Bills VS car with 457

DW0378

Here is my story I got in way over my head after my last child my wife came off payroll way earlier than expected and I lived on CC until I could arrange a second job.

I racked up about 35000 in debt in a real short time losing a second income really hurts.

So here is my question MY wife has finally left her job to be a stay home mom and I have picked up a second job to make up some of the income. So she has a 457 that's getting cashed out valued at 27,000 and I am looking for advice on what to do with it. I know I can roll it over or should I pay off my existing debt currently not paid for about 3 years or buy my my wife and myself car's?

A little back history My car had 350,00 miles on it and is on it's last leg and she just totaled hers public transportation is not an option as it is almost non existent here. I work 2 jobs and travel about 100 miles a day round trip so buying used and cheap get's expensive in the repair department.

My thought is 2 civics nothing special probably about 22,000 each 10,000 down on each and finance the rest. this will leave me about 7000 to negotiate with my current creditors.

I am already approved for the loans at a high but not too high considering 4.5 interest rate. I would like a lower rate but you have to pay the piper for your mistakes.

I would appreciate any advice.

mgdavid

what's a 457? Are you in USA? If you are I doubt this UK-centric forum will be able to help you.

jamesd

You have a clear job need to have a reliable car. She doesn't. So one new cheap car is reasonable so you can be sure of making the money you're both relying on. Best for now for her to use your old car because shopping can be done with yours when you're at home if necessary.

For the rest, getting rid of the debt is a good move. That'll cut the cost or potential hassle of old problems and free up more income to use to live on and once it's gone get her a new car. Or you and pass on yours to her so you keep the highest available reliability. Two cars of different ages should cut the chance of having to replace both at the same time. Finance on the new car makes sense. You'll probably be able to get the second car before school run time starts for her.

A major catch is that most of the money initially is coming from her 457 and it's being used for a new car for you but not her, though at least the debts were accumulated for joint needs, I assume, so she can feel better about that.

If you don't mind debts showing as partially settled on your credit reports you could tell the creditors that a relative is willing to consider a partial payment to settle the debt. Offer each 25% of the current balance and see if any take you up on the offer or make a counter-offer. I'm assuming that these are debts that you have not been paying, so you've defaulted? If you haven't defaulted, ignore this paragraph and move on to the next.

If you haven't defaulted, instead of doing the settlement offers you should work out which debt has the highest interest rate and clear all of that one first, then move on to the next until you get rid of them all. Keep on making minimum payments on them all. Assuming that you're paying interest, check out the deals for balance transfer credit cards. Those can be way cheaper than normal interest rates for the duration of the card deal.

The stay at home mom situation is likely to be around for a while so good financial planning for you now is to get rid of the debts so that you can have the highest sustainable amount of money to spend and later invest. Debt interest hurts big time in this situation.

When you get a chance, read the book The Millionaire Next Door. It explains how even those on ordinary incomes can do really well financially. I've linked to the wiki page but the book is better, don't just read the page, get the book, even if it's from a download site.

For others, yes, a 457 is a US retirement plan. the rest of the question is pretty much the same as the UK case.