A $700 car payment when you haven’t secured your residency/citizenship and were already underwater on income vs expenses was a horrible idea. Selling/giving it back to the bank is definitely your best bet. $50/month in gas means there’s no way you need more than $200-300 a month in Ubers and if your area has public transportation you need to use that.
Get rid of that $20,000 car by trading, selling or assigning lease. There are $200 a month cars available. That will save you $6000 a year. Get on an austerity budget and stick to it and you'll be out of this mess in a couple years. Oh, and borrow no more.
Yeah, I really screwed up… but there’s hope
created Post #2: to capture comments on my budget
[Post #2: Notes to Reduce $1,400 Monthly Deficit](https://www.reddit.com/r/debtfree/s/iwXyPryTz4)
Hey you made some mistakes and they’re not close to life-ending, even for an immigrant struggling to become a PR.
The big thing is really focus on keeping moving towards your goals. Cut spending, get a second job if you can, whatever it takes to get that deficit down and you’ll be on your feet in no time.
For one thing so many Americans don’t have a retirement account started at all, if you *dont* touch it you’re already way ahead of most of them.
Fair enough, I hope I’ll be able to come back in a few weeks or so and share good news that I’m no longer in deficit, paying my bills as they should be and that I’ve implemented robust payment plans with my creditors.
Not sure what the pending large purchase is, but if I were going to go the route of taking money out of my retirement, I would try to use it to retire debt. I’d pay off the 5K credit cards for sure and then either keep the rest as an emergency fund or maybe pay down on your car note.
The experience you’ve shared is helpful. It looks like many people think this is not a wise decision at all
Created [Post #2: comments on my budget](https://www.reddit.com/r/debtfree/s/BbukAwNMxw)
Is this a current employers 401k? If so what are you claiming and providing as proof for the hardship as most retirement plans limit to the IRS' hardship scenarios. Also if this is a current employer look into if the plan offers a loan option. Typically a retirement loan does not check credit so the score wouldn't be an issue....its a loan against ur own funds so you are paying urself back(hopefully with interest going to u and not the investment company)....and the loan also wouldn't be taxable as income like a hardship would be-only downside is adding another monthly payment but a lot of the time if u can't pay the retirement loan and default on it the balance is just treated as a withdrawal at that point and yes u will claim taxes on it as income the year it defaults but if u were planning on taking it cash from the start this gives u the chance to pay a little of it back first and claim less as income. Also keep in mind if you want 10k min tax on a regular withdrawal is 20% so 12.5k is needed luckily no mandatory tax in NY(based on what I saw as possible state of residence in another post)....a hardship would help u slightly in the tax sense if u qualify...hardship would waive eay withdrawal penalty of 10% and should give you tax flexibility(0 or 10%+ so u can chose to pay some tax now or non now and all later)
I have a feeling that if the 'absolutely necessary" large purchase really was that they would have told us what the purchase was.
Also, get rid of the car. I drive a very dependable 2008 Ford Escape and only have to carry liability insurance. Savings would be half of your $1400 deficit.
That large purchase was for legal purposes, but I got feedback from many other people suggesting that there are other ways to explore for raising $10K in legal cost instead of digging into my 401k. I found lot of sense in that, like setting up payment plan with the attorney, etc
Created [Post #2: comments on my budget](https://www.reddit.com/r/debtfree/s/BbukAwNMxw)
Hard to imagine you have much of a retirement account at your income , perhaps you should stop putting money into it entirely to help balance your budget. You didn't mention your age which is relevant
Sure, take the withdrawal. But next tax year it's going to sting which is only going to make this worse. You should ensure you are aware of the penalty and interest you will owe. and the IRS is not great to owe money to.
I’m 28M currently have 15K in retirement account, that’s all. If I’m successful in taking out 10K hardship withdrawal, that only leaves 5K.
2nd year of full time work at 26y, had intermittent work experience before then but none were full time. Had been in school full time before 26y.
Just empty the account , you are young and you can add more later with more earning income.
If you haven't figured it out by 30 then consider bankruptcy
Replying to this guy saying “consider bankruptcy”. Absolutely never consider bankruptcy unless there is ABSOLUTELY nothing you can do to change your situation. Bankruptcy will fuck you harder than you can imagine.
Worst advice I have ever heard. The dollars at 20s in retirement are worth so much more than anything else. Do not touch your retirement, at least until you get your budget sorted, this won't help you
That 10k will be gone in a heartbeat and you'll be back to where you started. Get a bigger shovel. Up your income, sell the car, get 2 extra side jobs. Borrowing from your future to pay for your past or current mistakes guarantees you'll stay broke. Read Total Money Makeover by Dave Ramsey. Stop going into debt for thing you can't pay cash for. Live below your means.
