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January 29, 2013


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It looks like you need to shave ~$650 off of your expenses. I would try to do that before breaking open your 401k.

I would consider food, shopping, and home supplies as potential targets for aggressive cuts. Clothing would also be another target. Over $200 a month seems excessive.

I would also rethink the $1000 a month in tithing. I'm all for supporting your church (I support mine too), but I wouldn't tithe yourself into ruin. I would cut back on this, and then bring it back up slowly as each debt is paid off or as you find ways to cut other areas.

The 401k funds are very expensive to use (extra taxes and penalties), much more expensive than any of the current creditors are charging. I'd certainly look at reducing my expenses first, focusing hard on getting the credit card paid first (lowest balance and highest interest rate). Lowering the tithe to 10% of income would "save" $380 a month in cash flow. You can always increase it later when the rest of the financial picture is better. It's more honoring to God to manage your finances well than to donate an extra amount but not get your bills paid.

After paying off your debt you will be in great shape. You should focus on that and cut any luxury spending like the clothes and eating out.

I would also consider moving to a "lower end" area, if it doesn't cost more on transportation. I think you have space to move and try harder to pay up debt.

I agree with all the above, but wanted to suggest tithing your time by doing more volunteer work for the church and cut back on the cash tithe. If you can do work for the church that saves them money or brings in more contributions, that would be the same as tithing cash.

I would advise against using 401k funds to pay off the debt given the penalties and taxes you've cited. Additionally, you jeopardize your future with that option.

I know you said you've cut costs as much as possible, but to the casual observer, there appears to be more room for cuts. Your clothing, home supplies and shopping/target expense items caught my attention. I would suggest going back through your data and really nailing down what is in these buckets. Take an honest look and determine if each purchase was really necessary or if you could do without it in 2013. Also, your food budget seems a little high based on what my wife and I spend. See if you can't swap out steaks for burgers every once in a while. I would then look at your church donations. I really like Roy's suggestion above and would second that. Reduce your tithe to - say - $250. It's better to $250 indefinitely than to give $1,000 until you find yourself in a more difficult financial situation. With these changes, I think a +$400/month cashflow is feasible.

I would recommend researching a credit card with a 12-month 0% APR introductory and transferring your current balance. With that done, cut up your other cards as they appear to affect your spending habits ("when they get out of hand"). With your budget in line and interest costs on your credit card debt halted, I would attack that balance with any excess cash flow you generate and use an envelope systems for your both expenses - particularly those I mentioned earlier. I would not immediately try to knock out the auto loan as you mentioned given its low interest rate.

One last thought - Is there a possibility your wife may be able to find employment, whether it be on a part-time or full-time basis? A second income would go a long way in right-sizing your budget.

Best of luck to you -


"One thing that will probably jump out to you is the $1,000 a month for church donations. That is tithing and other donations. Right now that is not on the table for possible cuts."

I believe it's great that you desire to follow's God's commandment in this area, but do you think it would be pleasing to God that you are paying Him via increasing debt?

I'd cut the tithe down to 10% of your take home pay (right now I assume you're tithing based upon your gross income). I don't believe there is justification for doing this. God command's to tithe 10% of your "increase". The "increase" to you family is only what to actually get after the government confiscates its share. In Bible times, the tithe actually paid for many things that your income taxes now pay for.

That first step would save you $380 per month. Like others have said, once your are out of debt, ten by all means, give to your heart's desire.

I'd also cut out all eating out until debt is repaid. That saves another $165 per month.

If your side business is a money sink at this point, cut it out and save another $230 per month.

Those 3 moves alone will cut $775 per month out of your spending. That would put you into a positive cash flow situation each month and allow you to finally get your debt moving in the right direction.

Its very simple really. You're currently spending more than you make. For an immediate fix, all you can really do is cut expenses somewhere. If you're not willing to do that, you won't get out of debt. Ever.

