Debt question: car and 401k

[strugglingalong]

I just wanted to get some opinions. I want to work on paying down my student loans over the next few years while I discerning my vocation. I have two questions and just wanted to get some opinions from my Catholic brothers and sisters:

1. I owe $24,000 on my car and have an offer for $19,000. I’m trying to see they’d give $20,000 for it. That means I get rid of the $24,000 on my car but acquire a $4,000 loan for the difference. I then thought I could try to get just a car to get me around, maybe $3000-$5000. So I’d owe, in the end, $9,000-$10,000 instead of $24,000. Does that sound like a smart move to you guys?
2. I have a 401k. Does it make sense to pay into it? Right now I have almost $200 a month going to that but I don’t know, in the long-term, if I care about it.

I know this thread isn’t really full of discernment questions but it sort of is I guess. I’m just open to advice and thoughts because I need to make some decisions and never like to do it without the advice of others.

Pax Christi tecum.

 

[puzzleannie]

max out your retirement fund now before you have more debts and responsibilities, wisely invested due to the miracle of compounding you will have thousands more at retirement if you save the max now, rather than waiting until you are older, even if the total contribution is the same. $1M invested now will be worth more than twice as much as $1M invested when you are 40.

sure if you think you can get a good deal on a car and get a good used one for less, do it, and lower your payments, but I think your figures are a little low to be realistic.

pay steadily on your student loans and if you are lucky they will be gone before your eldest child enters college.

 

[strugglingalong]

max out your retirement fund now before you have more debts and responsibilities, wisely invested due to the miracle of compounding you will have thousands more at retirement if you save the max now, rather than waiting until you are older, even if the total contribution is the same. $1M invested now will be worth more than twice as much as $1M invested when you are 40.

sure if you think you can get a good deal on a car and get a good used one for less, do it, and lower your payments, but I think your figures are a little low to be realistic.

pay steadily on your student loans and if you are lucky they will be gone before your eldest child enters college.

Well the reason I am thinking of emptying my 401k and not contributing is because I am considering the priesthood or religious life. It won’t be needed then.

What do you think is not realistic about my car financial figures? I have a co-worker who has an older car with 71,000 miles he would sell me for $2,000. Add that to the $4,000 I have to deal with to sell my car and I could be at $6,000 possibly - at worst $9,000-$10,000.

My biggest issue is that debt is one huge reason I can’t consider priesthood or religious life. I want to tackle it so it’s not an issue.

Pax Christi tecum.

 

[Friar_David_O.Carm]

Well the reason I am thinking of emptying my 401k and not contributing is because I am considering the priesthood or religious life. It won’t be needed then.

If you go into the secular priesthood you will need retirement. If you go into a religious order you can always give that to the order.

What do you think is not realistic about my car financial figures? I have a co-worker who has an older car with 71,000 miles he would sell me for $2,000. Add that to the $4,000 I have to deal with to sell my car and I could be at $6,000 possibly - at worst $9,000-$10,000.

The car idea is a good one but be sure you can get around as needed.

My biggest issue is that debt is one huge reason I can’t consider priesthood or religious life. I want to tackle it so it’s not an issue.

You can discern a vocation while you have debt. Some religious orders will take over any student loans you have. Mine did. If you go the secular priesthood route the student loans are ok as when you go to school they are differed.

Also know that some religious groups you might join are not truly religious orders and they do not make vows but take promises as secular priests do. In essence they are a group of secular (diocesen priests) living in a sort of community way. Some of those groups required their candidate to pay for some of their education.

 

[dixieagle]

Please also consider the fact that “emptying” your 401K will make you subject to income tax and, (with rare exception) a 10% penalty. People often face a rude awakening when taking money out of 401Ks, having not considered the consequences.

 

[strugglingalong]

The car idea is a good one but be sure you can get around as needed.

Yes, I agree. Hopefully I can

You can discern a vocation while you have debt. Some religious orders will take over any student loans you have. Mine did. If you go the secular priesthood route the student loans are ok as when you go to school they are differed.

Also know that some religious groups you might join are not truly religious orders and they do not make vows but take promises as secular priests do. In essence they are a group of secular (diocesen priests) living in a sort of community way. Some of those groups required their candidate to pay for some of their education.