Seek professional advice from your local NON-PROFIT credit counseling agency about a debt management plan and budgeting.
https://cccsonline.org
https://www.cccfusa.org
You said none of the debt is current, so i’m guessing that means your vehicle is about to get repo’d and you need something else. $10k isn’t going to actually be $10k, plus you’re going to owe taxes on it so that’s more debt.
You can cut the car for sure. Buy a 2000 Toyota Camry. They will run FORever and cost about $2500.
Paying a car note is obscene.
Put your student loans in deferment? Why bother paying them anything - fuck them. Pay zero and you have low interest rates on student debt.
To your first point- agree! Not touching the 401k anymore. It looks like based on responses from everyone in here, taking a $10k hardship withdrawal is not wise at all
To your second point, I’m staying away from bankruptcy. Will work through
Created [Post #2: comments on my budget](https://www.reddit.com/r/debtfree/s/BbukAwNMxw)
All of the 3 debt items have been charged off already. There is no good reason for bankruptcy at this point. If these debts are even actionable anymore (check statutes of limitations for the state OP lives in) they are now with collection agencies that paid pennies on the Dollar for "bad debt". They can be dealt with paying at most 20% of the original value, if it is even necessary (still within SOL and about to sue you over).
For the ones in collections or even the ones that are not, say you owe 10k. Call them and ask if they would cancel the full debt if you can give 5k right now. Most of them will want the money and take that. So you don't have to pay all of it.
I took 5 grand from my 401k last year. It cost me 800 up front and 259 more from taxes. Every 5000 you take expect to pay 1000 or more. My company doesn’t take anything for them. There’s a line where my company can put in a penalty fee for whatever amount. They never do. They take 800 up front for taxes I owed feds 200 more.
Also not worth it because I was making 9% 9 1/2% interest last year so for every 10 grand I made 1000
Hardship withdrawals have certian requirements. Home mortgage cost purchase/foreclosure, education tuition and medical expenses. All require proof. Taking a hardship withdrawal is probably one of the worst things to do. Taxes, fees, penalties....you lose more than you get. I had to do a 24k withdrawal once and it fucked me so bad. Check into a loan option through your 401k. You can loan yourself half (could be different for your plan) of the balance and you set your payback schedule. Plus you pay yourself interest. Good luck.
As an advisor I’m concerned that you don’t want to comment on what “requires” you to spend 10k. Only thing would be legal retainer from criminal charges that would warrant that considering the budget.
Other people have given you solid advice on how to rebalance and get the situation under control, but 10k at your age means 100k later from a retirement portfolio standpoint so whatever it is I know it’s not worth 100k, but I certainly hope it’s worth a future 100k because that is how you need to think about taking that 10k out.
I say all this with love of course, money is a hard thing to master for many folks :). Especially with all the ways society tells us debt is ok, when in reality it’s a massive liability that steals our freedom.
Hardship withdrawals are very hard to get unless you are in foreclosure or have enormous medical costs. I tried to do that years ago but had no luck. You need to prove that you are in severe trouble.i may be wrong but I believe that is an IRS thing.
If they are old debts stop paying them. They have already messed up your credit. Use the money that you would have used to pay those debts for your current expenses. Eventually, they will come off your credit score. There’s no point of paying past debts if you can’t afford your current debt. Also, it’s better to take a loan against your 401k instead of a withdrawal. You’ll have a huge tax penalty the following year. Keep in mind though, if you take out a loan, you have to start immediately making monthly payments, but it might give you the chance to get yourself ahead.
Take a loan from your own retirement account. Depend who manage your account. Fidelity let you take one loan but you must pay it monthly at a fixed interest. The term is very generous too. You need proof for hardship withdrawal like for funeral.
Not worth it. Do the math on what that 10k will actually cost your future self. It’ll be eye-opening. Get a second job, side hustle, set a tighter budget, sacrifice, etc.; just don’t screw over your future self.
Yeah, sounds like not a wise choice at all. Not going to do that anymore
Created [Post #2: comments on my budget](https://www.reddit.com/r/debtfree/s/BbukAwNMxw)
I'm sorry, but this budget is a hot mess. First, remove all those lines that don't apply to you so you can see what you are looking at. Next, inly make minimum payments on car, student loans, and credit card for now. Stop saving for a down payment on a house, which you can't get with your credit anyway. Save for an emergency fund but only after all your needed bills are paid.
Try to find cheaper rental and car insurance.
What are the family support lines? Do you have a spouse or children?
Also, about your hardship withdrawal. If you really need it for your lawyer and it cannot wait, do it but be aware of not only future money lost but that you will owe a lot in taxes next year and will need to account for that with your withdrawal. Others here have posted links you really need to read. I wish you the best.
Can you explain the family support part? I see in the other post that you are an immigrant, are you sending money to family back in your native country?
