Money Crashers

Should I Cash Out My 403b Account To Pay Off Debt?

Erik Folgate — Thu, 19 Nov 2009 03:02:41 +0000

Help a reader with this question:

I currently have a 403b with about $20k in it. I am planning on leaving my job late April and was previously planning on moving the money somewhere else. However, I owe a family member $15k for a car they bought me almost 5 years ago. I did not pay them back yet because we have been working on paying off all of our other debts (which we have paid them all off!), and the family member was not charging me interest or asking for the money back. So this $15k (and our mortgage) is the only thing holding us back from being debt free. Would it be wise to consider pulling the money out of the 403b when I leave my job, paying the taxes, and then giving my family member the money to pay off the debt? Then I was thinking about opening a Roth IRA with any remaining money since I think we can get down to owing the family member $10k by the time I leave my job.

Another factor which I need to look into is how my company has invested in my 403b. I am not fully vested since I will be about 7 months short of becoming fully vested so I am not sure if I will lose money from the 20k when I leave my job.

My Answer:

Regarding the 403b, I would NOT pull the money out of it to pay off the debt you owe the family member. The reason for this is because you will potentially pay a 35% penalty to withdraw the money early. The 403b will charge you a 10% penalty and then you’ll owe the IRS taxes on the withdrawal amount based on your current tax bracket which is probably 25%. So, would you borrow 15k at 35% interest to pay off the personal loan? No, I am sure you wouldn’t, so there’s no reason to use the money from the 403b.

When you leave the company, transfer the 403b money into a Roth IRA with a discount stock broker. I like Vanguard, Charles Schwab, and Etrade.com. You want to do a DIRECT transfer. This is very important, because if they cut a check to you, you cash the check, and put the money into another account, the IRS could hit you for the taxes. You want the money to go straight from the 403b provider to the new brokerage account. Whoever you choose will have instructions on what to do for a direct transfer.

I commend you for wanting to get out of debt quickly, and I think you still can, but the family member obviously isn’t hurting from that loan, so contact him or her and tell them you’ll start sending them money on a monthly basis. Who knows, maybe after 6 months of sending them money, they’ll forgive you for the rest of the loan. But, you definitely owe the money, so you should start putting together a repayment plan as part of your monthly budget to get the loan paid off as quickly as possible.
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Should I Cash Out My 403b Account To Pay Off Debt? is a post from: Money Crashers

Black Friday Information and Resources

Erik Folgate — Tue, 17 Nov 2009 04:30:20 +0000

Black Friday isn’t for everyone, but for some of us, it’s the first fun event of the Christmas season. If you treat it like a family event or something fun to do with friends, you’ll have a much better time than treating it like a chore. The one thing I can’t stand about Black Friday is when I hear stories about people getting hurt trying to reach for the Nintendo Wii or whatever. This is absurd, people! It’s just stuff! Have some fun shopping, and if you score a great deal or a door buster, be happy, but don’t turn into a pack of wolves trying to get a door buster.

Black Friday Resources For Preparation

There are numerous others, but these are the ones that I check the most often. Instead of waiting until Thanksgiving day for the ads, you can look at them early, and this is important because knowing exactly what you want to get on Black Friday and being prepared is the key to scoring a deal.

Stores To Avoid

Avoid the small boutique type stores that try to ride the coat tails of the Black Friday frenzy but don’t have the resources to offer really good deals.

Avoid Most Door Busters

Door busters are meant to stir a frenzy and get people in the door. But, many door busters aren’t really a deal. If you look at them closely, it’ll typically be a model or brand that wasn’t expensive to begin with or it’s a model that’s being discontinued.

What To Look For

The best deals are usually on toys and items for kids, yet they don’t garner as much attention as the laptop or television. Also, I love bundle deals. A lot of stores like Target and Wal-Mart will offer an item with a free gift card. I like this, because I can either buy more stuff with the gift card or sell it on eBay or Craigslist for cash back.

