General loan against TSP

[luv2surf]

I was wondering what you think about doing a general loan against my TSP to payoff some of my high interest credit cards?? These interesting rates are about 12-24 percent and feel it is not too bad a decision to get this loan. I don't want another HELOC against my house given the market. Plus, the interest on this loan is only about 2.3 percent that I pay back to myself. Thanks for any and all anyone's advice.

[Rod]

I was wondering what you think about doing a general loan against my TSP to payoff some of my high interest credit cards?? These interesting rates are about 12-24 percent and feel it is not too bad a decision to get this loan. I don't want another HELOC against my house given the market. Plus, the interest on this loan is only about 2.3 percent that I pay back to myself. Thanks for any and all anyone's advice.

Well, before you were to tap your TSP for a loan I would first take a hard look at your living expenses/budget.

- Are you on a budget?

By that, I mean do you actually have a written-out budget, detailing each and every expense that you follow month-to-month?

If you do not, I would advise against tapping your TSP and advise that you get on a budget so you can free up some money to pay off those credit cards.

Begin with the credit card that has the highest interest rate.

If you are interested in a user friendly budget sheet, just shoot me a PM and I will be hapy to send you the one I use month-to-month.

Final note- a budget is not for those who are "broke". Everyone should be on a budget regardless of their financial position. It's important to always know exactly where your money goes... cent-for-cent.

-Rod

[Frixxxx]

:cool:Loans are very touchy subjects on this board. You are right, over the long haul you may save yourself some interest and stabilize your credit. But that money is not working for you.

I thought there was a sticky on the loan discussion but I can't find it right now.

Here's my two cents:

The market is not making alot of money right now. So, if you take out a loan and pay it back quickly, you may not lose to much on the retirement earnings.

If the market swings big to the green side, that money isn't working for you.:cool:

Whatever you do, YOU have to feel comfortable that it will give you peace of mind now so that you will have peace of mind later.

Of course, ROD types faster than me!!!!!

[KevinD]

I know, I know...Dave Ramsey. :rolleyes:

Heres a simple "zero" budget form from Dave Ramsey that you can look over.

https://www.mytotalmoneymakeover.com/media/pdf/fpuonline/2008/monthly_cash_flow_plan.pdf


Debt Snowball

http://www.daveramsey.com/etc/cms/index.cfm?intContentID=4055

Good Luck! :)

[Frixxxx]

https://www.mytotalmoneymakeover.com/media/pdf/fpuonline/2008/monthly_cash_flow_plan.pdf

Um Kevin, I went through this budget and I'm a little confused.

Do I put my cocaine purchases on the entertainment line, or

the *blow money line????:laugh::laugh:

Disclaimer: In no way were any coca plants grown, harvested, or processed for this bad joke!!!!!!

[luv2surf]

Well, I recently have been looking at my budget and unfortunately these credit cards are talking quite a bit of disposable income away so would be nice to pay some of them off and maybe even cancel them. The budget program was using is a simple one from Microsoft Works where I put in all my expenses. Some questions I have are: Am I taxed on the income I get? For example, will I get taxed on getting this loan (say $15,000) for 2009 as income? And 2), Should I back down my contributions from 8% down to 5% since I will need the money to pay back the loan?
Thanks....:)

[squalebear]

Um Kevin, I went through this budget and I'm a little confused.

Do I put my cocaine purchases on the entertainment line, or

the *blow money line????:laugh::laugh:

Disclaimer: In no way were any coca plants grown, harvested, or processed for this bad joke!!!!!!

The original Coca Cola Receipe, aye ! :nuts:

[KevinD]

Um Kevin, I went through this budget and I'm a little confused.

Do I put my cocaine purchases on the entertainment line, or

the *blow money line????:laugh::laugh:

Disclaimer: In no way were any coca plants grown, harvested, or processed for this bad joke!!!!!!

I know that was a joke because nobody snorts cocaine anymore. They smoke it. :laugh:

[KevinD]

For example, will I get taxed on getting this loan (say $15,000) for 2009 as income? And 2), Should I back down my contributions from 8% down to 5% since I will need the money to pay back the loan?
Thanks....:)

1 - Only if you don't pay the loan back. Then it becomes a distribution. I don't think it's an option to not pay it back...

2 - I have. I went from 15% contribution down to 5% and put every last dime I have toward debt. My truck will be paid off next month freeing up $330/month and by the end of the year I should owe for nothing but my house.

[squalebear]

Well, I recently have been looking at my budget and unfortunately these credit cards are talking quite a bit of disposable income away so would be nice to pay some of them off and maybe even cancel them. The budget program was using is a simple one from Microsoft Works where I put in all my expenses. Some questions I have are: Am I taxed on the income I get? For example, will I get taxed on getting this loan (say $15,000) for 2009 as income? And 2), Should I back down my contributions from 8% down to 5% since I will need the money to pay back the loan? Thanks....:)

With Interest Rates down, Could'nt you refi to get a lower rate and pull out
just enough cash to payoff the cards. You could also make Principle Only
payments with the difference between your old payment and new, just
to get your cost of refi'ing (included in the mort) paid down quicker.

The end result would be a easier Mortgage Payment, Credit Card Debt Free
and a higher FICO score (initially). This is something I did in 1997 when
I was facing $35k of unexpected (long story) C.C. Debt. It certainly beats
touching your retirement account, as its a real no-no. ;)

[squalebear]

I was wondering what you think about doing a general loan against my TSP to payoff some of my high interest credit cards?? These interesting rates are about 12-24 percent and feel it is not too bad a decision to get this loan. I don't want another HELOC against my house given the market. Plus, the interest on this loan is only about 2.3 percent that I pay back to myself. Thanks for any and all anyone's advice.