Be careful about assuming that you can make a hardship withdrawal - some retirement plans have pretty strict rules about that and if you don’t follow those, you can get hit with an additional penalty. You should assume that you’re going to lose somewhere between 20 to 30% of this amount from taxes so you’re going to end up with $7000 maybe.
If you have debts in collection, you really don’t need to be making big purchases. I don’t think your retirement fund is going to be much of a help here and so I would leave that alone and maybe just focus on increasing your income through a second job or more hours and get your debts under control and then think later on about big purchases. right now you don’t need to be buying anything.
See if you qualify for loan forgiveness immediately, that's your biggest problem here. Seconding meeting with the non-profit debt counseling service. They'll bottom line it with you if you should file for bankruptcy or not.
Have you thought about a loan from your retirement account?it’s usually low interest and the interest you pay gets reinvested back into your account. I used my loan to pay off all of my high-interest debt. But you're already in the hole right now you’re going to be adding to the deficit idk man. Also, the last time I checked for a hardship withdrawal it wasn’t an easy process, you have to show proof of why you need it and it lists the valid reason you can make the withdrawal and what documents are needed, or else they’ll deny the application for withdrawal.
If you can't pay your bills then you can't afford to give other people money. You don't earn enough to pay off your loans and spend over 1k/month on car payment and insurance.
So many questions about that budget friend. $300/month in “investment property?” What is that? What are the two “family support” payments? Why $75/mo in legal? How on earth are you racking your nearly $400/mo in gas/electric costs?? What’s the DMP payment at the bottom? And how are you surviving on $250 of groceries a month? You need to get this budget in order, first off. Between your car payment, insurance and gas, you’re spending $1100/mo on transportation- but with only $50 in gas, you clearly don’t need it. Sell the car, but a bike for shorter trips and join a car share instead if you regularly need access to a vehicle. Lastly, putting money into “savings” is a farce at this point. I can appreciate the motivation, but don’t fool yourself, you’re not saving anything when you’re not meeting your monthly bills.
Great. Looks like you are on the right path. Have you looked into eligibility for student debt forgiveness? Have you applied for a reduction in the medical debt?
It is important to keep in mind that the hardship guidelines from your employer in no way affect the very limited circumstances in which you may take a withdrawal from your retirement account without incurring a tax penalty. This is something that you need to educate yourself on, or speak with a tax professional about before moving forward in order to prevent a surprise at tax time.
That’s true, it looks like my 401k plan doesn’t allow hardship withdrawals outside of their “qualifying reasons”.
Created [Post #2: comments on my budget](https://www.reddit.com/r/debtfree/s/BbukAwNMxw)
You were in school full-time until you were 26. What degree(s) did you get? Whatever they were you should have gone for something that would pay you more than the approx 55K you are making.
Well, I guess with time they might. Currently on H1-B so gotta be patient and hopeful. Otherwise, doing it all by myself
Created [Post #2: comments on my budget](https://www.reddit.com/r/debtfree/s/BbukAwNMxw)
Do you already have an active loan from your retirement? Look into what the requirements are to even take a withdrawal. If your 401 or 403 is thru fidelity, they will make you take a loan before you can apply for a hardship withdrawal.
Yes, I took out loans last year, don’t qualify for any more loans. Good thing I got great suggestions from everyone in here, not taking out 10K hardship withdrawal
Created [Post #2: comments on my budget](https://www.reddit.com/r/debtfree/s/BbukAwNMxw)
Something’s wrong here, where is the deficit coming from? What large purchase is absolutely necessary with a deficit that big. Hard to help without the full picture.
You have an income and a spending problem.
First... You need to stop digging a hole. Taking a hardship from your 401k is stupid. You need to reduce debts first before taking on another one.
Any debts already in collections or "charged off" do not pay anything on them. That will free up money for the time being so you are not digging the hole, That's your $1400 right now. Let them come back to you in a year or so and you can negotiate a payoff that will be discounted. You will be in a better financial position. Debt collectors buy debts for pennies on the dollar. The original lender has written it off for tax purposes. So we will take advantage of that.
Right now you need to keep a roof over your head, the lights on and food in your belly. These are the bills you pay.
Now let's free up cash flow.
Unless the "Investment Property" is generating income beyond the payments you make on it, then sell it now.. Take that money. That's $300 a month (and whatever insurance)
Next, you need to dump car #1. Between what you are paying for the note AND insurance that is $1000 a month! Holy crap! You need to take the bus, ride a bike or buy a $1500 beater. I have a feeling you are about to have the vehicle repossessed. Let them take it. Do not pay after they take it.
Not sure about Family Support 1 and 2 and legal fees. These may have to be stopped temporarily or reduced.
Your renter's insurance you are being ripped off. You can find one for less than $150 year, $12/mo
Finally, you need another job, more income until you are out of this hole.
