Plastic Pinch: May 2008
The month of May had some rough patches with having to deal with a car repair. On the bright side we got the stimulus payment to help us roll through the month. After looking at the numbers our debt went down by $600 for May. My retirement contributions are finally picking back up which does help us offset the asset and liability factor when it comes to net worth.
I have debated the idea of stopping my 401k contributions to take that money and pay it directly towards debt. Even though I don’t save a large chunk of my income for retirement yet, it seems like I could get out of debt faster if I stopped this for a year or two, at least until the credit card debt is gone. The credit card debt bugs me because since I’ve paid off all the smaller balances, having the larger ones left makes it feel like I’m not making progress.
Now that we’re in the month of June we have to really watch the spending. I received the dreaded car insurance bill this weekend and we’re going to roll this along with the budget. On top of that I had a dentist appointment this weekend to have a root canal done. Both of these things are about $1500 extra that we have to squeeze into June. Depending on how things go I may need help from the EF to slide into July. It would be much easier to just handle one or the other in a given month, but life doesn’t always happen that way. I’ll see where things stand regarding this later in the month.
Stopping 401k contributions definitely makes sense. I doubt you could earn as good of a return as your credit card rate. Just make sure all those extra funds go to pay down the credit card balance!
I was just about to say the opposite of the above commenter!
Do not, do not, do not stop your 401k contributions entirely. Right now, you have the power of compound interest on your side. Your dollar buys so much more now while you are in your twenties than when you are in your thirties. Look up the retirement calendars!
I appreciate that you want to get out of debt and you’re doing great. This month, you’re faced with a couple of “oh, man, where is that money coming from?” obstacles, but that’s going to happen whether you are making 401k contributions.
From close up, it seems tiresome and that month by month you are making little progress, but year by year, you are making amazing progress. Last year, you and your wife were SO not on the same page and it was very much his and hers. Not sure what happened, but look at you! It’s totally an US thing now. That’s wonderful! And look at your networthiq chart. After the tumble from factoring in the student loans… you’re already on the upswing.
You are doing good things, reasonable things with your money and that includes paying into your 401k.
There will always be something that crops up, and I just worry that if you stop paying into your 401k, you won’t get out of debt any faster and you also won’t have saved as much for retirement.
Best of luck!
sorry, that should be retirement calculators, not calendars
I like the title “plastic pinch”. I might borrow the term if you dont mind :)That’s for sure some months you’ll pay more than other months. And yes I agree with you; cards with bigger balances take determination, motivation and consistency..and it is hard to be patient. For 401K I totally get your point. What about just lowering your contribution and putting rest towards CC debt.That would be awesome if yu can get rid of CC with in 2-3 years. That way you would have only student loans.
Jim,
My question will be kind of unrelated but here you go, when you bought your house how much downpayment did you put in?
There was no down payment because I did an 80/20 loan. When we bought our house two years ago it actually had about 3% equity built in. Needless to say that is gone because we have lost some of the value of the house as it is today. If we were to sell it today, it would probably break even regarding the loans, but the realtors, closing costs, and taxes would hit us hard. I think the downward market has ended and the value will start to pick back up, slowly. Either way I’ll just keep paying the mortgage and letting it go down little by little.
Thanks..Yesterday I was trying to figure out how much we need to save for downpayment. Here in OC home prices are just ridiculous. I dont know how in the hell we can save $50K for downpayment.It is depressing.