Again, I still think a Refi could possibly help you more then a HELOC. It
all depends on your current interest rate on your current mortgage. With
the average being around 4.50% - 5.50% this would be my first consideration
as a loan through your TSP costs you potential compounded gains on that
money as well. (its not just the 2.3% you pay yourself). ;)

If the Mortgage idea isn't possible and a Home Equity Loan or HELOC is not
a cost effecient alternative, then the TSP Loan might be your only alternative.
Remember, the TSP Loan has no pre-paymant penalty, should you find some
extra bucks at tax time.

[luv2surf]

Regarding this loan, I could still refinance my house...but not right now since my credit card debit is high. (Banks may not want to mess with a refinance with me since I have quite a bit of debt). If I find that I can eventually do a REFI after paying off some debt, then I can possibly pull money out from the REFI and pay back some or all of my general loan against the TSP. That way, I can hope to re-coup some of the loss I might incur. Complex situation and not clear cut as I see it. :worried:

[Rod]

I know, I know...Dave Ramsey. :rolleyes:

Heres a simple "zero" budget form from Dave Ramsey that you can look over.

https://www.mytotalmoneymakeover.com/media/pdf/fpuonline/2008/monthly_cash_flow_plan.pdf


Debt Snowball

http://www.daveramsey.com/etc/cms/index.cfm?intContentID=4055

Good Luck! :)

Ummm, NO. My form is not from Dave Ramsey. Nice try, though.

[Rod]

BTW, here's the automated budget sheet I use. I don't use all the categories. But, you can simply tailor this sheet IAW your needs. The point is to account for ALL spending.

Good luck!

[wv-girl]

Don't take out secured extra debt on your house to pay off unsecured cc debt. This is not normally a good practice,(altho, I too have been guilty of that in the past when I was young and didn't know any better-- live and learn). Sounds like you have a good plan with a tsp loan.

Good luck.

[KevinD]

Ummm, NO. My form is not from Dave Ramsey. Nice try, though.

My post wasn't a reply to your post. Not sure what made you think it was. :confused:

Now THIS post...you know...the one with a quote from you in it? This IS a reply to a post you made. :D

[JTH]

I took out a TSP General loan to pay down my credit cards. Here's the way I see it. I still had to re-evaluate my budget to prevent myself from getting back in dept in the first place.

TSP debt does have it's advantages. I'm currently down almost 10% this year, but half the money is tied up in the loan so it's not all that bad. All dept is evil but if you're going to owe someone it minus will be yourself.

Credit card dept is EVIL and those bastards can change your rates at any given time with little to no notification.

IMHO I'd only go for it if you are able to STRICTLY ADHERE to a budget that will prevent you from getting back in dept.

Best of luck... JTH

[KevinD]

IMHO I'd only go for it if you are able to STRICTLY ADHERE to a budget that will prevent you from getting back in dept.

AMEN! Preach it brother! :D

[KevinD]

Get your 5% match but contribute no more to TSP untill you're out of debt.

Cut spending to the bone. Ramen noodles. Mac-N-Cheese. Don't see the inside of a restaurant unless you work there. Deliver pizzas. Have a yard sale. Sell stuff. Make the dog, cat and kids nervous because they think they're going to be next. Make your friends think you've lost your mind. If my truck wasn't so close to being paid off I'd sell it and buy a beater. Do you have a car payment?

What ever budgeting method you use...make sure you know where EVERY penny goes and why. It's the only way.

My vote is for you to NOT make a TSP loan. Grow a set and pay for the crap you've already bought.




























Sorry...didn't mean to go off. :o :D

[luv2surf]

Thanks to all the replies. I agree about the strict budget. Without the budget, spending will get out of hand and it did for fairly long time. I don't actually know where all that money has gone to. I am a family man and the wife does the shopping so it is my fault for not overseeing and doing a little bit of the shopping myself.

I have already put the request in for the loan. But, I will back down my contribution to 5% like you said.
thanks again :cheesy:

[ChemEng]

Get your 5% match but contribute no more to TSP untill you're out of debt.

Cut spending to the bone. Ramen noodles. Mac-N-Cheese. Don't see the inside of a restaurant unless you work there. Deliver pizzas. Have a yard sale. Sell stuff. Make the dog, cat and kids nervous because they think they're going to be next. Make your friends think you've lost your mind. If my truck wasn't so close to being paid off I'd sell it and buy a beater. Do you have a car payment?

What ever budgeting method you use...make sure you know where EVERY penny goes and why. It's the only way.

My vote is for you to NOT make a TSP loan. Grow a set and pay for the crap you've already bought.
You forgot to mention gazelles. Dave Ramsey loves them for some reason. Everything is "like a gazelle this" or "with a gazelle-like intensity that".:D

[McDuck]

You forgot to mention gazelles. Dave Ramsey loves them for some reason.

"Give no sleep to your eyes, nor slumber to your eyelids. Deliver yourself like a gazelle from the hand of the hunter, and like a bird from the hand of the fowler." Proverbs 6:4-5

[McDuck]

Ummm, NO. My form is not from Dave Ramsey. Nice try, though.

Budgeting Form (http://asburyumc.ws/ministries/pdf/fpu/Budgeting%20Forms.xls)

I believe these are.