First, I commend you for keeping up with your payments of debts and taking care of your responsibilities. There are only two ways one can balance a budget in this situation; Make more money or cut/reduce your spending/expenses. There are ways you can save and I have listed them below from your budget list.
Firstly, your tithe should be 10% of your income and even if you contribute more towards offering, that should be around $620-$700. I will advice you apply the extra $300 towards your debt. You will have more opportunities to increase this back to $1000 once you are debt free and have more cash flow. You are essentially giving what you don’t have.
Secondly, there are some luxuries you should suspend if you are REALLY trying to get out of debt. Reduce your eating out to $50 (saving of $100). It’s not every month you perform oil change on your car and even if you want to save towards that every month, $100 is enough (savings of $44). Gift’s is a no-no if you are in such debt. YOU CAN”T GIVE WHAT YOU DON”T HAVE (savings of $155). Clothing shouldn’t exceed $100 (savings of $135) except your are in contracting or some type of job that requires new clothes every month. The key is to live frugally for a while so that you can enjoy latter. Ever heard of Dave Ramsey, “Live like no one else so you can live like no one else”? You have to make sacrifices now and nobody said it is going to be easy. It is the doing part that is the hardest.
What sort of shopping are you doing that is costing you $440 a month and home supplies? You can reduce these both to $200 at the maximum (savings of $400-$500). Crafts should be reduced to $20(savings of $20). What are you mailing that is costing you $25, I am assuming the gifts? Keep the miscellaneous monster under $100(savings of $35). I have a family of 4 and we try as much as possible to keep our miscellaneous under $80. At the end of each month, we save 50-60% of our income.
If you add up all the savings I have just found you, it is at least $1000 and can be as high as $1300 if you really want to find the money in your budget. Once again, it is not how much you make, but how much you keep.
All the best.

When you find yourself in a hole you can't seem to get out of, the first thing to do is stop digging. What I mean by this is cut up those credit cards TODAY and get on a very strict CASH ONLY budget for about 6 months. Pay minimums and only spend money on absolute necessities. You can't afford or need a gym membership and you won't be running in any races for a while. No eating out--stay home and eat cereal, sandwiches, pasta, etc for a while.

Save up $1000 cash in an emergency fund ASAP and then you won't feel you need the credit cards anymore. $1000 will cover most everyday emergencies.

Won't be fun but it's only temporary.

I know you can do it!

By not cutting down your donations to the church, you are putting your family at great risk. You are adding unnecessary stress to your family life and marriage. I don't believe this is what God would want for your life.

When I read the first paragraph, I assumed you would be bringing home $3-4K/montly. When I saw it was $6200, my eyes rolled a bit. Your yearly salary is probably at or near $100K and you can't figure out how to make that work.

Items that should be on the chopping block or in need of trimming:

- Gym & Fitness (2 adults+childcare+random races) - $120
- Food - Groceries - $680 (cut this down, you must be shopping at places like Trader Joe's - move to larger chains)
- Food - Eating Out - $165
- Business (web design, video production - $230 (if this is your side job, cease it for a bit)
- Entertainment/Dates - $85
- Gifts - $155
- Clothing - $235
- Home Supplies - $260 (what are you buying for your home?)
- Shopping/Target - $440 (I dread seeing Target receipts from my wife...)
- Crafts - $40
- Postage - $25 (business related?)
- Misc - $135

Even if your tithe remains the same, there are at least $500-1000 you can cut out. Pretend you have lost your job and have to strip out all non-crucial items.

As a fellow Washingtonian, I empathize re: the high cost of rent and food in the area. While I agree that your rent is on the "cheap" side for a 2 bedroom in this area, I agree with the other posters that tithing HAS to be on the table. Otherwise, you won't be able to make significant advancement.

If you really feel steadfast in that area, I would cut gifts/clothing/home supplies/Target. Washington DC is a very expensive area, to live here and stay out of debt means eliminating some of the luxuries that you might have if living in even another large metropolis.

Best of luck!

Cut down your tithing to $200 a month... donate your time instead. Then take that $800 leftover and apply it to an emergency fund - $1600 should be enough for the moment. Then after 2-3 months, start using that $800 to aggressively tackle your debts, starting with the credit card.

Also... don't buy anything on credit at all - even if you have rewards cards. People in debt are notorious for falling for these traps - buy everything with cash/checking until you've completely wiped out your consumer debt and can handle paying off your card in full every month!