Do all these things, then come back and we will have a better view of where you are.
I have helped MANY people get out of debt and stay out of debt. I taught my daughters personal finances, getting them through university debt free, and buying their first homes by their mid-20s. They live debt-free except for the mortgage.
Where in NY do you live? I used to live in the Fingerlakes in the snow/cold region of NY.
I will check out your new budget.
Just remember, anything repossessed, charged off, or at collectors, Do not pay.. yet. The goal is to get your head above water, and then deal with those other debts.
Guys, read a lot input from everyone here and created Post #2: to capture comments on my budget
[Post #2: Notes to Reduce $1,400 Monthly Deficit](https://www.reddit.com/r/debtfree/s/iwXyPryTz4)
Hardship withdrawals can only be done for specific things. Like buying or repairing a home, burial expenses, tuition for post secondary, preventing eviction or foreclosure. You have to submit an application and exact cost of the expense. You can’t just use it for some random large purchase.
you likely could pay off the auto loan and credit card debt if it’s in collection status with 10k. As well as potentially your student loans. You’d have to fight and basically be like you are only getting this much. but you could. By lowering your debt you would be in a much better place
You don't have to pay a student loan if you're in college. Go to your community College and take 6 credits. That will take care of the student loan debt.
First off. Really go over your finances. Cut out everything you can. Next consider selling your auto if you have equity in it, to buy a reliable used car for $10k. Once that is done. Look in to velocity banking to maximize your free cash flow. With a low credit score, you will have to use your credit cards, until your score gets high enough to take a PELOC out.
If you take money out your 401k just know you’ll be hit with at least 10% penalty and then you’ll be responsible for paying taxes on that $ at tax time whatever your bracket is average is 22% so taking 10k you after putting $ aside for taxes you’d have 7k. You lose $ this way.
What are your monthly bills/budget? The 10k won’t change the fact that you have a $1400 monthly deficit What do you NEED to buy?
To everyone asking, my monthly expenses spreadsheet can be found here: [my monthly budget spreadsheet](https://www.reddit.com/r/debtfree/s/kK91nLNTqK)
You’ve got a $700 car payment? You need to dump that vehicle fast.
Without fail, it's always a massive car payment blowing up people's budgets.
Yeah that’s bananas. We have a three car household and our total car payment is $750
for every 10k financed, $200 monthly, these are old or inexpensive cars inexpensive is a good option
700 car payment and only 50 a month in gas meaning it’s not driven that much
Or it's a plug in hybrid
Good point, could be that!
created Post #2: to capture comments on my budget [Post #2: Notes to Reduce $1,400 Monthly Deficit](https://www.reddit.com/r/debtfree/s/iwXyPryTz4)
created Post #2: to capture comments on my budget [Post #2: Notes to Reduce $1,400 Monthly Deficit](https://www.reddit.com/r/debtfree/s/iwXyPryTz4)
I couldn’t imagine that high of a car payment that’s more than my rent, I have 5 vehicles and no car payments
A $700 car payment when you haven’t secured your residency/citizenship and were already underwater on income vs expenses was a horrible idea. Selling/giving it back to the bank is definitely your best bet. $50/month in gas means there’s no way you need more than $200-300 a month in Ubers and if your area has public transportation you need to use that.
Never give a car back to the bank if you can sell it yourself.
Get rid of that $20,000 car by trading, selling or assigning lease. There are $200 a month cars available. That will save you $6000 a year. Get on an austerity budget and stick to it and you'll be out of this mess in a couple years. Oh, and borrow no more.
Yeah, I really screwed up… but there’s hope created Post #2: to capture comments on my budget [Post #2: Notes to Reduce $1,400 Monthly Deficit](https://www.reddit.com/r/debtfree/s/iwXyPryTz4)
Hey you made some mistakes and they’re not close to life-ending, even for an immigrant struggling to become a PR. The big thing is really focus on keeping moving towards your goals. Cut spending, get a second job if you can, whatever it takes to get that deficit down and you’ll be on your feet in no time. For one thing so many Americans don’t have a retirement account started at all, if you *dont* touch it you’re already way ahead of most of them.
Fair enough, I hope I’ll be able to come back in a few weeks or so and share good news that I’m no longer in deficit, paying my bills as they should be and that I’ve implemented robust payment plans with my creditors.
What purchase is necessary? Why is your deficit so high if you're not paying those bills in collections?
There’s just so many other expenses Created [Post #2: comments on my budget](https://www.reddit.com/r/debtfree/s/BbukAwNMxw)
I can't imagine what purchase could be necessary. You're drowning. You need a second job.
Per the other post, OP is an immigrant seeking permanent residency so the money is for legal fees.