[KevinD]

Say what you want...it's working for me. :)

[alevin]

Say what you want...it's working for me. :)

It worked for me too, the past several years, paid off 3-year loan on vehicle in 1 year by dropping back to 5% tsp, then paid off the mortgage over the next few years-didn't know Dave Ramsey's name at the time, but I went to Debt Free and Prosperous Living Class (3-hours, 1 night-best 3 hours I ever spent for $25) and "bought the T-shirt". That other 5% is now going into saving for next vehicle and new roof coming up next 3 years so I can stay out of debt. :cool:

[KevinD]

Where ever the message comes from it...needs to be heard.

I don't know if this is another depression or just a real bad recession but I think it will have the same effect on consumers. The majority won't go out and spend on credit ever again. Some will but I don't believe that we will see an economy where people live with debt for a long time.

False prosperity equals a false economy and IMO no amount of government stimulus is going to bring it back.

Good luck luv2surf.

[ChemEng]

I will never understand the preoccupation with being debt free instead of having a positive net worth. Any day of the week and twice on Sundays, I would glady be $100,000 in debt with $101,000 in the bank than only have $1,000 in the bank just for the privledge of being debt free.

The part missed by the advocates of being debt free is that there is a cost associated with that for those already with debt. Its called the opportunity cost of capital of which time is a HUGE component. By strictly having the goal of being debt free, you are paying a time cost that can not ever be regained.

[wv-girl]

I will never understand the preoccupation with being debt free instead of having a positive net worth. Any day of the week and twice on Sundays, I would glady be $100,000 in debt with $101,000 in the bank than only have $1,000 in the bank just for the privledge of being debt free.

The part missed by the advocates of being debt free is that there is a cost associated with that for those already with debt. Its called the opportunity cost of capital of which time is a HUGE component. By strictly having the goal of being debt free, you are paying a time cost that can not ever be regained.
Which is exactly why you should start young. And the cost of being debt free is freedom. Doesn't it bother you to pay for the priviledge of owing money to someone else? And letting that someone else dictate how to spend your hard earned money?

[alevin]

I will never understand the preoccupation with being debt free instead of having a positive net worth. Any day of the week and twice on Sundays, I would glady be $100,000 in debt with $101,000 in the bank than only have $1,000 in the bank just for the privledge of being debt free.

The part missed by the advocates of being debt free is that there is a cost associated with that for those already with debt. Its called the opportunity cost of capital of which time is a HUGE component. By strictly having the goal of being debt free, you are paying a time cost that can not ever be regained.

ChemEng, I'm a scientist like you. What can I say, the longterm math demonstrated in the class worked for me. I was sold based on math and facts. There is a time cost to being in debt too. Compounded interest. I now have greater net worth than I would have had otherwise if hadn't paid off the mortgage early-I now have full equity in my home and a truck that isn't costing me more than it is worth.

My good work buddy manages a family million-dollar trust and thought I was making a big mistake at first paying off my mortgage early. Four years later, listening to Dave Ramsey on the radion commuting to work 2 hours a day, he changed his mind. He just retired and made the passing remark that he was glad he managed to pay off his house early last year. His next career he's thinking of becoming a financial advisor. People around us respect his financial skills and knowledge.

I neither can/nor want to convince anyone what is right or wrong for them, I only encourage people to consider taking a class similar to what I did (very very small life investment, for potentially huge payoff). Find out what the logic is that convinced people like me and my friend. Expose yourself to heretical ideas and the math behind them.

[ChemEng]

Which is exactly why you should start young. And the cost of being debt free is freedom.
I would percieve the situation having "$101,000 in the bank and owing $100,000" to have much more freedom than the situation of "debt free with $1,000 in the bank."
Doesn't it bother you to pay for the priviledge of owing money to someone else? And letting that someone else dictate how to spend your hard earned money?
Not at all. First, I entered all my debt agreements with sound mind. No one has dictated what I do with my money besides me. If you can't say the same, then you should hire a lawyer and go to court immediately. Second, debt doesn't necessarily cost money to use. For instance, my consumer credit card is paid in full monthly and *makes* me money through bonuses simply by leveraging revolving monthly debt. Why would I ever get rid of that for the sole benefit of saying that "Im debt free"?

[ChemEng]

First of all, I actually have listened to Dave Ramsey for many, many months while working on my MBA. So I am very familiar with his concepts and I am also very familiar with the math behind them.

What can I say, the longterm math demonstrated in the class worked for me.
Then I am afraid you may have been misled. There are very clear situations where you shouldnt repay debt early. For instance, any debt at 0% where you have access to investments that yield 5%. In this case, paying off the 0% actually costs you money.
I was sold based on math and facts. There is a time cost to being in debt too. Compounded interest.
Again, Im afraid you were misled. Credit card interest is simple interest and isn't compounded unless you don't pay at least the monthly minimums. Even paying the minimums cover all the interest for the given month with no compounding. (Im not recommending only paying the minimums, just making a point here.)
I now have greater net worth than I would have had otherwise if hadn't paid off the mortgage early-I now have full equity in my home and a truck that isn't costing me more than it is worth.
If you take into account the amount of money you would have had if you took all the money you used to get out of debt and had invested it instead, then the numbers should be closer than you are leading here. If you are only looking at your net worth without considering that money, then you aren't comparing apples to apples.
I neither can/nor want to convince anyone what is right or wrong for them, I only encourage people to consider taking a class similar to what I did (very very small life investment, for potentially huge payoff). Find out what the logic is that convinced people like me and my friend. Expose yourself to heretical ideas and the math behind them.
I have taken a great many Finance course already and understand the mechanics behind them. The big difference is that my classes weren't trying to recommend any product to me (outside a degree). I would offer the same challenge to you--a few graduate level finance classes to at least understand academically why the debt free option may not be prudent.