I think everyone has brought up the main points you need to consider but how do you have a $1834 a month car payment and $144 in maintenance each month? That is more than you pay for rent so I assume you have a VERY nice car that will be paid off soon, maybe try selling that and pay off the debt?

My first advice would be to change the little things. Maybe cut down the phone bill. I mean $125/month is too much for that. I am sure you can get pretty good plans with free minutes and texts and cut down your phone bill in half at least. About the Gym and Fitness expesnse - invest in some equipment (doesn't have to be professional but at least buy some weights) and stop going to the gym. Try running, swimming, weight related exercises, using equipment in parks and so on.

Another thing is eating out. Do you really need that? Also expenses for shopping are a bit high. Can't you cut that down too? Do you really have to buy new clothing every month? I see a lot of unnecessary expenses in there and I just wonder how you would live if you were getting minimum wage. Pretend that is the case and see how much money you will save. Good luck!

Ill echo what the others have said about how you could reduce your spending substantially if you tried harder. I'd really stress cutting up that credit card.

Consider getting a crockpot and learning how to use it. You can easily make really good food for super cheap. You can buy great pork at costco for $2/pound (in Cali at least) and do carnitas or pulled pork that is AMAZING. Soups, beans and other stuff can also be crazy cheap.

Regarding the tithing...would you consider writing an IOU to the church? No offense, but you've been broke for a long time and just havent realized it yet. Unless your church runs it's finances like you (which is hardly uncommon) they should be able to handle the missing cash flow for a quarter or two.

Do not touch that 401(k)! With the hit you take it is like taking out a 40% interest loan!

I didn't even see that you are paying almost $2K a month for your car. Is that a typo? If not, there's your problem.

Based on the total debt service listed the car payment is a typo and is actually $184.

"Shopping/Target $440"?

You already have a category for groceries, gifts, clothing, home supplies, entertainment, personal care, & crafts.

Stop tithing to Target, they'll do just fine without you.

Everyone else has given good advice on how to proceed. In addition to the idea that using the 401-k will mortgage your future, there is an even more important reason why the 401-k is a bad idea.

Because it will not solve your problem!

Trust me it will not. I used to think things like that would but it won't. This was proven during the last housing bubble when I used to think that taking money out of your house in a refinance where you extract 20K on a larger mortgage and pay down the 20K in credit car debt was a good idea. That seems like a no brainer. Cheaper interest, better cash flow. There could be no way that would not be the smart thing to do. Except it turns out that in almost all of those cases within 18-24 months the 20K was back on the credit cards and the mortgage was now 20K higher. The person was worse off than they used to be.

The same thing is very likely to happen here. You got yourself into this situation by the choices you made. That is not meant to be a criticism, we all our in our situation from our choices (except for rare disasters out of our control). So that means your current mindset and spending patterns are such that this is what they created. You are now getting pushed up against the wall a little bit and that makes you try to cut corners and you still find yourself not quite being able to make it work. This means you have not yet been able to alter your patterns enough to deal with your current situation.

If you take the 401-k money and pay down over half your debt and improve your cash flow situation the pressure you now feel will be lifted. That is what this is about right? You want that pressure gone. But here is the thing. That pressure is needed. You will need it to motivate you to make whatever changes are necessary to make your budget balance. If you take that 401-k money and use it to pay down debt and remove the pressure, I am confident that within a few years you will find yourself in this exact same situation. Without the pressure the choice to not spend $20 here and $40 there will not be made and soon you will find you have put the debt all back.

The solution cannot be to use an escape hatch here. It has to be to stop the ship from sinking by offloading the excess baggage. Your make enough money to make that happen.

The part that almost every person I have encountered who wants to find a way to do this is usually thinking is how do I do it without pain. Everyone is looking for that answer. That is like asking how do I make the varsity football team without two-a-day grueling practices, how do I get into a top college without working my butt off day after day in school for 4 years, how do I get a big promotion at work without putting in the extra hours and the extra effort to outshine the others who want that job.

If you want something that is achievable you have to decide not just that you want it but that you are willing to do what it takes to get it, and what it takes is almost always not fun in the short term. No pain no gain is true far more often that not.