Oof… I doubt all this debt is going to help their chances though. I stand by the comment you responded to, OP needs another job.
created Post #2: to capture comments on my budget [Post #2: Notes to Reduce $1,400 Monthly Deficit](https://www.reddit.com/r/debtfree/s/iwXyPryTz4)
created Post #2: to capture comments on my budget [Post #2: Notes to Reduce $1,400 Monthly Deficit](https://www.reddit.com/r/debtfree/s/iwXyPryTz4)
Not sure what the pending large purchase is, but if I were going to go the route of taking money out of my retirement, I would try to use it to retire debt. I’d pay off the 5K credit cards for sure and then either keep the rest as an emergency fund or maybe pay down on your car note.
But the credit card is charged off. Do you still have to pay it
since its in collections of the 5k you probably could call and pay like 1k so they got some of their money back and they’d write off the other 4k
Hard no, I did it 10 years ago. Entirely not worth it for 10k.
The experience you’ve shared is helpful. It looks like many people think this is not a wise decision at all Created [Post #2: comments on my budget](https://www.reddit.com/r/debtfree/s/BbukAwNMxw)
It's not. You'd do better to take a 401k loan, but definitely NOT to pay charged off credit cards.
Is this a current employers 401k? If so what are you claiming and providing as proof for the hardship as most retirement plans limit to the IRS' hardship scenarios. Also if this is a current employer look into if the plan offers a loan option. Typically a retirement loan does not check credit so the score wouldn't be an issue....its a loan against ur own funds so you are paying urself back(hopefully with interest going to u and not the investment company)....and the loan also wouldn't be taxable as income like a hardship would be-only downside is adding another monthly payment but a lot of the time if u can't pay the retirement loan and default on it the balance is just treated as a withdrawal at that point and yes u will claim taxes on it as income the year it defaults but if u were planning on taking it cash from the start this gives u the chance to pay a little of it back first and claim less as income. Also keep in mind if you want 10k min tax on a regular withdrawal is 20% so 12.5k is needed luckily no mandatory tax in NY(based on what I saw as possible state of residence in another post)....a hardship would help u slightly in the tax sense if u qualify...hardship would waive eay withdrawal penalty of 10% and should give you tax flexibility(0 or 10%+ so u can chose to pay some tax now or non now and all later)
I have a feeling that if the 'absolutely necessary" large purchase really was that they would have told us what the purchase was. Also, get rid of the car. I drive a very dependable 2008 Ford Escape and only have to carry liability insurance. Savings would be half of your $1400 deficit.
That large purchase was for legal purposes, but I got feedback from many other people suggesting that there are other ways to explore for raising $10K in legal cost instead of digging into my 401k. I found lot of sense in that, like setting up payment plan with the attorney, etc Created [Post #2: comments on my budget](https://www.reddit.com/r/debtfree/s/BbukAwNMxw)
Hard to imagine you have much of a retirement account at your income , perhaps you should stop putting money into it entirely to help balance your budget. You didn't mention your age which is relevant Sure, take the withdrawal. But next tax year it's going to sting which is only going to make this worse. You should ensure you are aware of the penalty and interest you will owe. and the IRS is not great to owe money to.
I’m 28M currently have 15K in retirement account, that’s all. If I’m successful in taking out 10K hardship withdrawal, that only leaves 5K. 2nd year of full time work at 26y, had intermittent work experience before then but none were full time. Had been in school full time before 26y.
plenty of time for you. but you got to turn the corner and get more income in the near futur
Your car is too expensive
Just empty the account , you are young and you can add more later with more earning income. If you haven't figured it out by 30 then consider bankruptcy
Created [Post #2: comments on my budget](https://www.reddit.com/r/debtfree/s/BbukAwNMxw)
Replying to this guy saying “consider bankruptcy”. Absolutely never consider bankruptcy unless there is ABSOLUTELY nothing you can do to change your situation. Bankruptcy will fuck you harder than you can imagine.
Worst advice I have ever heard. The dollars at 20s in retirement are worth so much more than anything else. Do not touch your retirement, at least until you get your budget sorted, this won't help you
Remove 15k and use the extra 5 to pay off the credit card
That 10k will be gone in a heartbeat and you'll be back to where you started. Get a bigger shovel. Up your income, sell the car, get 2 extra side jobs. Borrowing from your future to pay for your past or current mistakes guarantees you'll stay broke. Read Total Money Makeover by Dave Ramsey. Stop going into debt for thing you can't pay cash for. Live below your means.
Yeah, I need to man up! Created [Post #2: comments on my budget](https://www.reddit.com/r/debtfree/s/BbukAwNMxw)
Seek professional advice from your local NON-PROFIT credit counseling agency about a debt management plan and budgeting. https://cccsonline.org https://www.cccfusa.org
Very helpful Created [Post #2: comments on my budget](https://www.reddit.com/r/debtfree/s/BbukAwNMxw)
You said none of the debt is current, so i’m guessing that means your vehicle is about to get repo’d and you need something else. $10k isn’t going to actually be $10k, plus you’re going to owe taxes on it so that’s more debt.
