The question is, would you stop 401k contributions to pay down debt? I could bring home close to $500 extra per month but I would miss out on that 6% match from my employer. I would also miss out on the company's profit sharing plan that goes in to the 401k account. The only way to get this money is to participate in the 401k program. This is not a lot of money but over the years I'd say close to $12,000.
The other issue I have is my rate of return. Below is my 401k asset allocation. As you can see, 98% of my contributions go to stock (growth/income) and 2% to go international stock. I think my risk tolerance is pretty high but last year my rate of return was 30%. Probably not a bad ROI, of course keep in mind that number was -68 back in 2008 when the market crashed.
I also have the wife on a 403b and 457 plan through her employer. They have a company that manages the asset allocations so her rate of return last year was something like 2% (lame). I could always take some of that money but it's such a hassle when it comes to public schools, you actually have to send in paperwork to HR.
So what would you do? pay down the debt or save for the future? I really don't know what to do. I think I can handle the debt but I also have this desire to bring it back down and be credit card debt free once again.
HS
24 comments:
Don't stop altogether, but scale back a bit. Again, include the wife in the discussion.
would you actually use the money to pay off debt though? Or would you just spend it on "stuff came up" and "life happens"?
I would changed ANY of your automatic employer's savings plans until you're seriously paying a fixed amount of your debt down every month on your own.
Your problem is NOT lack of money to pay down your debt, it's lack of discipline.
Don't stop saving for your retirement. Cut your spending down to the bare bones. You'll need your money when it comes time to retire.
Bike,
I agree, I'm lacking discipline, I think I would use that money somewhere else.. at least on 401k I can't touch it until I'm in my 60s.
HS
your first step is to STOP using your cards! period. cut them up right now!
Ok...first off-why on earth would you mess with your retirement? You mention that you would stop contributing for a while-but newsflash-from what I've read of your blog (every single entry)you wouldn't ever go back to contributing. Do you really want to be dependent on social security checks in 30-40 years from now? Which will probably not even exist by then anyways? Don't mess with RETIREMENT to pay off MATERIALISTIC CONSUMER DEBT. I'm not shouting, just trying to emphasize my point.
Also, you mentioned from your monthly pay you would have 2,000 a month for debt repayment. You do realize that you could pay off 11,000 in about 6 months if you stuck to that plan of paying 2,000 a month? And another thing-do you even use cash or do you just enjoy sliding a shiny piece of plastic through a machine because it looks cool? Ever hear of a debit card? Seriously!? And that five dollar coffee drink-by the time you paid the interest on that one purchase you have essentially bought ten coffees but with nothing to show for it. Use cash for small purchases.
I have been reading this blog for months but have never commented since I didn't want to sound like a broken record...but you honestly need to grow up. This is coming from a 23 year old. Take responsibility for your choices that you have made. And this might sound harsh-but MAN UP! Take control of your life. Talk to your wife. If I found out that my fiance was hiding debt from me and didn't tell me, all the while I was spending blissfully unaware - I would be heart broken. If you can't even communicate with your wife then that's honestly just sad and I feel sorry for you. Does your wife think you pay off the bill in full every month? I'm simply curious. And everyone here is human and we all make mistakes. I'm not going to sit and throw stones at a glass house because I don't pay off my credit card every month in full-but it is seriously my biggest priority at the moment to pay it off. You seem like an intelligent man so your decisions simply puzzle me.
You have such a small debt. Seriously. I have 60,000 in student loans. However, I don't sit there and make excuses. I am accountable for the fact that I wanted a good education. I know that I am responsible for my debt, and guess what-my fiance also knows I have 60,000 in loans. I was honest and never hid it from him. Did he break up with me? Did he balk and grimace? No. Perhaps it is because he knows that I intend to pay the loans by myself, or perhaps he is mature enough to handle the fact that education comes with a price.
What it all comes down to is honesty and trust. How can you trust someone if they aren't being honest. You mention that you aren't lying to your wife-but honestly you are lying by omission. I hope things improve for you and I hope you learn to take responsibility. I also wish you and your wife the best of luck with the fertility drugs. It seems like you would be able to provide well for a child, you just need to get your priorities in order. Good luck and I'm done with my rant.
You could cut your contributions back to 6% (so you still get the full employer match), and once you see how much more you have per check, set up an AUTOMATIC payment to your first debt. Have it set for the day you get paid (or the day after if you are concerned about it not being there). So if it is $200 per check...then that $200 is out of the account before you have a chance to spend it and it is going where you want it to go.
You have to be the boss of the money. Not the other way around.
