Financial misery

 

Dude, do NOT touch the money IN your 401k.

You only have $10,000 in there. You have $20,000 in debt. If you take the $10,000 out, you instantly loose $1000 (10%) in early withdrawl penalty. Then you also owe regular income tax on top of that. Since you say you make $40k/yr, this money will be taxed at 25% Federal rate. Then you are also in CA, which has one of the highest income tax rates in the country, and they want their share too. It looks like because of your income, the withdrawl will be taxed at the highest CA bracket, 9.3%. Then your local municipality probably has a local tax too, that's typically only around 1%, so lets go with that...

$10,000 - $1000 penalty = $9000
$9000x0.01=$90 local tax
$9000x.093=$837 CA tax
$9000x0.25=$2250 Federal tax

So that leaves you with only $5823 cash to you (vs your $20,000 in debts), and an empty retirement savings account. And nevermind the opportunity costs losts on the investment gains you will miss out on once the money is taken out of you 401k.

DON'T withdraw from your 401k!!! There is almost NO situation where that makes sense.

You might consider cutting back on your 401k CONTRIBUTIUONS temporarily, but DO NOT touch the money that is already in there. Maybe you take your contributions down to only 8% of income instead of your current 15%. That way, at 8%, you are getting a few more $ in your take home pay, but you are still taking full advantage of the free money your employer is giving you as part of the match up to 8%.

There HAVE to be better options available to you in your situation. Can you pick up some overtime at your current job? Can you get a part time job on the evenings or weekends? Can you get out of the lease on your S2000? Can you cut other expenses? Can you pawn your old junk on Ebay? etc.

Andrew

 

^^^ The only way this changes is if he contributes after-tax dollars.

 

Second job is not an option at the moment because I am attending school at night.

 

i did a tad bit of reading up on this... the US has the second highest GDP per person, we're right under Luxembourg. yet, we're ranked 13th in overall quality of life (Luxembourg is ranked 4th), which means even though we have all this money, it's not being used to enhance the quality of life for it's people, which makes sense because the US also has the highest level of economic inequality amongst it's people than any other developed country.

we have this uniquely American negative attitude towards the less affluent in our country. we blame their misfortune on the people themselves, we justify their poverty by saying they're lazy and stupid. when really, poverty is a much bigger issue than just a few people being lazy or being stupid. we've been told all our lives that this is "the Land of Opportunity" and that every child born in the US has just as much opportunity as the next, regardless of who the child is born to. Anyone who works hard enough can be rich and live the American dream.... but that's just NOT true. the truth is that if you're born poor, you will more than likely die poor.... regardless of whether you sit on your porch all day or work your ass off.

scot you made a remark in one of your posts about the section 8 people's kids... you said "these kids don't stand a chance." but just think that those section 8 people were also babies themselves once and their parents were probably shitty parents too and their parent's parent's were probably shitty parents and their parent's parent's parent's were probably shitty parents. these people don't stand a chance, they're born into this misery, their children will be born into misery and their children's children will be born into misery. you're right, none of them stand a chance.

and it pisses me off just as much as the next decent tax-paying American to see people milking the system... but i also have to think that i had parent's who were decent tax paying Americans to teach ME how to be one. i had parent's who drove me to school in the morning and had nice jobs so that when they got home from work they still had the energy to take me to soccer practice and yell at me if i skipped school. i had people there to teach me the difference between right and wrong and to teach me the virtue of hard work and making your money the honest way. if i didn't have parents there to teach me that, how else would i have learned it?

the problem doesn't lie with the individual. it's a problem that emcompasses generations, it's engrained in our society. i know i'm young, i have crazy liberal political views and i've always been a total idealist to a fault.... and you guys will probably totally disagree but that's my take on it.

 

i tend to agree with that...i know many people who are both wealthy and not wealthy...a lot of childrens financial knowledge stems from there parents...however some less wealthy people do meet the right people or are smart enough to break there way out of poverty...it appears most just find it easier to follow the same path as there parents...

 

[QUOTE=C_Unit,Jun 29 2006, 12:37 PM] i did a tad bit of reading up on this...

 

i dont think there is an answer to that scot...you can only do so much to help people...if they arent willing to put the effort in to better themselves and there future then it wont happen...maybe they are just content being bottom feeders...it seems like a never ending battle between the poor and the wealthy in the states...the wealthy dont want to pay for the poor to live and the poor believe it is owed to them so they can live...

 

if i knew, i'd run for president... but i don't.

typical democrat huh? i've got all these ideals and i can't/don't know how to do a damn thing about it. i'm not afraid to admit that's whats wrong with liberals today.

we actually spend hardly anything on welfare in this country... that's a fact. especially when you compare welfare spending to military spending in this country. i think if we actually developed a comprehensive, well thought out welfare system than it would work... it works in other countries. but once again, those are just hare-brained ideas.

but i know what you mean about ghetto people with their cadillacs, leather jackets and acrylic nails... but i guess if you grew up never having money, when you do actually get small amounts of money you don't know what to do with it so you just spend it on stupid shit that you see in rap videos. people like that have never learned how to save money or be smart with it because they've never had it.

 

[QUOTE=Scot,Jun 29 2006, 01:32 PM] any suggestions on how to motivate them to succeed?