COLUMN: Dipping into retirement plan a bad plan

Q: I’ve got about $15,000 in my 401(k). I also owe about $15,000 on my car, and the payments are killing me. Should I cash in my 401(k) to pay off the car, and free up money in my budget?
A: I love the fact that you want to get rid of your car payment, but I don’t want you to cash out your retirement plan to make it happen. If you use your 401(k) they’ll charge you a 10 percent penalty, plus your tax rate. This means you’ll lose anywhere from 30 to 50 percent to the government, and they get too much of your money already.
If it were me, and I could pay off the car in 12 to 18 months or less, I’d live on rice and beans and push on through until that car payment was out of my life forever. If that’s not going to happen, then you need to get an ad in the paper tomorrow and sell the car.
Q: I love your plan, but I think my husband is attached to eating out. Budgeting is very hard for him, and the cost of his fast food lunches is making it difficult for us to get by financially. On top of that, he’s taken a salary cut, and I’m working a part-time job to help us get by. Can you give him some tough love from a male perspective?
A: It sounds to me like you’ve been way too nice. You’re acting like a mother dealing with little kid and that’s not a good way to relate to a husband. Plus, if you guys are having money problems, the only time either of you should see the inside of a restaurant is if you’re working there.
A man has several jobs in life, and one of those is to take care of his wife and children. Yourß wife shouldn’t have to work so you can stuff your face with fast food. When you married him, you didn’t want a little boy. You wanted a man. He needs to grow up and start acting like one.
That being said, my perspective probably won’t help. There’s a saying that goes, “Those convinced against their will are of the same opinion still.”
He needs a serious change of heart. You said you love my plan, right? Then sit down with this guy and show him the numbers. Show him where all the money is going and tell him it’s just plain wrong for him to eat out all the time while you have to work just to make ends meet. This isn’t just damaging your finances – it’s damaging your relationship.
People can do all kinds of things when they’re stressed out because of money problems. I’m sure taking a cut in salary was a blow to his self-esteem as well. However, it’s time for a strong wake-up call when these behaviors start to have a negative impact on family and finances.

For more financial advice, visit www.davesays.org.

Dave Ramsey