Thursday, January 29, 2015
Davis Motor Sales banner ad

davesays300KENTUCKY (12/2/12) - This week Dave will be discussing why you shouldn’t cash out and paying for the classes.

Dear Dave,
Is it a good idea for a married couple in their early thirties, who have a lot of student loan debt, to cash out one of their 401(k)s to pay it off? - Marcy

Dear Marcy,
No way! You never cash out a 401(k) or IRA to pay off debt, unless it’s to avoid a foreclosure or bankruptcy. Let’s say you take $50,000 out of your 401(k). Do you know what happens next? They’re going to charge you a 10 percent penalty, plus your tax rate. If you make $75,000 a year, that puts you in a 25 percent tax rate, plus the penalty. That’s a 35 percent hit, and that’s how much of your money is going straight down the toilet.

Look at it this way. You wouldn’t ask me if it’s okay to borrow money at a 35 percent interest rate to pay off your school loans, right? That would be ridiculous, and this is just as dumb.

There are no shortcuts when it comes to getting out of debt, Marcy. Roll up your sleeves and get on a beans and rice budget where every dollar has a name. This will enable you to save money and pay off that debt! - Dave
 
Dear Dave,
My wife and I have our fully funded emergency fund in place, and we’re debt-free, except for the house. She wants to return to school to get a master’s degree and change careers. She’ll be reimbursed up to $7,000 a year. Can we use some of our emergency fund to get things started? - Kevin

Dear Kevin,
I’ve got a better idea. Save up the money!

You guys are in great shape already. And to me, this opportunity seems like a small investment with a fabulous return. I really like the idea. But you have to be careful when it comes to things like this. You don’t want to get into the habit of calling things emergencies when they’re not emergencies. It’s a great thing, but it’s nowhere near an emergency.

I know she’s excited about the possibilities, but I’d just roll up my sleeves, save a little extra for a while and cash flow the classes. She’ll probably get reimbursed for the first classes right after she gets her grades, then you can use the reimbursement check to pay for the next classes, and the next check the next classes. Make sense?

I love the school idea, and I’m glad your wife has such a great opportunity. But I don’t want you to take a chance on messing up the progress you’ve made in taking control of your finances. Just take your time and save for those first classes. You’ll be glad you did! - Dave

*Dave Ramsey is America’s trusted voice on money and business. He’s authored four New York Times best-selling books: Financial Peace, More Than Enough, The Total Money Makeover and EntreLeadership. The Dave Ramsey Show is heard by more than 5 million listeners each week on more than 500 radio stations. Follow Dave on Twitter at @DaveRamsey and on the web at daveramsey.com.

 

 

Disclaimer: The content supplied by columnists and letters to the Editor on this site does not in any way, shape or form, implied or otherwise, necessarily express or suggest endorsement or support of any of such content, statement, or opinions therein. SurfKY News does not necessarily adhere to or endorse content provided by outside non-staff sources.

© Copyright 2015 SurfKY News Group, Inc. All rights reserved. This material may not be published, broadcast, or rewritten without permission. SurfKY News encourages you to share this story by using one of the social media links below.

Started 11/8/2013
Started 11/8/2013

In Other News...

Letter to the Editor - Month of Mentors

HOPKINS COUNTY, Ky. (1/28/15) — January is National Mentoring Month. We would like to acknowledge our volunteers to let… Read More

Aces down Cloverport, 63-50

CLOVERPORT, Ky. (1/28/15) — Senior forward Ed Carter delivered 20 points, 11 rebounds and five blocks to lead visiting… Read More
Started 11/8/2013
Started 11/8/2013

Most Read This Week

January 28, 2015 14463

UPDATED: Several Involved in Two-Vehicle Accident

in Local (Hopkins) Top News by Doreen Dennis, SurfKY News
January 23, 2015 9711

Local Church's Faith Restored; 71 Souls Saved…

in Video by Gary Gates, SurfKY News
January 26, 2015 6281

KSP Arrests Two on Child Porn Charges; MPD…

in Top News For All Sites Touching Hopkins by Trooper Stu Recke
January 25, 2015 6258

Dean’s List Announced

in Top News For All Sites Touching Hopkins by Joyce Riggs
January 23, 2015 5994

Parents Face Charges after Marijuana Joint Falls…

in Local (Hopkins) Top News by Madisonville Police Department/Hopkins County Jail
January 28, 2015 5108

Nortonville Man Accused of Meth Possession,…

in Local (Hopkins) Top News by Madisonville Police Department/Hopkins County Detention Center
January 23, 2015 4785

Nortonville Woman Charged for Meth Possession

in Local (Hopkins) Top News by Hopkins County Sheriff's Office/Hopkins County Detention Center
January 25, 2015 4129

Juvenile Hit by Vehicle at McDonald's

in Local (Muhlenberg) Top News by GPD Officer Wes Miller

Most Read This Month

January 08, 2015 21331

Woman Claiming to be 'Lady Gaga' Tours Town in…

in Top News For All Sites by Madisonville Police Department
January 15, 2015 21118

UPDATE: Fatality Victim's Name Officially Released

in Top News For All Sites by Doreen Dennis, SurfKY News

Stories Trending Today

January 28, 2015 14463

UPDATED: Several Involved in Two-Vehicle Accident

in Local (Hopkins) Top News by Doreen Dennis, SurfKY News
January 28, 2015 5108

Nortonville Man Accused of Meth Possession,…

in Local (Hopkins) Top News by Madisonville Police Department/Hopkins County Detention Center
January 28, 2015 3064

Tax Recall Committee Formed Day After School…

in Local (Muhlenberg) Top News by Charles W. Riley II, SurfKY News
January 28, 2015 1855

Madisonville Police Arrest Reports - Jan. 28, 2015

in Hopkins News by Madisonville Police Department
January 27, 2015 1792

Whitfield Works to Combat Prescription Drug Abuse

in General News For All Sites by Marty Irby
January 29, 2015 1413

UPDATE - Students Have until Jan. 31 to Enter…

in General News For All Sites by James R. Comer
January 28, 2015 1300

Muhlenberg District Court Fines Handed Down

in Local (Muhlenberg) Top News by Charles W. Riley II, SurfKY News
January 28, 2015 1100

Hopkins County Sheriff's Reports Released

in Hopkins News by Hopkins County Sheriff's Office
January 28, 2015 946

Old City Hall Space to be 'First United Bank…

in Local (Hopkins) Top News by Doreen Dennis, SurfKY News
January 28, 2015 813

Crime Stoppers Top Most Wanted - January 28, 2015

in Video by Crime Stoppers
January 28, 2015 771

Letter to the Editor - Month of Mentors

in Hopkins News by Mallory D. Johnson
January 28, 2015 771

Kentucky Lottery Results for Tuesday Jan. 27, 2015

in General News For All Sites by Kentucky Lottery