Author Topic: 401k Contribution vs debt clearing  (Read 1674 times)

TheInsuranceMan

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401k Contribution vs debt clearing
« on: August 16, 2016, 01:33:26 PM »
Alright, MMMer's.  I'm sitting here, with my 401k contribution election form in front of me, debating what I should do.  So, I'm here.
Here is the just of things.
Wife and I had our second kid in May, she got disability for a bit of her leave, and that was it.  It killed us.  We didn't do near as well as we thought we'd do while she was off work.  So, facepunch away, but here goes.

We've got a credit card, 2, actually.
One is 0% interest, at $3,900 (taken on before her leave, was part of moving and redoing the house we moved into.  Had the cash, but it would have depleted us completely, so we went this way.) This is 0% interest until 8/24/17.  0 issue with this card, I knew it was there, we are paying the $300 a month to squash it by the time the 0% expires.  Will pay it quicker when possible.
Number two has a balance of $4,076.21 - this is an issue.  I hate credit card debt.  I don't really know where it came from, but it's here.  Without running through the statement to degrade ourselves any more about our spending habits, I won't really know where we went wrong, and I know that.

However, going forward, they will disappear, until we are done and out of debt.
We have 0 problem covering our regular bills with our income, so this is all extra spending, and we don't have anything to show for it.
Anyways, why I'm here...
I've got an extra 1165 coming in my monthly check due to some commissions that have came in, and I'm debating switching my 401k down to 0% until the debt is paid off.  This will "save" me $400 or so a month ($600 this month - employer contributes 3% regardless of whether we contribute or not), and allow us to put more on the credit card.  We also have daycare reimbursement, which is $416.67, which will go right on the card as well.  So, right there is 1k put towards it.  25% of it gone.

I do have 27k in an old 401k, and 9.3k in my current one (I'm 28, wife is 28), she has the state pension plan, which she can't change her contributions to.  And while I know this will hurt us in the future, I think paying off the debt would eliminate my current money issues.

So, thoughts?  Questions?

TheInsuranceMan

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Re: 401k Contribution vs debt clearing
« Reply #1 on: August 16, 2016, 01:51:36 PM »
Wife made the decision for me, leave the 401k alone.  I agree, just was going to get everyone's opinion.
We'll be going through a budget tonight, maybe signing up for YNAB to get a better handle on things.

Cromacster

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Re: 401k Contribution vs debt clearing
« Reply #2 on: August 16, 2016, 02:06:36 PM »
Without knowing more, I agree with your wife.

Where I do differ is how you are paying off the cards.  Pay the minimum on the 0% card and pay off the other card ASAP.  Once the 2nd card is paid off, go back to paying off the 0% card ASAP.

TheInsuranceMan

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Re: 401k Contribution vs debt clearing
« Reply #3 on: August 16, 2016, 02:56:04 PM »
Without knowing more, I agree with your wife.

Where I do differ is how you are paying off the cards.  Pay the minimum on the 0% card and pay off the other card ASAP.  Once the 2nd card is paid off, go back to paying off the 0% card ASAP.

This is logical.  I guess my mindset has more been that I need to pay "x" a month on the 0% interest card to make sure it's paid off on time.  While in reality, I should have been doing EXACTLY what you just said.  I'm hoping to kill the 4k credit card balance within 2-3 months, if all goes as planned.

abhe8

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Re: 401k Contribution vs debt clearing
« Reply #4 on: August 16, 2016, 03:20:57 PM »
And make a budget, today! Find every extra penny and dollar you can to throw at the debt. Reviewing expenses over the past few months,  although painful, will likely really help this.

TheInsuranceMan

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Re: 401k Contribution vs debt clearing
« Reply #5 on: August 16, 2016, 03:39:09 PM »
And make a budget, today! Find every extra penny and dollar you can to throw at the debt. Reviewing expenses over the past few months,  although painful, will likely really help this.

Yep, that's the plan tonight.  Get the kids to bed, and go over everything.  We know now that we spent like crap while she was on maternity leave, and it's killing us.  We did really, really well, for a long time, but had a lapse in judgement, I guess!  Now, time to fix it!