[wv-girl]

I would percieve the situation having "$101,000 in the bank and owing $100,000" to have much more freedom than the situation of "debt free with $1,000 in the bank."
Been there --done both. But you fail to mention that being debt free allows more money to save towards that 100,000.


Not at all. First, I entered all my debt agreements with sound mind. No one has dictated what I do with my money besides me. If you can't say the same, then you should hire a lawyer and go to court immediately.
So did I but I can't say I liked it.

Second, debt doesn't necessarily cost money to use. For instance, my consumer credit card is paid in full monthly and *makes* me money through bonuses simply by leveraging revolving monthly debt. Why would I ever get rid of that for the sole benefit of saying that "Im debt free"?
True, that is why I took advantage of the zero percent to help me get out of debt. I did use it for my gain/purposes.
I would say that age has a good deal to do with perspective on what it is you wish to accomplish and in what time frame. For me, being debt free is great, but am guilty of using the system to get there. Of course, I am closer to my 'golden years' than you are. There in lies the difference. And, btw, I only heard of Dave Ramsey last year. Never knew he existed and never took any courses on the subject of reducing debt.:)

[alevin]

Was not my intent to start a war here. I do beg pardon for imprecise terminology. What I should have said was "cumulative" interest paid on low-interest 3-year car loan and 30-year fixed rate mortgage @ >6.6% over 30 years ( was only on about year 2 of the mortgage when I took the class). The class I took cost me $25 and 3 hours, futher purchases were optional and not needed, math info from the 3hours and class material provided was sufficient to rearrange my belief system. I was sceptical when I went in, since I didn't owe any cc debt nor did I ever carry a balance thanks to good parental training before college. It took most of the class to present me with enough math to convince me of value of prepaying mortgage, but I now have that much more free cash in my pocket to put into Roths I could not previously fund with normal cash flow.

The math in the class ran the calculations out for decades and convinced me I'd have far more retirement savings at retirement by practicing the new ideas than continuing with paying off the car and home loans at same time as trying to save for retirement. All the $ previously going into mortgage payments (principal and interest) are now going into savings of one form or another-mostly retirement investments (perfect time for that, eh?). Paying off the mortgage earned me taxfree 6.6% annually (the interest I didn't spend over the next 28 years). Using 0% card is about what I do now, since I pay off cc's end of the month anyway.

Whether or not I've been misled, I have no regrets. If my position were to get downsized at this point, I have more life options than I would have otherwise. That did become an issue right after I started the paydown on principal: limited affordable relocation options related to potential job downsizing due to the housing bubble that occurred everywhere I wasn't, when I wasn't looking. Being debt-free, I could take a paycut now if I had to, to keep working here or somewhere else, and still be able to save for retirement. That wouldn't have been an option 3 years ago.

[momacs]

I've been paying ahead on my mortgage, trying to get it paid off as soon as possible.

Alot of people say you shouldn't because you can deduct the interest on your taxes. Even if you can, you have to figure you have actually paid all that interest and it's not a credit on your taxes, just a deduction.

I hate paying interest. I remember back in the early 80's. paying 21% interest on the loan to start a business. And 18% on a house loan. It totally freaks me out when you figure up 360 months of payments on the 30 year mortgage x how much your payment is. It more than doubles the actual cost of the house.

In my case, my mortgage interest doesn't amount to enough to qualify me to itemize deductions anyway.

About the credit cards, I use them for the points, cash back etc. And use the 0% balance transfers to sock away in high interest checking accounts. Of course that's all coming to an end now with the credit crisis and the credit card companies clamping down.

[wv-girl]

Was not my intent to start a war here.
No war here, alevin, at least on my part. Just a friendly discussion that have different preserved notions. I do believe that each circumstance is different, and their are many ways to achieve whatever one sets out to accomplish. Sounds like you found peace of mind(so did I) by being debt free. There is no price tag on that.:)

[budnipper1]

No war here, alevin, at least on my part. Just a friendly discussion that have different preserved notions. I do believe that each circumstance is different, and their are many ways to achieve whatever one sets out to accomplish. Sounds like you found peace of mind(so did I) by being debt free. There is no price tag on that.:)
My unsolicited 2 cents worth:
Anybody who believes it makes more financial sense to remain in debt than to become debt-free has taken at least one too many "finance classes", in my opinion. There is a huge difference between simply paying off credit card balances monthly and avoiding interest charges, compared to paying off a mortgage or an auto loan on which interest is owed unavoidably. Dave Ramsey preached to his listeners about paying off their credit cards because they were not even keeping up with the minimum payments and were drowning in interest charges.

I listened to Ramsey some years ago, but eventually became bored with hearing his same advice repeated over and over again. The majority of his call-in listeners were desperately in need of financial guidance because they did not have a clue about managing their money. They needed to faithfully follow his advice, step by step. Personally, I learned his principles the hard way years ago. My dad was my 'Dave Ramsey' and I should have known better, sooner. Eventually, I saw the light and my life got better. I am not by any stretch close to being rich, but I have more than I need, I'm retired with a "positive net worth",;) AND I am debt-free. My only regret is that I didn't get smart sooner.

[Rod]

My post wasn't a reply to your post. Not sure what made you think it was. :confused:



My bad... sorry.:)

Now, I do listen to DR quite regularly. I've disagreed with him on a couple occasions:

Occasion 1: When he actually told a listener, "You ought to be shot!". This listener was a mother who was financially irresponsible with her son. That comment was irresponsible of him to make. He did admit after a commercial break that he may have been a "bit harsh" on her. Perhaps some of you caught that one. It was recent.