Up next, we’ll discuss the Frugal Chat on Twitter that gave Black Friday tips and information and we’ll also discuss Cyber Monday.

Best Of Personal Finance Articles in 2nd Week of November

Erik Folgate — Sat, 14 Nov 2009 16:24:10 +0000

If you’re new to learning about personal finance or you spend most of your time on the internet shopping or playing games, I encourage you to check out all of the great personal finance blogs around the internet. There are hundreds, maybe even thousands, so that’s why I like to highlight some of the ones that I read and stay involved in on a regular basis.

Bargaineering explains how you can save money by canceling your cable TV. I really like this idea, and it’s becoming a lot easier with internet TV like Hulu and a-la-carte buying on iTunes, but for a sports guy like me, I want access to live football and basketball games.
Here’s a guest article on Consumerism Commentary about the lifestyle creep and the self-employed. This article caught my eye, because I am currently starting up an internet marketing company with a partner, and even though all of the basic are set up, we are still learning every day about how to run a small business.
Frugal Dad has a great article about how to set up a personal finance firewall and protect your cash assets from online fraudulent activity.
Kiplinger’s Magazine has ten ways to fatten your wallet on Black Friday. Read this article to get geared up for Black Friday, and I will also get you ready for the big shopping season next week.
Generation X Finance encourages us to make year-end tax moves now to lessen your tax burden for 2009.
Wisebread has a good article about dream jobs and day jobs. I have a strong passion for helping people helping people make their dream job become a reality. It can’t happen overnight, and many people get discouraged too quickly. Transitioning to work you love takes time and preparation.

Check back this week for tips on shopping, black friday, how to find great deals, and negotiate great deals. I’ll also explain how my wife and I keep Christmas spending to a minimum.

Earn Extra Money By Getting A Job Over The Holidays

Erik Folgate — Fri, 13 Nov 2009 03:26:23 +0000

The past 14 months have been one of the hardest time period for Americans looking to find work. The recession will not be over until the unemployment rate stops rising and starts receding again. Our economy cannot flourish without people contributing to the workforce and making enough money to put it back into the economy. I came across this article on Career Builder the other day revealing 10 companies hiring for the holidays

AT&T
Industry: Communications
Number of openings: 1000+
Seasonal positions available: Retail sales associates; store managers; and sales support
Location: Nationwide

A Wireless
Industry: Telecommunications
Number of openings: 250+
Seasonal positions available: Store managers; sales consultants; district managers; information technology; customer service
Location: Nationwide

Blockbuster
Industry: Entertainment
Number of openings: 1000+
Seasonal positions available: Retail sales associates; store managers
Location: Nationwide

HHGregg
Industry: Appliance and electronics retail
Number of openings: 800+
Seasonal positions available: Appliance and electronics sales
Location: Indiana; Ohio; Kentucky; Alabama; Georgia; Florida; North Carolina; South Carolina; Tennessee

Hickory Farms
Industry: Specialty retail
Number of openings: 4,000
Seasonal positions available: Sales associate
Location: Nationwide, shopping malls

Macy’s
Industry: Retail
Number of openings: 1,000 +
Seasonal positions available: Part-time season retail help in gift wrap, sales associates, etc.
Location: Nationwide

Olan Mills Studio
Industry: Studio photography
Number of openings: 100+
Seasonal positions available: Photographers; portrait sales; customer service
Location: Ala., Ga., Pa., Ky., Tenn., N.C., Ind., Mich.

RadioShack
Industry: Electronics sales
Number of openings: 1000
Seasonal positions available: Retail sales associates
Location: 250 cities

Toys”R”Us
Industry: Specialty retail
Number of openings: 35,000
Seasonal positions available: Management positions; sales associates, including cashiers, shelf stockers and customer service roles; and back-of-house stock opportunities
Location: Nationwide

UPS
Industry: Shipping and distribution
Number of openings: 200+
Seasonal positions available: Package delivery drivers; tractor trailer driver
Location: Nationwide.