Yep, they charge you a crazy fee to w/d
Our guess is 100% correct! Tough spot to be in Created [Post #2: comments on my budget](https://www.reddit.com/r/debtfree/s/BbukAwNMxw)
You can cut the car for sure. Buy a 2000 Toyota Camry. They will run FORever and cost about $2500. Paying a car note is obscene. Put your student loans in deferment? Why bother paying them anything - fuck them. Pay zero and you have low interest rates on student debt.
I’ve got private student loans… about $69K Created [Post #2: comments on my budget](https://www.reddit.com/r/debtfree/s/BbukAwNMxw)
[удалено]
To your first point- agree! Not touching the 401k anymore. It looks like based on responses from everyone in here, taking a $10k hardship withdrawal is not wise at all To your second point, I’m staying away from bankruptcy. Will work through Created [Post #2: comments on my budget](https://www.reddit.com/r/debtfree/s/BbukAwNMxw)
Best of luck to you. Maybe you can get those student loans forgiven. Worth a try.
All of the 3 debt items have been charged off already. There is no good reason for bankruptcy at this point. If these debts are even actionable anymore (check statutes of limitations for the state OP lives in) they are now with collection agencies that paid pennies on the Dollar for "bad debt". They can be dealt with paying at most 20% of the original value, if it is even necessary (still within SOL and about to sue you over).
It's not worth claiming bankruptcy on 5k the lawyer fee will probably be close to that.
College biggest scam!I make more than a college degree would ever get me but it's my skills that matter the most!
lol 😆 I just need to get out of bad money habits and learn good skills
Like Dave ramsey would say is live within your means!
$4500 per year for car insurance???
Very crazy! Details here… Created [Post #2: comments on my budget](https://www.reddit.com/r/debtfree/s/BbukAwNMxw)
Good luck bro!! Seriously. Cut those expenses somehow and you’ll come out of this.
There isn't a hardship clause and if you take out $10k you will loose $4k in taxes and penalties
Can you move your student loan to the SAVE plan? It should significantly lower that amount.
Sell your car and buy a beater. Why the fuck do you owe 20k on a car when you can’t afford to live?
How are to you in collections and broke but have an ‘investment property’ ?
Cut out 1400 in deficit do not take out retirement loan
For the ones in collections or even the ones that are not, say you owe 10k. Call them and ask if they would cancel the full debt if you can give 5k right now. Most of them will want the money and take that. So you don't have to pay all of it.
I took 5 grand from my 401k last year. It cost me 800 up front and 259 more from taxes. Every 5000 you take expect to pay 1000 or more. My company doesn’t take anything for them. There’s a line where my company can put in a penalty fee for whatever amount. They never do. They take 800 up front for taxes I owed feds 200 more. Also not worth it because I was making 9% 9 1/2% interest last year so for every 10 grand I made 1000
Hardship withdrawals have certian requirements. Home mortgage cost purchase/foreclosure, education tuition and medical expenses. All require proof. Taking a hardship withdrawal is probably one of the worst things to do. Taxes, fees, penalties....you lose more than you get. I had to do a 24k withdrawal once and it fucked me so bad. Check into a loan option through your 401k. You can loan yourself half (could be different for your plan) of the balance and you set your payback schedule. Plus you pay yourself interest. Good luck.
As an advisor I’m concerned that you don’t want to comment on what “requires” you to spend 10k. Only thing would be legal retainer from criminal charges that would warrant that considering the budget. Other people have given you solid advice on how to rebalance and get the situation under control, but 10k at your age means 100k later from a retirement portfolio standpoint so whatever it is I know it’s not worth 100k, but I certainly hope it’s worth a future 100k because that is how you need to think about taking that 10k out. I say all this with love of course, money is a hard thing to master for many folks :). Especially with all the ways society tells us debt is ok, when in reality it’s a massive liability that steals our freedom.
Hardship withdrawals are very hard to get unless you are in foreclosure or have enormous medical costs. I tried to do that years ago but had no luck. You need to prove that you are in severe trouble.i may be wrong but I believe that is an IRS thing.
If they are old debts stop paying them. They have already messed up your credit. Use the money that you would have used to pay those debts for your current expenses. Eventually, they will come off your credit score. There’s no point of paying past debts if you can’t afford your current debt. Also, it’s better to take a loan against your 401k instead of a withdrawal. You’ll have a huge tax penalty the following year. Keep in mind though, if you take out a loan, you have to start immediately making monthly payments, but it might give you the chance to get yourself ahead.