I am not going to even suggest where you look to balance your budget. It's your priorities not mine. But you do have to balance it. Even though you almost certainly feel like you are not living large, it is irrelevant how large you feel you are are living, its too large. You may be living smaller than those around you, you still need to live smaller yet. And the great thing for you is that you are not that far away. A few changes over a couple year span and your situation is fixed.

But if you take the short cut of the 401-k you are not only not going to fix your situation you will create the breathing room that removes the pressure in your budget to allow you to unconsciously get your budget more broken than it is now and then when you get up against the wall again it will be even worse.

So the biggest reason not to do the 401-k is that it won't fix your problems. It will just give you room to breath so that you can dig deeper.

Like many of the others I would recommend against cashing out the 401k. I am assuming the $21,000 is gross so you'd be running into taxes that would lower it even more. My brother lives in D.C., so I can understand the cost of living, however there are numerous areas of fat that can be trimmed: Target shopping, Misc, Clothing, Home Supplies, Lowering the tithing some. With a little bit of cutting you can easily come up with an extra $500-1000/month. Best of luck!

As a family of 5 we spend $650 dollars a month total on dining out groceries and shopping at Target etc. Keep your tithing, Gods math is better than our own. take 6 months of a beans and rice budget, plus if you're paid biweekly you should get an extra pay period In that time frame. you will likely also get a tax refund. make a short term sacrifice and get rid of 1 of your payments. the consequences of a 401 k loan are just too big. To me your miscellaneous monthly expenditures are just too high. after 6 months reassess, do you need a break or can you knock out the next payment?

Listen to Apex. Very sage advice indeed.

I agree with some of the very good advice here.
You have to cut expenses. I would suggest clothing/groceries/shoping and eating out. Tithe for now. I can see 500-600 reduction from here alone.

Then consolidate all your debt to 0% interest rate card for a year. The goal is to pay this off qucikly and not continuously bounce it between cards. (Car/ credit card/ lending club can be rolled over to this card) Once these are paid off you have now freed up several hundred dollars of cash flow. You can then increase your tithe etc.

This will be so liberating when you knock off most of this debt.

Right off the bat I would say stop eating out and eat at home. I see you spend a lot on groceries a month. A report was done that there is a high percentage of food that is wasted and thrown out. Are you throwing away a lot of food because you don't use it before it goes bad? Also, not sure if during lunch breaks at work if you drive anywhere to eat, but if you do, consider just bringing food into work instead. You'll save money doing this, as well as wear & tear on your car saving you gas money and potential repairs.

I would definitely not touch your 401k. You can pay off this debt by making some minor tweaks, and come out stronger on the other side!

I'm assuming the car payment of $1834 is a typo. If not, you only have 3 more months!

Here are a few areas where I think you have an opportunity to scale back:

Food/Groceries/Eating out - $845. That seems very high. Stop eating out for a few months, cook in large quantities and freeze half, use coupons, etc and you should be able to skim at least $200 off that without resorting to unhealthy or processed food.

Gym/Fitness - $120. Fitness and health is important, but if you're not locked into a contract I would cut this - even if it's just until you get a basic e-fund in place.

Entertainment/Dates - $85. Go for walks, cook together, stream movies from free online sites, go to free museum days and free concerts.

Gifts - $155. This is very generous, but I bet the majority of recipients would be just as happy with a card made by your daughter (use that $40 craft budget each month) :-)

But the really glaring issue I see, as other commenters have pointed out, is that you are currently spending $875 in "misc", home supplies, personal care, and shopping at Target. Believe when I tell you that Target ALWAYS sucks me in - I highly recommend just not going. Even if you end up paying $2 more for the bottle of 409 you were going to pick up, it's worth it to not spend $20 on random stuff that caught your eye. I bet you could cut this spending by 2/3 without even noticing.

If you make these cuts, that frees up around $1000 each month and you'll barely feel it. You can totally do this without touching your 401k!