Holiday Work Can Turn Into Full-Time Work

If you are still struggling to find work, the holidays are a great time to get your foot in the door. Sometimes these companies only want seasonal work, but often times these seasonal positions turn into full-time positions. If you land a seasonal position with a company that you like, then you need to bring your “A” game. Stand out from the others, go the extra mile, be flexible and show leadership qualities that make you stand out from others.

Holiday Work To Earn Extra Income

Holiday work is also a great time to earn extra money. Whether you want to catch up on your bills, make money for holiday gifts, or simply build up a cash reserve, finding an extra job around the holidays is easy. The nice thing about holiday work is that the employer won’t take it personally if you leave after 2 months, and they may tell you to leave after 2 months. I know that UPS pays well for hourly work, and you can work in the warehouse and never have to drive the truck. Are you good at sales? AT&T and A Wireless will be looking for sales associates, and they often pay commission. I recommend looking for jobs with sales incentives and bonuses, because this will give you more motivation to work hard and make more money. Related Posts:

Earn Extra Money By Getting A Job Over The Holidays is a post from: Money Crashers

How to Save Money While Vacationing In A Big City

Erik Folgate — Wed, 11 Nov 2009 04:59:30 +0000

My wife and I just got back from a trip to Chicago. I surprised her for her birthday and took her to the Windy City for four days. We have a best friend that just moved there, so that was part of the reason for picking Chicago to visit. Visiting big cities can be really pricey, because hotels, eating out, and entertainment are usually very expensive. We didn’t go frugal on this trip, but there were certain things we did that helped us save some money during the trip.

Use The Entertainment Book

Chicago had a huge entertainment book, and it gave us great ideas for places to eat and things to do with coupons. The entertainment book can be purchased for $20 online.

Look for coupons online

We found a buy one, get one free coupon for the Shedd Aquarium on their website. That’s a $25 dollar savings, because each ticket is $25.00.

We stayed with friends

For the first night, we pampered ourselves and stayed at the Four Seasons hotel. Even that was a deal, because we have a friend who works for Four Seasons and gets 50% off of room rates. The other two nights we stayed with our friends and saved a lot of money by not paying for two more nights at a hotel. The Four Seasons was AMAZING, by the way. By far the best service I’ve ever received at a hotel.

We didn’t go overboard with sightseeing

In order to avoid feeling worn out from your vacation, sometimes you need to take it slow. My wife and I aren’t dissapointed if we didn’t get to see or do something on our checklist. We are okay with hanging out with friends and taking it slow. This also saves money, because you aren’t running around and spending money on every tourist trap attraction in the city. Related Posts:

How to Save Money While Vacationing In A Big City is a post from: Money Crashers

Is Your Car Payment Destroying Your Life?

Erik Folgate — Wed, 04 Nov 2009 04:34:59 +0000

You’ve heard me get on my soap box in the past about car payments and how they can soak up a lot of your monthly income. I really don’t like car payments, and I don’t think you need one to have a reliable car that serves your transportation purposes. As Americans, we’re obsessed with having nice, new cars. We have been taught from a young age that car payments are inevitable. You buy a car on credit, you pay the payment for five years, then you sell it. Follow that cycle, and you’ll actually never own a car outright. Here is an email that I received from a reader recently.

I am in a dead-end situation..I am paying for student loans,credit cards, and my expenses including a car payment of $636 monthly. Last year, I had 2 part-time jobs and a full-time job making 30K, and then i quit both part-time jobs to study. I can’t deal with living paycheck to paycheck with no emergency. I traded in my Honda Pilot EX-L fully loaded to a Honda Civic Ex-Navigation to reduce costs in gas. On the Honda Pilot I owed 20K and the dealer gave me 15K for it. The Honda Civic cost me 25K plus the upside down of the Pilot and the finance charges left me with a loan of 35K. I took that other loan and now in this recession with a job that only pay $26k a year I see myself living paycheck after paycheck, and I hate it.