Occasion 2 (and on occasion after that): He advocates tithing- when the conversation is prompted by a listener. In other words, if a listener is struggling financially, and they bring up the fact that they tithe, DR does not recommend ceasing from tithing in order to speed their way to becoming debt-free. But, he will recommend eating "beans and rice" instead.:rolleyes:

It is a fact DR believes tithing is a continued old testament tradition that is to be honored and observed. He misunderstands OT tithing vs. NT giving in the framework of law and grace, IMHO. And no, I do not and will not debate theology on TSPTalk.

Everyone has their shortcomings. So, I've overlooked these in order to gain some financial wisdom... in which DR has some to offer.

Peace

[CountryBoy]

Age does play into how you may feel about debt, but from any POV, debt free beats debt anytime, at any age. As the younger generation, you almost can't avoid some debt such as housing, but regardless how you try to spin it, I think most folks would want to be debt free.

CB

[ChemEng]

There are definitely some perception differences here. Age may be a factor, but I'm sure there are others that haven't been communicated in the thread.

The bottom line is that I view of debt as a tool. And just like every other tool there are situations that receive positive results from the right application of that tool. Similarly, there are situations where applying that same tool could worsen the situation. But to arbitrarily say that a hammer is bad because it can't dig a hole wel or that we should stop using miter saws because they can't screw down a bolt just doesn't make much sense.

If the issue is a personal one when you try to use a hammer to dig a hole, then realize that the problem isn't with the hammer--it's with your choice of how you use that hammer. That's a very important point of clarification here.

[Rod]

Debt Alert

Haven't you heard??? Uncle Sam's intent is to keep "The People" down, out, and dependent!:nuts:

This is interesting... if you have the patience and the time-

http://www.deprogram.us/deprogram.php

I found it quite entertaining.:cool:

It just may cause you to think.;)

[KevinD]

Theres another radio talk show that I listen to, John Adams. He's an Atlanta real estate guy. He says that debt/mortgages/lending is like electricity. If you stick your finger in the socket you get a jolt. But if you use it right it is a tool to be used to build wealth. He mostly talks about single family rental houses.

The commercial real estate market is a situation where property owners are playing with electricity. In the past a property owner wouldn't pay out right for a strip mall or an apartment complex. Who in their right mind would pay cash for a commercial property? In this situation, if I had a million dollars I wouldn't pay out right for a commercial property either. From what I hear the commercial real estate financing is about to hit the fan this year.

I do see where letting a credit card company float your expenses and give you cash back and you pay it off every month that you can make a buck or two but this false economy we have seen has ground to a stop and people like me and alevin and luv2surf need to pay off accumulated debt and learn to live within our means.

Good conversation!

[Rod]

I do see where letting a credit card company float your expenses and give you cash back and you pay it off every month that you can make a buck or two

This is exactly what we do. We have a no-fee CASH rewards card from Pentagon Federal Credit Union which pays the following rewards:

- 5% cash back on gas paid at the pump
- 2% cash back on supermarket purchases
- 1.25% cash back from all other purchases

Since we NEVER EVER carry-over a balance, we charge every living expense we can (including utilities) in order to take full advantage of the rewards.

We average $60.00 cash reward each month. I've seen it as high as $75.00 when gas prices were higher.

Can't beat FREE money!:cool:

https://www.penfed.org/productsAndRates/creditCards/RewardCards.asp

[Rustynutt]

Thanks to all the replies. I agree about the strict budget. Without the budget, spending will get out of hand and it did for fairly long time. I don't actually know where all that money has gone to. I am a family man and the wife does the shopping so it is my fault for not overseeing and doing a little bit of the shopping myself.

I have already put the request in for the loan. But, I will back down my contribution to 5% like you said.
thanks again :cheesy:

Saw your questions on another site a couple of weeks ago, there you provided a bit more information about your situation. Actually, a lot more information :worried:

All of this aside, and that now you have applied for the TSP loan, hopefully you have taken the time to write your budget down on a piece of paper with what comes in and what goes out. The current state of the economy will not only dictate your family living on a budget, it will absolutely require it. You and your wife need to work together on it. You need to balance and review it before each payday comes.

Don't recall what you said was available to you, but to really make pulling funds from your TSP work, you'll need enough to pay off ALL of your revolving credit where you are only managing to keep the account out of default. If you don't have enough to say pay off 3 accounts with 10k in debt, pay one off, bring the second down as far as possible leaving enough to drop the third noticeably down. Don't use the funds for anything frivolous, it will be tempting to skim a couple of hundred off the amount for enjoyment. Yea, the math for the interest won't work out on this, but in the event you can't pay all the accounts off, it will bring the minimum payment down on two to help meet your budget needs. Your family still needs to eat, but that extra six bucks for texting isn't a necessity. Get rid of it. Get on a level payment plan with your utility companies, sure you'll be paying a bit more to them during the lows of the season, but as you haven't been able to budget in the past, would be a good buffer against an unexpected high bill. Pay on time, late fees suck your efforts down the drain, don't over draw on accounts and create more cost.
Calculate and claim enough exemptions so as to not be over paying income tax throughout the year.
Auto insurance, pay an additional amount each month so you'll have a couple of hundred extra during November and December. Plan for registration fees, tires and such. Set aside each month to cover for those.
Recycle. Don't laugh, once you start looking what goes into the trash can, a months separation of recyclable goods can bring in a couple of gallons of gas. Eat for lunch what you had for dinner the night before. Shop only for items on sale at the market, use coupons. It all adds up.
What ever you do, you need to keep your budget in the positive each month, even if all your wife has is 20 bucks to go to the hair dressers. It's going to be tough with only one wage earner in the family.
Don't mean to sound so brash, but in the other off site post you made your situation sound serious. You want to protect your government employment right now above all else. You surely don't want judgments attached to your pay check. Those are non negotiable, and are very hard to create a budget around. You should have just gotten a decent increase in pay this period. Budget and stick to it, next year it could end up as "additional" income in the green. It's going to be a long year for everyone, except for the non-professional fisherman and golfers here.