I do not think the 401k withdrawal is worth it considering the penalties, taxes, and the fact that you would still be in debt. The problem is that your expenses are out of control.
-$260 for home supplies and $440 for shopping/Target in excess of the expenses you already listed are probably mostly things you do not need.
-Check out Planet Fitness gyms in the DC area for about $10 per month per person.
-If web design/video production is your side business and not cash flow positive, then you should cut that $230.
-Clothing of $235 is too high (high quality clothing lasts longer).
-$680 of groceries for 3 people seems high.
-Tithing should be 10% of your income; you and/or your wife could also volunteer at the church if you feel bad about reducing your contribution.

Under absolutely no circumstances should you pull money from your 401k. This would be a masive mistake due to the taxes and future earnings on your money.

If I were in your shoes, my first priorty would be to pay off the credit card. See if you can get a $0 balance transfer by opening up a new card and pay it off. Never, ever ever, ever, cary a balance on it going forward.
You really need to look at your reoccuring expenses. I would suggest doing something about the car also. The payment is way out of line. Can you refinance for a longer term? Can you sell it? My though is that you probably need to get rid of it right away.

Also sorry to be blunt but your tithing is damaging you. You are doing yourself and your family financial harm until you can get your finances in order, my advice would be not to tithe.

Also, you should be able to cut out crafts, cut back on house supplies, clothing etc. You have to say no to yourelf and your family at some point. Bottom line is you don't have a handle on your spending and until you do, you're not going to be able to dig yourself out.

No, cashing out your 401k is a BAD idea.

Listen to Apex. You need to cut spending. Theres no way around that. You're living beyond your means and spending more than you make. This attitude that you can't / won't cut spending will lead you to bankruptcy.

$1834 car loan payment must be a typo. It should be $184. The sum of the total debt payments is given as 924-1024 so the car payment must be 184.

I suggest going to the library and checking out several thrift type books or start reading thrift focused blogs. Somehow you have missed learning the basics of a thrifty life style which you and your wife sorely need. It's not too late!

Good advice from Apex, as long as you "still find myself gradually seeping further and further into debt each month by a couple $100s.", little else you do will really help things.

Maybe one thing to try is a no-spend month. We are wrapping ours (we do it every January). We don't go all out at it (its really a low-spend month), but I find it helpful for many reasons.

First off, you don't even whine to yourself the regular "I don't want to live life this way" or "but this is really worth it" stuff, because this is not your new lifestyle, just a one month challenge. Its a grit your teeth and see what you can do and then its done.

Two things always amaze us when we do this, #1 - how much less we spend (its really a lot) and #2 - as my wife put it last night, "you know, its not exactly like we 'struggled', I didn't miss that much". And sure enough, we generally maintain a lower level of spending and, more importantly, appreciation (as opposed to expectation) for the extras for months after. Eventually it gets away from us, and so we do it every year.

It used to be to pay down serous debt and learn that we really do make "enough". This year, many years later, it proved that we likely have a large enough nest egg to get by on if we did for some reason decide to throw in the work towel even at our relatively young ages. That is a pretty awesome feeling, better than buying something at Target ever did for me.

I think you'll see a trend in these comments: no way to using the 401K. I haven't much to add except this: if you are dead-set against lowering the tithe, then when you make the other cuts to the budget consider those sacrifices as the bearing of your cross--because the tithing is a big reason you need to trim budget. Maybe it will make the cuts easier for you if you look at it that way...

Tough love time - what are you doing spending $85 per month on "entertainment/dates" if you're more than $600 cash-flow negative every month? "Eating out" is a luxury you also cannot afford. Also, why are you spending $125 on "phones"? It is not difficult to quit the data habit and spend something more like $10 per month per phone with prepaid from an MVNO. I don't want to hear whining about early termination fees, either. You'll earn that back in a matter of months by cutting the data.
Those three changes just saved you $350 per month, but there is so much more.

If you spend $260 on "home supplies", $235 on "clothing", another $40 each on "personal care" and "crafts" and $135 on "Misc", how the heck are you also spending $440 on "shopping/Target"? Shopping is not a sport. It's not something to be done when there's "nothing else to do". Shopping occurs when you need something. Need. Wants do not apply.