First, I am not treat this reader as a spectacle, but their situation is a perfect example of how a car payment can strangle your finances and your life. $636 a month is almost HALF of this reader’s monthly take-home pay, and there is no way that he/she can keep paying this payment and continue to live. The easy answer to this situation is that he/she needs to sell the car as QUICKLY as possible. Obviously, he/she won’t be able to break even on the sale, because there is negative equity from a previous car, and depreciation to factor in from the new car. What you need to do is go to a local community bank or credit union and ask for a personal loan for the difference between what you owe on the original note and the amount you can sell it for. So if you owe $35k and all you can sell it for is $22k, then you’ll be left with an unsecured loan of $13k and a much lower payment. Have 3 or 4 garage sales and scrounge up $1,000 to buy yourself a “beater” car that will get you from point A to point B. The embarassment of driving a $1,000 car will help teach you to never go out and get a $35k car loan when you make $30k.

Car Loan Rule of Thumb: If your car loan is close to half or more of your yearly take-home pay, then you need to sell the car. If it’s less than half, then you should be able to pay it off with aggressive debt payments. Related Posts:

Is Your Car Payment Destroying Your Life? is a post from: Money Crashers

7 Home Improvements To Increase Its Value

Erik Folgate — Tue, 03 Nov 2009 04:39:34 +0000

For the most part, the real estate markets around the country have flattened out, and homeowners are breathing a tentative sigh of relief. So, where do homeowners go from here? It will be a while before we start to see home values appreciate on their own, because demand will need to drastically increase before that happens. So, if you want to increase the value of your home, you’ll need to do it the old-fashioned way. Here are seven ways to improve home’s value.

Remodel the Kitchen. Take into account the value of your home. If you have a $750,000 house, you should probably put $50,000 into a kitchen remodel. If you have a $250,000 house, you can get away with $5,000 to $10,000 in remodeling. Instead of replacing cabinets, try refinishing or re-facing them. New tile flooring, upgraded countertops, and a new sink are great things to update that don’t cost a ton of money.
Remodel the Bathrooms. This doesn’t need to be a lot. A new vanity, new flooring, a fresh coat of paint, and new fixtures can be done for less than $5,000.
Put up a privacy fence. You’ll get 100% return on your money by putting up a privacy fence, and when you go to sell the house, your house will appeal to people with children and pets.
Replace the windows. This is a great upgrade that many savvy buyers will look for when they are shopping for a house. New windows helps improve energy efficiency to the home.
Finish Your Basement. We don’t have basements in Florida, because 10 feet below us is water. But many of you do have basements that are not being used or collecting junk. You can drastically improve your finished living space by putting up drywall, paint, and some carpet or laminate flooring.
Replace the Roof. You drastically improve the re-sale value of your home if you roof is new. Not only can you sell it for more money, but your house will stand out above other houses when trying to sell it. If a buyer is torn between your house and another house, a new roof can seal the deal, because many buyers don’t want to deal with buying a new roof when they first move in.
Add a deck. EVERYONE loves wood decks. They never go out of style and they are great for entertaining. Decks are always a great selling feature. My advice would be to have your deck professionally installed, unless you are great with carpentry. No one wants an uneven deck.

There are many improvements you can make to your home, but only few of them will actually increase the value to your home. Also, make sure that you factor in where you live. You don’t want to put $100,000 into a house in a neighborhood full of $150,000 houses. Find the most expensive and the cheapeast homes in your neighborhood, then make improvements to put your value somewhere in between the median home prices and the most expensive prices.