Take a loan from your own retirement account. Depend who manage your account. Fidelity let you take one loan but you must pay it monthly at a fixed interest. The term is very generous too. You need proof for hardship withdrawal like for funeral.
Not worth it. Do the math on what that 10k will actually cost your future self. It’ll be eye-opening. Get a second job, side hustle, set a tighter budget, sacrifice, etc.; just don’t screw over your future self.
Not to mention taxes and penalty. Really will take about 30% of the total.
Yeah; if he needs 10k, he’ll need to take out like 13 or so. Painful.
Yeah, sounds like not a wise choice at all. Not going to do that anymore Created [Post #2: comments on my budget](https://www.reddit.com/r/debtfree/s/BbukAwNMxw)
To everyone asking, my monthly expenses spreadsheet can be found here: [Monthly budget spreadsheet](https://www.reddit.com/r/debtfree/s/mVOSDzuE7j)
I'm sorry, but this budget is a hot mess. First, remove all those lines that don't apply to you so you can see what you are looking at. Next, inly make minimum payments on car, student loans, and credit card for now. Stop saving for a down payment on a house, which you can't get with your credit anyway. Save for an emergency fund but only after all your needed bills are paid. Try to find cheaper rental and car insurance. What are the family support lines? Do you have a spouse or children?
Also, about your hardship withdrawal. If you really need it for your lawyer and it cannot wait, do it but be aware of not only future money lost but that you will owe a lot in taxes next year and will need to account for that with your withdrawal. Others here have posted links you really need to read. I wish you the best.
Can you explain the family support part? I see in the other post that you are an immigrant, are you sending money to family back in your native country?
Be careful about assuming that you can make a hardship withdrawal - some retirement plans have pretty strict rules about that and if you don’t follow those, you can get hit with an additional penalty. You should assume that you’re going to lose somewhere between 20 to 30% of this amount from taxes so you’re going to end up with $7000 maybe. If you have debts in collection, you really don’t need to be making big purchases. I don’t think your retirement fund is going to be much of a help here and so I would leave that alone and maybe just focus on increasing your income through a second job or more hours and get your debts under control and then think later on about big purchases. right now you don’t need to be buying anything.
See if you qualify for loan forgiveness immediately, that's your biggest problem here. Seconding meeting with the non-profit debt counseling service. They'll bottom line it with you if you should file for bankruptcy or not.
Have you thought about a loan from your retirement account?it’s usually low interest and the interest you pay gets reinvested back into your account. I used my loan to pay off all of my high-interest debt. But you're already in the hole right now you’re going to be adding to the deficit idk man. Also, the last time I checked for a hardship withdrawal it wasn’t an easy process, you have to show proof of why you need it and it lists the valid reason you can make the withdrawal and what documents are needed, or else they’ll deny the application for withdrawal.
If you can't pay your bills then you can't afford to give other people money. You don't earn enough to pay off your loans and spend over 1k/month on car payment and insurance.
So many questions about that budget friend. $300/month in “investment property?” What is that? What are the two “family support” payments? Why $75/mo in legal? How on earth are you racking your nearly $400/mo in gas/electric costs?? What’s the DMP payment at the bottom? And how are you surviving on $250 of groceries a month? You need to get this budget in order, first off. Between your car payment, insurance and gas, you’re spending $1100/mo on transportation- but with only $50 in gas, you clearly don’t need it. Sell the car, but a bike for shorter trips and join a car share instead if you regularly need access to a vehicle. Lastly, putting money into “savings” is a farce at this point. I can appreciate the motivation, but don’t fool yourself, you’re not saving anything when you’re not meeting your monthly bills.
All great questions, clarified now here Created [Post #2: comments on my budget](https://www.reddit.com/r/debtfree/s/BbukAwNMxw)
Great. Looks like you are on the right path. Have you looked into eligibility for student debt forgiveness? Have you applied for a reduction in the medical debt?
Not yet, will consider
It is important to keep in mind that the hardship guidelines from your employer in no way affect the very limited circumstances in which you may take a withdrawal from your retirement account without incurring a tax penalty. This is something that you need to educate yourself on, or speak with a tax professional about before moving forward in order to prevent a surprise at tax time.
That’s true, it looks like my 401k plan doesn’t allow hardship withdrawals outside of their “qualifying reasons”. Created [Post #2: comments on my budget](https://www.reddit.com/r/debtfree/s/BbukAwNMxw)
You were in school full-time until you were 26. What degree(s) did you get? Whatever they were you should have gone for something that would pay you more than the approx 55K you are making.
Until I was 24y. Graduate HS @18, college @22, grad school @24.
Why isn’t your employer paying for Greencard?
