I’m 37 years old and got the boot from my App Admin job in AZ on Jan 2nd. The job market was rough, and I couldn’t even snag an interview. To make things worse, my 70-year-old mom, who lives with me, has zero income. I’ve been supporting her since my dad passed away 8 years ago.
I hustled with odd jobs and ridesharing until my car gave out. Before losing my job, I used 0% balance transfers to cover living costs and medical bills, totaling 51K ($51,000.00). Now I landed a new gig that barely covers our monthly expenses at $3200.
The 0% interest on my credit cards will end in January, and I might have to kick my mom out to get her assistance from the state. I’m thinking of cashing out my meager 401K of 19K to pay off some credit card debt to avoid high-interest payments.
With only 16K income this year, I hope the tax hit won’t break the bank. I’d rather lose my 401K than pay $260 monthly in interest, considering it’s losing money already. The 10% penalty seems better than drowning in debt.
I’ve lived frugally for 8 months, cutting out all extras, so I feel confident about my financial discipline. Bankruptcy is my last resort, but I worry about its long-term effects on job prospects.
Other than my car, I have no assets. Clearing the 50K debt would be a huge relief, but I’m unsure about the aftermath. Any advice on my situation?
Thanks for your help,
Seeking a Way Out
401K: $19,125
3 Credit Cards
19K Barclay
19K BofA
13K US Bank
No other debt.
Any tips appreciated!
Response from THE MONEY MINDER:
Hello There,
I’m truly sorry to hear about the challenging situation you’re facing. It’s commendable how you’ve been taking care of your mother amidst all these financial difficulties. Your diligence in finding odd jobs and now securing employment is impressive.
Regarding your 401K and credit card debt situation, it’s important to weigh the pros and cons before making any decisions. Cashing out your 401K to pay off high-interest credit card debt may seem like a quick fix, but it’s crucial to consider the long-term implications. You mentioned the 10% penalty and potential tax liabilities, which could impact your overall financial stability.
Instead, I would recommend exploring other options before tapping into your retirement savings. Since you’ve been diligently managing your finances and have a new job, reaching out to a credit counselor or financial advisor could provide valuable insights. They could help you create a realistic budget, negotiate with creditors for lower interest rates, or explore debt consolidation options.
Going the bankruptcy route should be a last resort due to the potential impact on your credit score and future job prospects. However, it’s essential to consult with a financial professional who can provide personalized advice based on your specific circumstances.
In the meantime, continue living frugally and focus on building a strong financial foundation. Keep up with your regular payments and maintain a good credit history. Remember, financial challenges are not a reflection of your worth or abilities. Stay proactive, seek support when needed, and stay committed to improving your financial situation.
If you have any further questions or need more guidance, please don’t hesitate to reach out. Stay strong, and know that you’re not alone in this journey towards financial stability.
Best Regards,
THE MONEY MINDER
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