Pick Your Community: | Hopkins | Muhlenberg | Daviess | Christian | Henderson | Lakes | McCracken | Webster
Davis Motor Sales banner ad

Dave Says - December 2, 2012

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 2014 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.

button coupons
button classifieds

In Other News...

Happenings and Meetings - Hopkins County

HOPKINS COUNTY, Ky. (12/20/14) — The following meetings and events are scheduled for the following week: Poppy and… Read More

Land Between the Lakes Upcoming Programs and Events

KENTUCKY (12/20/14) — The following are the upcoming programs and events at Land Between the Lakes: Dec. 17 - 23 Daily… Read More

Most Read This Week

December 16, 2014 10761

Coal Miner Fatally Injured in Underground Mining…

in Top News For All Sites by Dick Brown
December 17, 2014 7687

Elderly Couple Found Shot to Death in Muhlenberg

in Local (Muhlenberg) Top News by Trooper Stu Recke
December 17, 2014 6814

Three Men Charged with Burglary

in Local (Hopkins) Top News by Madisonville Police Department
December 15, 2014 5128

Hopkins County Woman Charged Second Time in Two…

in Local (Hopkins) Top News by Charles W. Riley II, SurfKY News
December 15, 2014 4579

Woman Leads Police on High-Speed Chase in Stolen…

in Local (Hopkins) Top News by Madisonville Police
December 19, 2014 4482

Dawson Springs Man Charged with Sexual Abuse of…

in Local (Hopkins) Top News by Detective Sean McCance
December 19, 2014 4465

Armstrong Mine to Layoff 39 by End of Day

in Top News For All Sites by Rita Dukes Smith, SurfKY News Director
December 18, 2014 4172

Cat Scratching over Dog Ownership Escalates

in Local (Hopkins) Top News by Amber Averitt, SurfKY News
December 19, 2014 4036

Woman Flown to St. Mary's after Two-Car Collision

in Local (Hopkins) Top News by Trooper Stu Recke
December 16, 2014 3960

Highway Crews Pre-Treating Roadways for Potential…

in Hopkins News by Keith Todd

Stories Trending Today

December 19, 2014 3367

Vehicle Fire Causes Traffic Back-Up on Pennyrile

in Local (Hopkins) Top News by Doreen Dennis
December 20, 2014 1503

KET’s Kentucky Life Segment to Feature Old…

in Local (Muhlenberg) Top News by Paul McRee, SurfKY News
December 19, 2014 1491

Greenville Mayor Honored during Final Council…

in Local (Muhlenberg) Top News by Charles W. Riley II, SurfKY News
December 20, 2014 1269

New Trial Sites Added for U of L's Brown Cancer…

in General News For All Sites by Health Sciences News
December 20, 2014 1188

Farmers' Markets, Vendors; Sign Up for Free…

in General News For All Sites by Ted Sloan
December 20, 2014 1148

'When the Universe Was Young' Opens Jan. 4 at…

in General News For All Sites by WKU News
December 20, 2014 1136

WKU Public Affairs Claims 17 Statewide Awards

in General News For All Sites by WKU News
December 20, 2014 1125

Law Enforcement Officers, Agencies Honored for…

in General News For All Sites by Erin Eggen
December 20, 2014 1111

Happenings and Meetings - Hopkins County

in Hopkins News by Amber Averitt, SurfKY News
December 20, 2014 1078

City of Madisonville Holiday Schedule

in Hopkins News by Leslie Curneal

SurfKY News Group, Inc.
Corporate Office & Studio
1125 Nebo Rd.  •  Madisonville, KY 42431
270.452.2727 (phone)
  •  270.452.2249 (fax)


Contact a member of our staff: www.surfky.com/contact
Copyright © 2014 SurfKY News Group, Inc.  •  Terms of Use  •  Site Map

social fbsocial twsocial yt
social gpsocial flrsocial rss