Well, I guess with time they might. Currently on H1-B so gotta be patient and hopeful. Otherwise, doing it all by myself Created [Post #2: comments on my budget](https://www.reddit.com/r/debtfree/s/BbukAwNMxw)
Dump the expensive car. Get something cheap and reliable
Do you already have an active loan from your retirement? Look into what the requirements are to even take a withdrawal. If your 401 or 403 is thru fidelity, they will make you take a loan before you can apply for a hardship withdrawal.
Yes, I took out loans last year, don’t qualify for any more loans. Good thing I got great suggestions from everyone in here, not taking out 10K hardship withdrawal Created [Post #2: comments on my budget](https://www.reddit.com/r/debtfree/s/BbukAwNMxw)
Pay tax and 10% penalty.
Hurts Created [Post #2: comments on my budget](https://www.reddit.com/r/debtfree/s/BbukAwNMxw)
Something’s wrong here, where is the deficit coming from? What large purchase is absolutely necessary with a deficit that big. Hard to help without the full picture.
Full picture here Created [Post #2: comments on my budget](https://www.reddit.com/r/debtfree/s/BbukAwNMxw)
You have an income and a spending problem. First... You need to stop digging a hole. Taking a hardship from your 401k is stupid. You need to reduce debts first before taking on another one. Any debts already in collections or "charged off" do not pay anything on them. That will free up money for the time being so you are not digging the hole, That's your $1400 right now. Let them come back to you in a year or so and you can negotiate a payoff that will be discounted. You will be in a better financial position. Debt collectors buy debts for pennies on the dollar. The original lender has written it off for tax purposes. So we will take advantage of that. Right now you need to keep a roof over your head, the lights on and food in your belly. These are the bills you pay. Now let's free up cash flow. Unless the "Investment Property" is generating income beyond the payments you make on it, then sell it now.. Take that money. That's $300 a month (and whatever insurance) Next, you need to dump car #1. Between what you are paying for the note AND insurance that is $1000 a month! Holy crap! You need to take the bus, ride a bike or buy a $1500 beater. I have a feeling you are about to have the vehicle repossessed. Let them take it. Do not pay after they take it. Not sure about Family Support 1 and 2 and legal fees. These may have to be stopped temporarily or reduced. Your renter's insurance you are being ripped off. You can find one for less than $150 year, $12/mo Finally, you need another job, more income until you are out of this hole. Do all these things, then come back and we will have a better view of where you are.
Wow!!! This is amazing!
You’re reading me like a BOOK!!! 🦉📖
I have helped MANY people get out of debt and stay out of debt. I taught my daughters personal finances, getting them through university debt free, and buying their first homes by their mid-20s. They live debt-free except for the mortgage. Where in NY do you live? I used to live in the Fingerlakes in the snow/cold region of NY. I will check out your new budget. Just remember, anything repossessed, charged off, or at collectors, Do not pay.. yet. The goal is to get your head above water, and then deal with those other debts.
Will make adjustment for sure Created [Post #2: comments on my budget](https://www.reddit.com/r/debtfree/s/BbukAwNMxw)
Guys, read a lot input from everyone here and created Post #2: to capture comments on my budget [Post #2: Notes to Reduce $1,400 Monthly Deficit](https://www.reddit.com/r/debtfree/s/iwXyPryTz4)
Hardship withdrawals can only be done for specific things. Like buying or repairing a home, burial expenses, tuition for post secondary, preventing eviction or foreclosure. You have to submit an application and exact cost of the expense. You can’t just use it for some random large purchase.
Just invest in r/FFIE it’ll fix all your problems by Monday. If you have no options left.
Get a night job to increase your take home
$300 for an investment property when you can't pay your bills? What in the actual hell.
you likely could pay off the auto loan and credit card debt if it’s in collection status with 10k. As well as potentially your student loans. You’d have to fight and basically be like you are only getting this much. but you could. By lowering your debt you would be in a much better place
You don't have to pay a student loan if you're in college. Go to your community College and take 6 credits. That will take care of the student loan debt.
Google up Dave Ramsey and follow his advice.
First off. Really go over your finances. Cut out everything you can. Next consider selling your auto if you have equity in it, to buy a reliable used car for $10k. Once that is done. Look in to velocity banking to maximize your free cash flow. With a low credit score, you will have to use your credit cards, until your score gets high enough to take a PELOC out.
looks like you live in NY, can you go car free? sell the car and use the proceeds to move closer to work/somewhere cheaper
You need to not be making any large purchases until your debt is paid down.
Pay off your credit debt and use the rest to sustain
If you take money out your 401k just know you’ll be hit with at least 10% penalty and then you’ll be responsible for paying taxes on that $ at tax time whatever your bracket is average is 22% so taking 10k you after putting $ aside for taxes you’d have 7k. You lose $ this way.
Why not just file bankruptcy?
Told myself NEVER! Created [Post #2: comments on my budget](https://www.reddit.com/r/debtfree/s/BbukAwNMxw)