Sorry, I'm all out of T-Shirts :D

[KevinD]

Nice post Rustynut. Thats what the whole nation is going to have to do. Ain't no stimulus going to bring back spending on credit like "we the people" have been doing in the past. I feel fortunate that I woke up when I did...

[momacs]

Would it be possible for you to get a 0% balance transfer credit card with no fees? If there is, you can float the balances for probably a year with no interest. There's a really good thread on Fatwallet in the finance section, search for IBJanky and it explains it all there.

[ChemEng]

Would it be possible for you to get a 0% balance transfer credit card with no fees? If there is, you can float the balances for probably a year with no interest. There's a really good thread on Fatwallet in the finance section, search for IBJanky and it explains it all there.
But why would you ever want to have $1,000s of dollars of 0% interest debt? Maybe because right now you could park it in a savings account earning at least 3% and make money from the debt. Its the bank paying you for using their debt products (credit cards).

Just pay the minimum payments during the introductory period of the card and pay it off the month before it transitions away from the 0%. Too easy.

[KevinD]

But why would you ever want to have $1,000s of dollars of 0% interest debt?


Because it beats thousands of dollars of debt at 18%, 23%, 27% maybe? :confused:

Heck, 0% beats 2.125 that you're paying to yourself! ;) :D

[ChemEng]

Ummm. No.

If you can't understand why borrowing money at 0% to invest in a guaranteed 3% can be a good idea, then we aren't going to agree (and that you also have a lot of math to learn). I could run through the numbers but that would also probably be a bridge too far.

Because it beats thousands of dollars of debt at 18%, 23%, 27% maybe? :confused:

Heck, 0% beats 2.125 that you're paying to yourself! ;) :D

[momacs]

It is possible to make good money off credit cards if you qualify (excellent credit scores). Not just with the rewards, cash back etc. Even if you don't have any balances for the credit cards to do balance transfers to. Alot of them will just send you a check for the amount of the balance transfer. Then you either buy a cd or what I've done, open up rewards checking accounts that pay high interest. They were paying 6% but of course they've been going down all year as the interest rates have dropped. Most are 3% now, except for a few hold outs at 5 and 6%. $100,000 at even at 3% is still $3000 for 12 months and you're not doing anything except making the payments on time. :nuts: Your credit scores will drop a bit, but as soon as they're all paid back, they'll all go right back up. :D

[KevinD]

I was wondering what you think about doing a general loan against my TSP to payoff some of my high interest credit cards?? These interesting rates are about 12-24 percent and feel it is not too bad a decision to get this loan. I don't want another HELOC against my house given the market. Plus, the interest on this loan is only about 2.3 percent that I pay back to myself. Thanks for any and all anyone's advice.

He ain't trying to borrow money to invest.

Would it be possible for you to get a 0% balance transfer credit card with no fees? If there is, you can float the balances for probably a year with no interest.

She ain't trying to borrow money at 0% to invest.

If you can't understand why borrowing money at 0% to invest in a guaranteed 3% can be a good idea, then we aren't going to agree (and that you also have a lot of math to learn). I could run through the numbers but that would also probably be a bridge too far.

Ain't nobody talking about borrowing money to invest but you. This discussion is about getting out of debt, balance transfers, borrowing money to pay off credit cards WITH BALANCES ON THEM. I don't think there's a credit card in the world that would let you cash out at 0% without it being a balance transfer.

Not everybody is in your shoes but you can't seem to grasp that. Please...lets try to stay on topic. :rolleyes: :D

[ChemEng]

Umm no. Borrowing money from the TSP to pay off a credit card or whatever is financially the same thing as borrowing from a credit card to invest in a savings account. It operates on the principal of interest arbitrage. If you believe in being completely debt free, then you don't have access to that arbitrage tool.

He ain't trying to borrow money to invest.

[KevinD]

:rolleyes:

[momacs]

My original post was to use the 0% balance transfer money to transfer the credit card balances that he was being charged interest on.
Sorry I took the thread off topic

[KevinD]

ChemEng - You have convinced me of one thing. I'm going to look for some sort of rewards card to pay for things that I would normally use my debit/check card for and pay it off in full each month. That would probably be a good thing even for people who have balances on other cards that they are trying to get paid off. Free money, right?

I guess the rest of it is above my head...

[alevin]

ChemEng - You have convinced me of one thing. I'm going to look for some sort of rewards card to pay for things that I would normally use my debit/check card for and pay it off in full each month. That would probably be a good thing even for people who have balances on other cards that they are trying to get paid off. Free money, right?

I guess the rest of it is above my head...

THAT part I do fully agree with, and do practice. But a caution here, the cc company starts to see you buying things you've normally used debit card for (groceries, minor purchases), and they could drop your credit limit overnight from what I've been reading elsewhere-thinking your credit risk profile is changing for some unknown reason. My cc gets used for gas (always has-so no change in pattern that would suggest increased credit risk), restaurants, out-of-town travel and buys, internet purchases. Doesn't get used at Walmart or Starbucks or McDonalds.

[momacs]

THAT part I do fully agree with, and do practice. But a caution here, the cc company starts to see you buying things you've normally used debit card for (groceries, minor purchases), and they could drop your credit limit overnight from what I've been reading elsewhere-thinking your credit risk profile is changing for some unknown reason. My cc gets used for gas (always has-so no change in pattern that would suggest increased credit risk), restaurants, out-of-town travel and buys, internet purchases. Doesn't get used at Walmart or Starbucks or McDonalds.

