403(b)? I was able to borrow money ($5000) from my retirement plan for a large purchase and pay it back into the account (you use the accumulation on the funds, but you pay yourself the interest on the loan). You won't be charged a withdrawal penalty on a loan. The drawback is that if you leave your employer before the loan is repaid into the retirement fund, the balance becomes due immediately.
I strongly suggest you investigate this, since credit card interest is huge and having a high balance affects your credit score as well. Borrow enough to pay the bills and cut up the credit cards.
Have you checked your plan to even see if you can do a withdrawal?
Some plans don't allow for withdraw's except under a few very limited circumstances. The last time I had a 403b, the plan only permitted withdrawal's if you were in danger of not having a roof over your head.
In Ron Popeil's (the founder of the Ronco Rotisserie Oven) immortal words, once you set up your retirement accounts, just forget it. Just look at it as money you can never touch until your retired self thanks you for not touching them. Just forget you ever had that retirement account until you retire. Get a second or third job until you pay off your debts.
No, it's almost certainly a horrible idea, for lots of reasons:
1. You lose the benefit of compounding. $3000 over 24 years turns at a pretty conservative 6% rate of return will turn into $12,146. That's not a lot of money. But it's even harder to make up for it in the future when you have less time for it to compound. If it's hard for you to save and pay debts now, don't assume it will be easier in the future.
2. You're treating your 403b like a savings account. It isn't. A 403b is a long term pot of money. If you get in the habit of treating it like a savings account once, you are prone to do it again.
3. By dipping into the 403b, you're not getting at the root cause of how you got into $3000 credit card debt. There could be lots of reasons for that. The main categories include:
--Not paying attention to spending and spending too freely on wants instead of saving some money regularly in a savings account.
--Caring too much about what friends and family think regarding spending and lifestyle expenses.
--Having fixed expenses that are too high for your income (too much car, too much house, rent too high for your income).
--Not having good relationship boundaries (you give too much to family members, friends, bf/gf when you can't afford to. Or you may have a spouse who will not cooperate with a reasonable spending plan).
--Not having a solid and realistic career plan that will enable you to earn more money over time.
^^Many people would rather avoid dealing with these above problems because they are difficult and aren't fixed quickly. Instead, they dip into their retirement plans. Financially successful people don't do that. They face the hard problems head on...and they fix them, even if it takes time and significant effort. They treat debt like an emergency and they do what it takes, within the bounds of ethics to get rid of their debts as quickly as possible (other than, perhaps, a modest mortgage with a low interest rate). They don't look for quick fix solutions like dipping into their retirement plans to pay off credit card debt.
And by the way, a 1.5% pay increase in 2 years isn't going to fix your problem. It's just not enough extra money to do much of anything. If you're honest with yourself, you know that's the truth. It's just simple math. You need to find ways to reduce spending and increase your income (more than just 1.5% in 2 years).
I would take these steps:
1. Stop contributing to the 403b for now and use that money to pay off the debt.
2. Start writing down every penny you spend, either on a yellow legal pad, an Excel spreadsheet, or on one of those web sites like You Need a Budget or Mint.com.
3. After a month, take a look and see how much you've spent in every category. Most people don't know where 20% of their spending goes. If that describes you, take some or all of that spending and put it toward your debt.
4. Work extra hours or find a side hustle/job to earn extra money.
5. A lot of people do 0% balance transfers on their credit cards. If you have half decent credit, you can probably apply for such a card. They do charge an annoying 3% balance transfer fee. The key is to
Mysticaltiger and I agree on a lot of things.
All that juggling, taking monies from here and there and paying it here and there is going to get you confused and will only spiral you into making other bad decisions.
Don't touch retirement. If you DO have to apply for any "help", they generally don't count retirement funds as assets against you.
Your best bet, as noted here by MT, is to record every penny , then cut cut cut.
Cut out cable, get basic cheap calling and texting only cell, cut you energy consumption( wear less, get a fan instead of a.c., or wear an extra sweater or sweat shirt), cut your transportation, cut cut cut.
Once you have a workable budget, then go to the cash envelope system, putting a set amount in each envelope for each line item (that isn't payable by check, like your rent). When that money is gone it's gone. When the food envelope is empty, go to a good pantry or call Catholic charities in your area. If in doubt, call 2-1-1 help line ( available across the country) to find out where to get free food. Eat ramen noodles on meal, filling and cheap. Eat spaghetti one meal at least (cheap). Figure out how to eat cheap AT HOME, NO eating out.
Walk where you can. Take public transportation, if available.
Then get a second and or third job. Devote every penny of every paycheck to paying down the debt.
Don't cut up one of the cards, KEEP IT. You may very well need it later, but keep on NOT using it, until it is paid off. These,days a c.c is needed for so many things, you MAY need it.
But that is not to say keep charging on it!!
When the debt is paid down by all means, you need to start an emergency fund. Put 10% away until you have a minimum of 6 months to a year living expenses in easy liquid cash. That will help ensure you don't charge on c.c the costs of living.
Once the debt is paid off, once the e-fund is in place, then increase your retirement contributions.
Then after all that if you want, quit your extra jobs.
But not until then.
It's a tough long road, but in the end you'll be thankful.
Best of luck to you.
(PS I was there before)
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