Leadership Lessons From Truett Cathy, Founder of Chick-fil-A

Erik Folgate — Fri, 30 Oct 2009 03:36:49 +0000

Tonight I went with my wife to an event called “Live, Love, Lead” put on by Chick-fil-A and the entire Cathy family was there. It was a great event, and it was done very well. Like anything done by Chick-fil-A, it was done with class. I’m a big fan of the company, because I love their commitment to serving others and their out-of-ordinary business practices like closing on Sunday and choosing high-quality and high-character franchise owners and employees. The event focused on three main concepts: Your physical health, your marriage health, and your leadership skills. Here are some highlights and lessons that I took from the event.

2nd Mile is 2nd Nature

This is a customer service concept, but it applie to all of our professional lives. Many companies go the first mile to provide good customer service, but going the 2nd mile is doing something extra special. Going the second mile is pulling the chair out for a pregnant woman or refilling a customer’s drink at a quick-service restaurant. Chick-fil-A sought to make the second mile second nature, meaning they taught all of their employees that the extra special services should be automatic, not something they do every now and then. Apply this to your professional life. Do you only do what’s expected of you or do you go the extra mile to make things perfect or make your work better? Do you take pride in what you do and do you serve your clients/customers with everything you’ve got?

You cannot manage a business if you cannot manage your own household

Cathy has been married for 61 years. He is huge on always improving your marriage and never giving up on it. He believes that since no perfect people exist, no perfect marriages exist either. And if you have problems in your marriage or in your household, it will be a direct reflection on how you run a business. Your family should always come before your business. If they are not taken care of, your business will suffer, plain and simple. This also goes along with the reason he decided to stay closed on Sundays. He believes families need Sunday to spend time together, and his restaurants do better, because his employees work harder for him the rest of the week and they are refreshed for the new week.

Perseverance

Truett Cathy took a huge step in the restaurant business by opening his second restaurant, and it burned down. But, instead of filing for bankruptcy, because he didn’t have it properly insured, he put up tents with grills and continued to serve customers next to the burnt down building until he was able to pay to repair it. That’s perseverance, and that’s the will to never give up, even when the WORST happens.

He never forgot his roots

One comment that Cathy said that stuck out to me the most was when he said, “I feel blessed to have grown up in poverty”. How many people do you know that say something like that? What he meant was that growing up in poverty helped him become the man that he is today. He never takes his wealth for granted, he understands “small town America”, and it taught him life lessons that he would have never been taught if he was spoiled as a child or lived a comfortable childhood. I’m not glorifying poverty, but I thought that if more people who grew up in poverty would take that approach, we would see a true revolution in the war on poverty. Feeling sorry for ourselves will never get us anywhere. I also liked when Dan Cathy, his son and current president, said that their children must work for two years outside of the family business before they are allowed to work in the family business. The idea behind this was that the Cathy’s don’t want their kids assuming that they are automatically given a big-wig job with Chick-fil-A from a golden spoon. They want them to experience what every other college graduate experiences, finding a job on their own.

If you apply these four principles to your career and professional life, you’ll naturally succeed, because you’ll be putting yourself aside and others in front. This is how you get ahead in life, but many people think it’s the other way around. Many people still believe that they must only look out for themselves in order succeed and get ahead in their careers, but it’s a huge lie. Serve others and give back. The rewards will be three-fold.
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Leadership Lessons From Truett Cathy, Founder of Chick-fil-A is a post from: Money Crashers

3 Reasons Why You Shoud Avoid Bankruptcy

Erik Folgate — Thu, 29 Oct 2009 01:36:28 +0000

I listen to the Dave Ramsey Radio Show every once in a while on my way home from work, and one of the most common topics I hear from callers is the question about bankruptcy. So many people call in for advice about whether or not they should file for bankruptcy. Ramsey, having gone through a very messy bankruptcy himself 20 years ago, almost always talks people out of filing for bankruptcy. There are some cases where bankruptcy is the only option, but after listening to his show for a while now, I’ve realized that bankruptcy doesn’t need to be the first option for someone in serious financial trouble.

