Is this a smart move?

Question

I have worked for a successful, thriving, company for several years now and earned over $15,000 worth of profit sharing. The problem is i have $9,000.00 worth of credit card debt. I was thinking about quitting the company i work for then use the profit sharing to get out of Credit card Debt! Just can't stand being in Debt,..can use that money and feed into a saving and retirement account. Always nice to have money saved up for a rainy day or if something were to ever happen then have the means to do something about it. So, my question to you. Is it a smart move to get out Credit card Debt by using your profit sharing?

Answer 1

That would only make sense if you are very, very certain that you can get an equally good or better job after you quit this one - do not quit until the new contract is signed!

But even if you could find such a job, you'd still be giving up a job you know and like, and one where you've been working for several years, so you probably have a lot of job security. I would NOT quit such a job just to pay of the credit card debts.

Does your company do employee loans with good conditions? If so, you could take out the money to pay of your CC debt - then you'd still be in debt, but at better conditions, and pay out off out of your salary.

The more important questions seems to me how you ran up such a huge cc debt despite having a job in a successful, thriving company. If it was due to reasons beyond your control, like a medical emergency with no insurance; There's nothing much to do (well, except getting insurance), but if you're not really sure where it came from, or you know it came from poor buying decisions, you might want to speak to an financial/debt adviser.

(In fact, you might want to do that anyway. A professional with all your files in front of him is a much better resource than Yahoo! Answers, no matter how much we all love this site. ;D)

Answer 2

I would not recomnmend it especially if you do not have a much better job to go to. Being unemployed tends to put a person further in debt fast. In addition you will find that there will be taxes on your profit sharing money so you will have little left after you pay off the credit cards.

You are right. Paying off the cards is a good move just not this way. Try to stop charging things so the debt does not build more. Pay more than the minimum payment each month. Think about the possibilities of getting a second job part time, selling something(s) that you don't need, and putting ourself on a budget that will help you out of debt and help you save for emergencies. Consider transfering some of this debt for example to a card that is interest free for 6 months to a year. If you have equity in your home you may be able to do a refinance to get this debt at a far lower interest rate and have the interest tax deductible but you also are putting your home at risk to do that and if you take a long pay off time you may pay more interest. You may find that an organization like Crown Financial Ministries can offer you the training you want to be debt free and financially independent.

Answer 3

In part, it is going to depend on how your profit sharing plan is set up and whether or not you are fully vested how much money you can even get out right now. You also need to look at the tax ramifications if you take that money out. Your tax liability may be a lot more than you want to pay, leaving you a lot less money to pay off debts.

You'll need to read the plan documents to determine whether this would in any way be a good idea.

My gut instinct is no. Getting rid of credit card debt is a great idea. However, taking money out of your retirement to do it may not be all that smart. And quitting your job??? Why? If you're not employed, what are you going to live on? You'll likely wind up with even MORE credit card debt.

You need to stop using the credit cards and running up more debt. Don't charge anything you can't afford to pay off when the bill comes. The more you add on to those cards, the more you're paying out in interest. That pair of shoes you decided you just had to have because they were on sale for $50 winds up costing you $100 by the time you've paid for them for 5 years and add all the interest on to them.

Start paying MORE than the minimum payment on those cards and stop using them for things you don't need. You have to pay more than the minimum payment to ever see a dent in the amount you owe. Right now, if you're just paying the minimum payment, you are barely covering the interest they are charging you every month.

Get them paid off but don't use your future to do it. In other words, leave your retirement money alone. Spend less and pay off the cards.

Answer 4

yes, provided you can curve your penchant for getting heavily in debt. I never heard of profit sharing policy that requires one to quit in order to use it...so I presume you are quitting regardless for some other reason. In that case, you have plan where your bread and butter would be coming from? Else, you'd be hitting that credit card again, for sure.

Answer 5

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Answer 6

No, i dont think its an good move b'cos if u have earned so much so far so u can earn much more keep working.It is better.