How many people are you feeding on $680/month in groceries? If it's not at least six, there should be plenty of items to cut. I assume you've already stopped buying soda and salty junk foods. If that spending is for organic meats, either cut back on consumption (bean and cheese quesadilla night once a week works great, especially with avocado and grilled vegetables) or switch back to non-organic.

You must decide if you really want to get out of debt. You are living a life full of luxurious things and complaining how much is costs. If you want to get out from under the debt, the luxuries must be removed.

We used to live in Arlington, so we can understand the high cost of living. However, pulling in $655 of new debt per month is disastrous to your family's future. You have a wife and daughter that are depending on you to make sound financial decisions. Fortunately, you make a good enough of a salary to turn this around. I would highly recommend Dave Ramsey's Financial Peace University (FPU). This program got us on a cash envelope system that works and gives us the freedom enjoy the money we work so hard for.

You need a balanced budget in order for you to have financial harmony. This is the first and most fundamental step. Give each dollar a name at the beginning of the month.

* Clothes - I'm sure that you have plenty of clothes in your closet. Nobody really cares what you wear. Dry clean your work shirt/pants and you should be fine for several months.
* College Fund - Cut this. Once the debt is contained and your budget is in the black, this can be re-started. Don't forsake your future, college is not a right.
* Shopping/Target - Cut this at least in half.
Home Supplies - Cut this at least in half.
* Gifts - Man, this is tricky. It seems like when you meet new friends or your current friends have kids there are all these new gifts to buy. Adults really shouldn't need gifts for their birthday, so maybe cut this down to gifts for nieces, nephews, and close friends.
* Interest Payments (when credit cards get out of hand) - Your credit cards *are* out of hand. Is this a nice way of saying late fee(s)?

Pay off your debts using the debt snowball. List your debts from smallest to largest balance and throw everything possible at the smallest debt while paying the minimums on the other debts. Once the first debt is retired, take all the money you were paying on that debt and work on the next debt, and so forth. This approach will give you some quick "conquests" that will keep you motivated to take down the larger debts. In your case the order would be:

1. Credit Card (double bonus since this also has the highest interest rate).
2. Car Loan
3. Lending Club
4. Student Loan

If you went full throttle, could you pay off the Credit Card in 6 months?

We live in the SF Bay Area, so I understand the highcost of living, although $1600 sound like a bargain compared to what we pay. I'm hoping the car loan ammount is a mistake, my advice is to:
-cut all non-essential spending, if it doesn't put a roof over your head or food in your belly it goes until your debt is reduced. This includes the college fund, your kid can get scholarships and work part time in school, most of us did and we turned out just fine.
-why do you need a car in a city with public transit like Washington DC, I say sell it then use the proceeds to pay off your debt. When you're out of debt, then you can think about using a car, but until then it's walk, bike or transit.
-take your kid out to museums, the park, stream a movie, there are lots of way to fill your time outside of Target, that place is such a money suck, until you're on your feet avoid it like the plague.
-if you need to keep your 20% tithing, that's your choice, but if you could drop it down to 10% until your debt is gone, I'm sure all parties involved would understand.

Personally I'd file bankruptcy before withdrawing money from a 401(k) to pay debts. You will retire one day, and saving enough for that day is a huge task. You don't want to take a step backward, and pay a big penalty to boot. However and fortunately, you're not even close to needing to file bankruptcy.

A few ideas:
- Stop funding your kid's college fund until your debts are manageable.
- End the gym membership until your debts are manageable. Ride bike, hike, jump rope, etc.
- Why does your personal budget include apparent business expenses?
- Eliminate or scale back eating out, entertainment/dates, gifts, clothing, crafts, "Shopping/Target", Misc. until--again--your debts are manageable.

My sense is there is plenty of room to cut back on your spending and close the budget gap to meet your debt obligations. You are contemplating making perhaps the most common mistake made by consumers (and government): Cutting your future standard of living to consume more now than you can afford. Don't do it!

You say that you have slashed all expenses possible, but after looking at your budget, it seems like you are looking for some kind of secret magic money tree. There is nothing magic (or pain free) about reducing debt.