I've just had American Express drop my limits because I was using it at Walmart. It had 0% interest on purchases for 12 months so I had been putting everything on it and letting it ride except for paying the minimum payments. They dropped the balance down to about $500 over what my balance was on the card. Luckily my 12 months were almost up so I paid it off and closed it. :nuts:

[budnipper1]

I've just had American Express drop my limits because I was using it at Walmart. It had 0% interest on purchases for 12 months so I had been putting everything on it and letting it ride except for paying the minimum payments. They dropped the balance down to about $500 over what my balance was on the card. Luckily my 12 months were almost up so I paid it off and closed it. :nuts:
Wise decision, momacs. I stopped doing business with Amex a long time ago. Biggest crooks of them all!

[KevinD]

THAT part I do fully agree with, and do practice. But a caution here, the cc company starts to see you buying things you've normally used debit card for (groceries, minor purchases), and they could drop your credit limit overnight from what I've been reading elsewhere-thinking your credit risk profile is changing for some unknown reason. My cc gets used for gas (always has-so no change in pattern that would suggest increased credit risk), restaurants, out-of-town travel and buys, internet purchases. Doesn't get used at Walmart or Starbucks or McDonalds.

Thanks for the heads up! :)

[Show-me]

I've just had American Express drop my limits because I was using it at Walmart. It had 0% interest on purchases for 12 months so I had been putting everything on it and letting it ride except for paying the minimum payments. They dropped the balance down to about $500 over what my balance was on the card. Luckily my 12 months were almost up so I paid it off and closed it. :nuts:

This is classic, Clark Howard described this exact scenario to a Tee in one of his shows a few months ago. Read between the lines, they are doing risk management and figure if you are using it at Walmart you are hard up. LOL

I went shopping at Sam's and Walmart and my debit card companies called me a few minutes ago checking on my purchases for the weekend. Gas, lunch at Sprouts, Sam's, and Wal-mart. What is suspicious there? Nothing big and all purchases under $100.

[budnipper1]

This is classic, Clark Howard described this exact scenario to a Tee in one of his shows a few months ago. Read between the lines, they are doing risk management and figure if you are using it at Walmart you are hard up. LOL
I went shopping at Sam's and Walmart and my debit card companies called me a few minutes ago checking on my purchases for the weekend. Gas, lunch at Sprouts, Sam's, and Wal-mart. What is suspicious there? Nothing big and all purchases under $100.
It is possible that your debit card company's system flagged your account because of multiple transactions during an unusually short period of time.

A few years ago, I bought a motor home and had to pick it up in Virginia. On the trip back home, I stopped to fill up that gas-guzzler several times using my debit card. At that time, the gas pumps had a limit and would shut off at $50. So I had to re-card the pump to finish filling up. Before I got back home, the card company called me on my cell to investigate 'suspicious activity' on my account. Actually, I'm glad they are watching.

[Show-me]

I'm glad too, I made a point to thank the person for watching out.

[2moryrs]

Hello, I don't usually put in my 2 cents worth; but here you are:

NEVER NEVER EVER, borrow against your TSP account! I read this somewhere, very sorry I can't remember where. Your income advancement will cease when you borrow against your TSP. (It has something to do with the return on what you have invested.) If you are a FERS retirement person, this is a major part of your retirement picture. You get matching funds from the Gov't (until they desire to change that due to economic situation) which the CSRS retirement system doesn't get.

So just tighten up the belt, freeze the credit cards, and you will get through the crisis. It only hurts for a little while and you will be glad of the discipline that you exercise of not (ab)using credit card debt, or any debt for that matter. Most americans need to learn to live with what they bring in, the gravey train stopped a long time ago.

I'm glad I own my home, now all I have to be able to do each year is pay the taxes and utilities.

I pray you make it intact through your crisis.

[Show-me]

Your income advancement would only cease if the markets were in positive territory and was beating the G fund return rate.

If the market is down 30% and I'm in the G fund making 3% and a personal loan at a bank is 6%, I am saving 3% plus I'm paying myself the other 3% on the loan. Nobody is makes money off of me (except the $50 loan fee) and I am in the G fund because of the market anyways.

[luv2surf]

I was the original to post this question about borrowing money from my TSP to pay off debt from my credit cards. Yes, the damage is already done with 10s of thousands to pay off in credit card debt. there is not a sensible way at this time to pay off the huge debt, except to borrow from family members, which i don't want to do. keep in mind interest on a couple of these credit cards, is about $100-$225/month, so how can one make any head way paying off a card with that high interest debt. I already have enough credit cards (at least 6) and don't want to open another one to just have a teaser rate for a year or less.

[KevinD]

Debt is just a tool. You're in great shape! :D

[Frixxxx]

I was the original to post this question about borrowing money from my TSP to pay off debt from my credit cards. Yes, the damage is already done with 10s of thousands to pay off in credit card debt. there is not a sensible way at this time to pay off the huge debt, except to borrow from family members, which i don't want to do. keep in mind interest on a couple of these credit cards, is about $100-$225/month, so how can one make any head way paying off a card with that high interest debt. I already have enough credit cards (at least 6) and don't want to open another one to just have a teaser rate for a year or less.
If you are paying that much, get rid of all but one credit card. YOU have to make the decision to take the loan out and pay back the loan. If this is what will help you sleep at night, then do it. If you risk your health over this matter then those med bills will pile up.