And I agree with Rhitter....wifey really needs to be a part of ALL of these discussions. When you don't include all parties involved, there is a balance shift. You start to have more "power" than your partner, and it can come back and bite ya.
You've made it plenty clear that you're not actually serious about paying down debt, so no, I wouldn't cut down 401k contributions. You know as well as the rest of us that this would just get blown at a bar some weekend.
Don't stop contributing to your 401K. I fear the money would end up being spent rather than paying down debt... then you'd have to decide at some point to get back into the 401K plan at work and you would be accustomed to getting that extra money each month. It really is a recipe for disaster. Leave it alone and cut back on your spending to make debt payments.
Your past mistakes have shown you are not going to be wise with the 401k money so leave it doing some sort of good.
Ok and finally, I'm just gonna come out and say what I've been thinking for months now.
You and your wife are in no way, shape, or form ready to have a kid. Scrap those plans ASAP and get the two of you to marriage counseling.
If the two of you can't have open communication and create compromise on something as integral to a marriage as finances, there's no way you two are going to survive the insanity having a child brings.
You guys have no idea how much having a child strains people and relationships. Tackle the hard stuff with your wife before you complicate your lives AND the life of an innocent baby even further and needlessly.
There are no exceptions to making a marriage work. You need open communication, you need to compromise, you need to plan, you need to strategize and you need to do it together. The two of you are living the lives of friends with benefits more than any real marriage. And trust me, I know them when I see them.
The stupidity of this boggles my mind. Really.
Re-read what @hithatsmybike and @Stephanie said.
I can't say anything else or I'll say something I'll regret.
We don't need marriage counseling, the wife and I love each other to death, we're going on 11 years together... if anything we probably just need some financial counseling.
Children will bring us closer together.
HS
WOW! I do feel for you how you get bashed sometimes. We all have our own demons to deal with - whether financial or not.
Having said that, I would not stop the 401(k) contributions, but keep on as you are with debt payoff committing to no more toys. The match that you get from your employer is free money!
LOL! I love reading these comments, especially HS's replies... it's the only reason I even bother to read this blog. Keep the laughs coming!
Pennies,
Enjoy your laughs! Thanks for coming back!
HS
"Children will bring us closer together."
Wow. Just ... wow.
I just want to point out that while children are a blessing, they do not "bring the parents closer together". The opposite is closer to reality. Children can be the "thin edge of the wedge" and can permanently separate your interests and loyalties.
If you think children will bring you closer together you are romanticizing having them.
"children will bring us closer together"? Please title your next blog:"I don't live in reality."
I am a bit confused. By your own numbers you have at least $1,000 a month over your needed expenses. Put $500 in emergency fund and $500 towards debt. Why would you need to touch your 401k? Also I think you can even go faster with debt reduction if you cut your spending and scale way back.
Also when you have a baby you will have to buy stuff and lose income of wife or have daycare costs, best to be debt free before you have added expenses.
Also babies and children will challenge every relationship, especially if you have a child with special needs (I have 2, so it more common than you would think.)
Not questioning the strength of your marriage, but also will agree with others that the debt repayment probably will not work if wife is not on board.
I would strongle recomend Mary Hunt or Dave Ramsey, buy one of their plans and start following it with your wife today!!!
Step 1, get $1,000 liquid emergency fund
Step 2, spend only cash
Step 3, create realistic budget
Step 4, after you have $1,000 in emergency fund then start paying down debt while still saving for 6 months in emergency fund
If you do not save than the emergencies of life (oh and you have to figure out what those really are) will go right back on credit cards.
I will be so excited the day you are debt free and have a baby, so hopefully you can accomplish your goals!!
I agree with Mysti's first comment. That's exactly what I would suggest. Keep the matching, and no excuses for not using that money to pay down debt!
Also, what about some sort of "challenge" for you to work on your discipline, starting small. Like a "no buying coffee" challenge? (make it at home). Or a packing your lunch to work challenge? Start with a week and build from there. I think it would be productive for you, and not just because of the money you would save.
I think that it is important to continue contributing, at least up to the amount that your company is willing to match. You don't want to miss out on "free" money that your company matches on your account.
...just my two cents!
-Disgusted with Debt
Marriage counseling is most effective when a couple loves each other dearly. It's not a bad thing, it's a good thing. You guys have major communication issues that you keep glossing over. Marriage counseling will help you with those. It's not just communicating with your wife, you have a major problem getting on the same page with her. Counseling can be very useful in figuring that out. And no, kids don't bring parents closer together. No way, no how. Love isn't everything.
Always pay yourself first. Don't stop saving.
Oh, and if your company is matching, that's like free money? Who wouldn't want free money? Definitely don't give that up.
Post a Comment