Budget after bare minimum cuts:

Rent & Utilities - $1,655
Auto Insurance - $61
Internet - $38
Phones - $40 or less (go to prepaid)
Debt Repayment - $824
Interest Payments (when credit cards get out of hand) - $0 (you should NOT be using credit cards right now)
Donations to Church - $620 or less (10%, should you feel the need to live in the Old Testament.)
Daughter's College fund - $0 (Worry about that later. You have bigger problems right now.)
Gym & Fitness (2 adults+childcare+random races) - $0 (Take a walk, run, do at home exercises using your body weight).

Food - Groceries - $400 (What are you eating?)
Food - Eating Out - $100 (I wouldn't cut this to $0. Things come up and its important to splurge a bit to not get discouraged)
Gas - $180
Car (oil changes/repairs) - $144
Business (web design, video production - $0 (cut. If you are not turning a profit, suspend this for now)
Entertainment/Dates - $85 (personally I would keep this to keep my sanity)
Gifts - $25 (A gift here and there, but don't go overboard)
Clothing - $0 (I'm sure you have plenty for at least the next 12 months)
Travel/Transportation - $74
Parking/Tickets/Tolls - $54
Home Supplies - $50 (surely you don't need more than this for cleaning/paper products)
Shopping/Target - $50 (What are you buying that is not covered by home supplies, groceries, or Misc?)
Personal Care - $40
Medical - $5
Crafts - $40
Postage - $25
Misc - $50 (for anything that pops up during the month)

That right there is a savings of $2530 per month, with the potential for MUCH more.

With some squeezing, there is NO reason that you should not be able to pay off ALL of your debt in 12-14 months.

To all of you who don't live in the DC area, groceries are super expensive there. My dad is a widower (who can cook!) and he spends over $300/month in groceries himself, even after being invited to eat with friends and relatives 1-2 meals per week. I wouldn't call his purchases extravagant, and we lament how much more expensive it is every time we go to the grocery store. (We live in NC).

I agree that there are some areas that they can cut, but it's hard to judge what is reasonable if you don't live in the same area.

@first step,

Your example does not help. Your dad spends $300 a month on groceries. The reader is 2 adults and one small child (still at home since the mom watches her), so the math still doesn't add up.

A brief look at prices for groceries at various Sam's clubs located just outside of D.C. show prices that are largely on-par or identical with prices where I live here in the Midwest. This is even before shopping at stores like Aldi to save huge on shelf stable items.

Stop making excuses for this reader. It's obvious that he hasn't even tried to save money yet.

Cashing out your 401(k) is not a good idea. You MIGHT consider a 401(k) loan, though. Roll over the 401(k) balance to your new employer. If your new plan allows it, you can borrow up to half of your balance at about 4.25%, and you'll pay the interest to yourself.

Just make sure you use it to reduce your debt load, and don't go racking up more.

Don't take my above comment as an excuse not to cut down on spending, though. The other commenters are correct that you need to get your spending under control as well.

I have no money in my budget to give to charity so I give time, labour and blood. Perhaps you could reduce your money to to the church and help them to keep their expenses down by providing maintenance or grounds keeping help.

Your wife could increase her home day care income and you should consider all the cuts the other commentors have recommended.

There is a lot of room in the budgets for cuts and increases in income. A few lean years now will reward you with an easier future.

The eating out and grocery budgets stick out to me. Could you spare $15/month or so for a Sunday paper that has coupon inserts? Sign up for Groupon? See what you actually have in your cabinets and fridge and eat from that for some time? I'd also recommend cutting down on the clothing budget, and maybe finding some cheaper dates? $230/mo seems outrageous for clothes, IMHO. It's not clear what "shopping/target" is, though I'm sure I can guess, but it should be better controlled. Also, could your wife drive you to a Metro station to avoid the parking fees?

as i understand damage to 401k cannot be repaired.
i think the clues are staring right in the face in the 'variable' category. there is a 3000$ leverage to use...

I agree with the comment left by Apex. You need to take drastic steps to cut your expenses. Start from zero spending and work up from there. Let me share a story I'm going through that may connect with your situation.

