Personal monthly I/S

Monthly I/S
6810 income (after tax, wife and I, 3% into 401k, Bay Area)

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Please God do not cash out a retirement account to pay off a car loan.

likesmart

Debt snowball it. DON'T cash out your 401k. You'll have to pay taxes and a penalty. Just stop contributing to it until after you pay of the CC and Car Loan. This should only take you about 6-7 months.

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OP - take a deep breath. There are 2 things here, economics and psychology. I have been in your shoes when my significant other and I were struggling to save anything and loans were piling up and we were paying for our upcoming wedding. It was depressing and a self inflicted shame/ disgust that I was working hard and failing at basic life strategy. There were sleepless nights but the most important part is to accept that we have debt and minimize the impact, that was the biggest thing for me. Many of your peers who own a home or a car, have some kind of loans. A lot of staff and Seniors are still paying the student loans. So you are NOT alone. Think of these as expenses for the life that you are living. As you progress through the years, pay will increase, the principal is shrinking, and you are closer than ever.

From an economics standpoint, people are giving you very sound advice. If 10+ people are offering you the advice not to use the 401k, there may be something to it. I strongly urge you to heed to it. My 401k last year grew at 17% and wife's at 23%. Do the math, you will take away the growth, pay taxes on it only to pay off a lower interest debt. I also agree with above advice that you stop contributing to the 401k and use that cash to pay off debt for now.

Now OP, it's mind over matter. But if you think that peace of mind is the most important thing, sure understand that too. Whatever you do, come up with strategies and seek someone's advice before you take the next step. If your firm has financial planning assistance, highly recommend calling them tomorrow. Good luck!!

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Definitely get the CC off your back even if that means no savings for a couple of months unless you 0% APR. No sense paying 20% APR. I would then hit student loans. Car loans usually in the 2% isn't making as much a dent..

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Thanks for the detailed response. I’ve gotten it down from 24k credit card debt to this with self discipline. You’re all right - the finish line is close and it makes no sense. Breathe.

likeuplifting

Donate some plasma while you're at it.

likefunny

No chance I’m typing all that out but I know bottomline after both of us are putting 15% in 401k, we have around $400/month that goes to a taxable investment account and $800/month that goes to cash savings on after tax income of around $6200.

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Have 5k credit card, 9k car note and 80k of student loan debt left. Only started working recently so barely anything in the 401k (9k). I’m really really tempted to finish paying off the credit card debt ASAP and then cash out the measly 401k to pay off the car note. Would have the debt monkey of our back except for the forever lifetime student loan amount. I know fiscally it doesn’t make much sense but it mentally sounds like a great way to become “free” from being in the treadmill.

likefunny

Definitely pay off your CC debt first .... over savings

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You should check out and post on reddit/r/personalfinance

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Paid off the credit cards! Car loan down to 8k. Pushed the federal loans to 25 years for $520 or so. Going to just forget about it mentally..auto debit for the foreseeable future lol.

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Is that you and wife combined income? I was shocked for a minute thinking you make 6.8k alone after tax lol

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Tackle your highest interest debt first.

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Don’t cash out your 401k to pay off a car note of all things - that’s not getting the debt monkey off your back. Cars depreciate and need replaced. I would view that one as a recurring expense. Ditch the CC as fast as you can and then attack the student loan - that’s the real monkey.

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Your rent is 2k combined in the bay area? Do you live in a box? My husband and mine is $3400 in texas

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Don’t cash out 401k - read r/personalfinance. You’re intuition on this is not fiscally responsible

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Clearly I’m trying to justify a lack of patience lol. Just very tired of being in the red. It’s depressing to be working like a dog and seeing the only thing happen is debt go down. I want to finally have a year where money is being saved instead of used to pay things down. The student loan I’m good with...the other debt is something that is on my mind constantly. Feels like chains forcing me to work

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I would agree with others on not taking funds out of the 401k. The opportunity cost of taking it is higher than your cost of borrowing - so you don’t want to use your 401k even if it means that you’d have debt longer. If the market grows at 8% long term (~6.5% post tax). And your debt is at most a 6.5% rate, the benefit of paying the debt to avoid interest is a wash because you also lose an equal amount of earnings. Then you’d have penalties in withdrawing which would make it a no-go. Lower rate debt would be a loss to your long term net worth even more so. Just take it down in little bites! You have gone really far and are very close.

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2050 rent
300 Utilities
220 groceries
120 Phone
275 car loan and insurance
400 Student loan
150 Gas, repairs, miscellaneous
450 Bart & Ubers
800 Food, Entertainment, Gym
230 Pet insurance and food
4995 total expenses
Leftover Net income = $1,815 toward saving + paying off credit cards/debt

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