Please get something to help you budget after you consolidate your debt. If you don't change your habits, the results will always be the same. Take it from a smoker!!!!

Good luck and I hope you feel better after you are debt free!

[Scout333]

Love2Surf,

Originally Posted by luv2surf
"I was the original to post this question about borrowing money from my TSP to pay off debt from my credit cards. Yes, the damage is already done with 10s of thousands to pay off in credit card debt. there is not a sensible way at this time to pay off the huge debt, except to borrow from family members, which i don't want to do. keep in mind interest on a couple of these credit cards, is about $100-$225/month, so how can one make any head way paying off a card with that high interest debt. I already have enough credit cards (at least 6) and don't want to open another one to just have a teaser rate for a year or less."

Just a thought, You might contact the credit card company you have the longest relationship with and ask if they have any balance transfer offers with zero or low interest rates and roll all of your other card balances into one. Assuming you're not maxed out on that card and have a high enough limit. Then grit your teeth, get a second job, cut spending, whatever you have to do to get it paid off. Good luck! I know its not easy but when its over you will really be proud of yourself!

[Elgallo]

And another take on the matter, and it's all in how you look at the situation.

When you borrow an amount of your TSP money it is no longer at RISK in the market. Now a days that's a good thing!

If it were in the G fund your making a measly 2-3% of late. Using those TSP funds to pay off high interest rate Credit cards at say 20% effectively earns you that amount of return. That's a good thing!

With the market down like it is stocks are on sale at a 40-50% discount. So paying back your loan even with post tax dollars allows you to buy even more shares PPP than would be the case with only your biweekly contributions. It's a way to do the over 50 catchup without being over 50 assuming you are contributing the max 10% bi weekly. Again this is a good thing.

The real kicer in all of this is what you DO with the money borrowed.

I know I'm gonna get flamed on this one!

[dannyboy]

And another take on the matter, and it's all in how you look at the situation.

When you borrow an amount of your TSP money it is no longer at RISK in the market. Now a days that's a good thing!

If it were in the G fund your making a measly 2-3% of late. Using those TSP funds to pay off high interest rate Credit cards at say 20% effectively earns you that amount of return. That's a good thing!

With the market down like it is stocks are on sale at a 40-50% discount. So paying back your loan even with post tax dollars allows you to buy even more shares PPP than would be the case with only your biweekly contributions. It's a way to do the over 50 catchup without being over 50 assuming you are contributing the max 10% bi weekly. Again this is a good thing.

The real kicer in all of this is what you DO with the money borrowed.

I know I'm gonna get flamed on this one!


Try To Be Open-minded Friend,
You may want that money to take care of some ankle biter that hurts, right now. Why not say "Let's just pretend that TSP really isn't there and that I've got what I got and I've got to deal with it". I was there before and it's not worth ever taking money out of your TSP Account. Once you do that once, you'll keep going back to it over and over again, guaranteed. Get another job, develop a ponzi scheme, do whatever but this money you need in the future. The most critical time in getting a healthy balance is when you are just starting up. I think that if you just tighten your belt, give up some extra's that aren't needed, you'll be amazed at how things take care of themselves. I'm guilty of that too.
I'M GETTIN OFF THE SOAPBOX.
Elgallo, congrats on your TSP starter tag since 2004!! :D
Now, you may have some real fun with those funds,the markets are bad, but you are setting yourself up for lower balances in the future through the markets and future deals. But it is your bling-bling and remember you can't take out another TSP loan until the first TSP loan is fully paid off. Dannyboy

[Elgallo]

I have borrowed and completed paying back a loan just this year. I relieved a modest credit card balance and purchased a fully depreciated asset easily worth more now than what total amount I borrowed.

My lower tsp balance (C,S and I) now has more to do with market conditions than my borrowing form it. Even after the 5 year loan and the recent debacle in the market my balance is still 5 times the national average for a 401Ks. BTW I'm 62 and would like to retire at the end of 09, but with the market like it is I MAY delay that a year or so. Also, I have been doing the TSP since 1986/7

Will I borrow against it again? It depends. If I can squeeze into some local real estate at what are big time bargain basement prices in my area (zip 9394X) I may borrow part of the down payment, who knows. Knowing the area like I do I will be smiling 5-10 years down the road.

Like I said in my earlier post; it's what you do with the borrowed money. Waste it YOU LOOSE. Invest it wisely you may win in the long run.

There is a saying I have predominately posted in my office:

Courage is not the absence of fear, but it is the judgment of what is more important than fear. The brave do not live forever, but the cautious do not live at all.

Yes, I am a risk taker, and feel I have benifited greatly by being one.

[KevinD]

Elgallo - Have you met ChemEng? :laugh: :laugh: :D

[Elgallo]

No I have not met ChemEng and you point is.

Like I said "I know I'm gonna get flamed on this one"!

[Scout333]

You know...Birds of a feather. :D You think alike!:)

[Elgallo]

Great minds always have!

On a related but a bit different note:

http://www.govexec.com/story_page.cfm?articleid=41970&dcn=todaysnews

FWIW The statistics in this article are interesting, and sort of explain why folks like ChemEng and I apparently stand out of the avg. govt. crowd and this MB.

[thomas1215]

Stupid question: are shares sold when a loan is taken out, or is just the balance reduced by the loan amount?

[tsptalk]

Good question. I would assume you'd lose shares since they would still calculate your balance by multiplying share price by # shares.

[Show-me]

The amount has to be available in the G fund.

[McDuck]

Great minds always have!



This is one of my favorite cartoons. I seem to always have a unique point of view.
http://frankandernest.com/images/archive/101/1010403.gif