Should You Borrow From Your 401(k)?

It's Not A Loan

If you were wondering whether or not taking a loan against your 401(k) to pay off credit card debt makes sense, the answer is quite simple. Maybe…

Although it has been tagged with the term, accessing a portion of your 401(k) assets, and making payments to replenish that amount, is not truly a "loan". There are typically no credit checks, nor income requirements to qualify. If you have funds in your 401(k) account, odds are you have already been approved. That's why so many borrow against their retirement funds...its convenience and ease.

The Hamburger Loan Shark

I have been in the finance industry, in some fashion, for the majority of my life. However, my passion for playing with money began at a much younger age.

Growing up, my sister and I spent a lot of time at my grandparent’s house. We loved going there for a weekend sleepover, or even better, for weeks at a time throughout the summer. During our visits we were pampered, as grandchildren typically are, but my grandpa (“Papa”) also used the time to teach us some valuable lessons...how to get the best bang for your buck when shopping.

Which Debt Should You Pay Off First?

When it comes to the best techniques and ideas for paying off debt, there are about as many out there as there are chocolate chip cookie recipes. And while it may take a few recipes until you find the tastiest one, finding the best fit for you when it comes to debt payoff may also take a few tries.

When you break it down, there are really three basic ways to pay off debt:

Getting Schooled On Student Loans

A few days before leaving on my trip to Germany, we received a call at the office from a local news station wanting to do an interview regarding student loans. Since Gary was out of town, and I'm a Certified Credit Counselor, I thought it only right to step up to the plate and help out.

Prior to the interview, I asked what the interviewer might want to know in case any specific details would be needed. One of the questions was fairly simple: Why are graduates having to live paycheck to paycheck upon finishing school?

The question sounds simple enough, right? The answer, however, is a bit more complicated. 

How much can you afford

I used the example of purchasing a vehicle. Before shopping around, someone has (or should) a pretty good idea of the monthly payment they can afford. Secondly, there are many financial calculators online that allow you to plug in that monthly payment amount, interest rate, and term to discover what purchase amount will fit into your budget.

So once you have the amount of car you can afford in mind, you can begin the car shopping experience. If your budget is in the $18,000 range, obviously you wouldn't want to begin that journey at the Mercedes dealership, but something a little more conservative.