Over the past 7 years, I have been gaining a little bit of weight each year. I'm 6'2 and some 10 years ago when I was doing a ton of hiking and running I was at 175'... my weight has gone up to 205' in the beginning of January. I am working out 6 days a week (running 2 days, running stairs one day, biking outside 1 day, weights and cardio 2 days) for years now but my weight kept going up. Approaching 40 doesn't help.

So this year I made a few resolutions. I told myself I'd try fasting all day for 10 days and build up my running mileage.

In early January I started building up my runs to about 7 miles a run until my ankle started giving me grief... felt like a stress fracture so I decided to switch to another exercise.

On the fasting side, I did my first one last week. Woke up and no food the entire day, just water, and then I ended up doing a 1 hour workout before having a most delicious dinner. I did another one yesterday with similar results. I am slowly seeing a change and am not going to stop until I get back to 175 or 180' and maintain this.

The interesting thing is before fasting I found myself always being hungry even after an hour or two following a big meal. Perhaps my stomach was stretching and I was used to eating more. After fasting it's the opposite feeling- I realize I don't need to eat much and feel full much more easily. This is the perfect analogy to controlling spending and having a high savings rate.

So I'd say start by going on a spending fast- spend nothing besides your fixed commitments for as long as you can, then gradually realize how little you need to spend to get by.

Good luck and thanks for reading my long-winded passage.


"So the biggest reason not to do the 401-k is that it won't fix your problems. It will just give you room to breath so that you can dig deeper."

Listen to Apex. I raided my 401K when I lost my job and you can never get that back.

I will never be able gto retire.

You and many others like you need to learn four simple words, then memorize them until they are etched into your memory, and then keep using them, like my wife and I did eons ago when we were young kids back in England and I was delivering a paper route every morning.

Those words are, "WE CAN'T AFFORD IT."

If you stay on your present course things are only going to get worse and worse. I'd start with the 1000 bucks you are giving the church every month - that's not tithing - that's insane.

Do not take from your 401K. Balance your budget. Cut your shopping and food expenses. Keep the business expenses, you must keep building that. I would cut the donations down (at least for now), I really like the idea of donating your time instead. Everyone gives in different ways. Then pay off the highest interest debt first and work your way down. You will be in great shape in a year.

If the tithe was the only thing breaking your budget, I'd recommend that you look up 1 Timothy 5:8 (assuming you are a Christian) and really think about what it means for your life and whether you should cut the tithe. It's not just about providing for your family in the short term, but providing for them long-term with wisdom and financial stability. Actually, you should look up that verse anyway and think about it even if you aren't thinking of reducing the tithe.

As things stand, if the tithe is really important you can keep it as-is because you have LOTS of other areas that are ripe for savings in your monthly expenses.

It will not be easy, but if it's important to you, YOU CAN DO IT! You need to make some hard choices now or you will be making life worse in the long run. DO NOT take money out of your 401k.

Your tithe is excessive. If you are a Christian you should be giving 10% of your NET pay and only give extra IF you can afford it. That would free up nearly $400 per month allowing you to clean up your mess. Remember that the bible says that a man who doesn't take care of his own household is worse than a non-believer.

I would avoid a withdrawal from your 401k and leave that as a last result. The tax implications are severe and you would be robbing your future. As far as the $1000 per month in tithing being inviolate. I admire your resolve and conviction but if you are in financial duress, you should reconsider the amount and potentially lower it some.
I definitely see room for shaving some items in your budget. $155 a month in gifts can probably be trimmed down some, I'm not sure what the nature of the gifts are but it seems pretty high. $144 a month for car maintenance seems somewhat high as well, is that only for one vehicle?
There are two line items in your variable expense category that bother me a little bit (actually a lot). You have Clothing for $235 and Shopping/Target for $440. That is a total of $665 per month between the two of them which is $10 more than your shortfall! Do you really need $235 a month in clothing for a family of three? Isn't $440 dollars a month a bit excessive for general shopping?
I don't mean to come across as overly critical but I don't think you have a budgeting problem but instead have a spending problem. My suggestion would be to look over your spending habits in the clothing and shopping categories with a fine tooth comb. I wouldn't be surprised if you could easily shave $300 a month out of that alone.

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