But bankruptcy sounds so easy, right? You hire an attorney, they file some papers, and your slate is wiped clean. Well, it’s not quite that easy, and many people take filing for bankruptcy lightly nowadays. Here are three reasons why you should try to avoid bankruptcy at all costs.

You’ll be dropping a bombshell on your credit. The bankruptcy will stay on your credit report for 7 to 10 years, and you’ll be treated like an untouchable when it comes to getting a loan in the future. The only people you’ll attract are sub-prime loan sharks. The worst part is that it will take at least 3 years to be bankable again for a mortgage. You’ll need to pay for everything on time and not slip up ONCE if you want to think about buying a house after a bankruptcy.
It puts an emotional strain on your relationships. You’ll be getting sued, dealing with attorneys, and going to trial hearings. It’s not a walk in the park, and if you’re married, it will definitely affect your relationship. Ramsey is very candid about the fact that his marriage was hanging on a shoestring while they were going through a bankruptcy and raising two kids. It’s not a fun and easy process. It’s not the “start over fresh” feeling that some portray it to be.
It Can Be Expensive. That’s right, filing for bankruptcy isn’t for free, and if you want to do it right, you’ll need a decent attorney to handle it for you, and attorneys aren’t free! If you don’t use an attorney, you leave yourself vulnerable to possible liability for debts you can’t pay. Remember, it can be expensive to go broke!

Most people don’t need to file bankruptcy to get out of their financial mess. Most times it only requires you to get organized, take control of your life, and start systematically paying off debt. Get on a written budget, work another job, sell a bunch of stuff, and get your debts paid off. It sounds so simple, but the hard part is overcoming the person that got you into this mess…yourself. If you can overcome yourself and make wiser decisions, you can win with money and avoid bankruptcy.

10 High Paying Jobs That Don’t Require An Undergraduate Degree

Erik Folgate — Wed, 28 Oct 2009 02:59:55 +0000

We’re going through one of the tougher recessions in the past few decades, and jobs are very hard to find. Going to school for four years and paying for four years of undergraduate schooling is not on the minds of very many people right now. Survival mode is more on your minds, and one of the biggest misconceptions about finding a career that pays a lot of money is that you MUST have at least a bachelor’s degree. This is simply not true. There are thousands of careers that pay very well and do require schooling or an apprenticeship, but this is more like one to two years, rather than four. Some jobs just require you to have a great sales personality, the determination to succeed, and a certification/license. This article from Yahoo Finance caught my eye about the top 10 high paying jobs that don’t require a degree., and I want to share it with you.

Air Traffic Controllers: $117,200
Industrial Production Managers: $77,670
First-Line Police and Detective Supervisors: $69,300
Funeral Director: $49,620
Police and Sheriff Patrol Officers: $47,460
Advertising Sales Agents: $42,750
Real Estate Brokers and Sales Agents: $39,760
Occupational Therapist Assistants: $42,060
Occupational Therapist Aides: $25,000
Physical Therapist Assistants: $41,360

My Thoughts On This List

Air Traffic Controllers make great money, but it is consistently one of the most stressful jobs to have. If you are great at attention to detail and you thrive on high-pressure situations, then it’s definitely worth checking out. Real Estate Agents and Brokers are great professions for those without a four-year degree, but they are not for everyone. You must have an entrepreneurial spirit, because essentially you are running your own business. You have to go and get your own clients, do your own follow-up, pay for a lot of your own advertising, and you need to spend a lot of time developing the career, but it can be VERY rewarding once you establish a good foundation with a good pool of leads to clients. My favorite one on this list is the physical therapy assistant, because it pays well, it’s in the health care industry which always has shortages, and it doesn’t require a ton of schooling like many health care jobs do.

The Bottom Line

Don’t sit around and settle for waiting tables or being a secretary if you don’t have a four-year degree. It’s not the end of the world. There are plenty of great careers to be had, but you must put a lot of effort into them to make them work. Also, starting your own business is another career path that requires no college degree.