All the religious orders I have talked to can take maybe up to $20,000 or $30,000. My diocese, as far as I know, requires you to take your own student loans but when they ordain you, if they do, they pay them all off.

Pax Christi tecum.

 

[strugglingalong]

Please also consider the fact that “emptying” your 401K will make you subject to income tax and, (with rare exception) a 10% penalty. People often face a rude awakening when taking money out of 401Ks, having not considered the consequences.

Yep, I do know that. Thanks for mentioning it!

Pax Christi tecum.

 

[SerraSemper]

You might also consider the fact that you do not need to dispose of your 401k until and unless you profess vows in a religious order which requires it. Using up the money or giving it away when entering an order is not always wise as not all people who enter stay.

 

[aggiecatholic05]

2 words
Dave
Ramsey

the man is a pro at fiances and does his best to give it from a christian perspective. he is on fox business news and has a nationally syndacated radio show. call him up and im sure you will know what to do afterwards.

 

[bpbasilphx]

Well the reason I am thinking of emptying my 401k and not contributing is because I am considering the priesthood or religious life. It won’t be needed then.

**Yes, it will be.

Trust me on this one.**

 

[strugglingalong]

Well the reason I am thinking of emptying my 401k and not contributing is because I am considering the priesthood or religious life. It won’t be needed then.

**Yes, it will be.

Trust me on this one.**

Why would it be needed? Don’t religious orders and diocese provide for the retirement of their priests?

Pax Christi tecum.

 

[Friar_David_O.Carm]

Why would it be needed? Don’t religious orders and diocese provide for the retirement of their priests?

Pax Christi tecum.

It depends on the religious community. Religious orders, that is groups were you make the vows of chastity, poverty, and obedience, do take care of their retired members. Other groups only take promises. They are more like the secular priesthood who form a community and are under a superior rather than being under a bishop, might or might not as there is no vow of poverty, just a promise of simplicity.

A diocese may have a retirement plan of some sort but they might not, or it might not be enough. A secular priest in a diocese just make promises of obedience and chastity. They are responsible for much of their own life and upkeep.

If you join an order and make a vow of poverty then you will not be able to keep the 401k but you do not need to get rid of it until you make your final vows.

 

[strugglingalong]

It depends on the religious community. Religious orders, that is groups were you make the vows of chastity, poverty, and obedience, do take care of their retired members. Other groups only take promises. They are more like the secular priesthood who form a community and are under a superior rather than being under a bishop, might or might not as there is no vow of poverty, just a promise of simplicity.

A diocese may have a retirement plan of some sort but they might not, or it might not be enough. A secular priest in a diocese just make promises of obedience and chastity. They are responsible for much of their own life and upkeep.

If you join an order and make a vow of poverty then you will not be able to keep the 401k but you do not need to get rid of it until you make your final vows.

Let me explain. First of all, my 401k has not much in it right now. So even if I keep contributing, it won’t be much at all. Literally. Second, I pay about $200 a month into it which if I stop contributing then I can pay that on my student loans, which are huge and cause me the most concern.

I’m not worried about taking my 401k with me because, as I said, it’ll be very small.

Pax Christi tecum.

 

[Nanny_PK]

I wouldn’t cash it out; but I don’t think there’d be anything wrong in stopping your contribution in order to pay off debt – if I’m not mistaken, that’s what Dave Ramsey proposes, as long as you have $1,000 in an emergency fund.

After you get your debt paid off and if you’re still working, I would continue contributing. I remember hearing stories about retired priests having trouble making ends meet in retirement. If you do join an order that cares for their retirees, you can just turn over any sums you get to your order.

 

[strugglingalong]

I wouldn’t cash it out; but I don’t think there’d be anything wrong in stopping your contribution in order to pay off debt – if I’m not mistaken, that’s what Dave Ramsey proposes, as long as you have $1,000 in an emergency fund.

After you get your debt paid off and if you’re still working, I would continue contributing. I remember hearing stories about retired priests having trouble making ends meet in retirement. If you do join an order that cares for their retirees, you can just turn over any sums you get to your order.

That makes sense. Yes, if I get my debt paid off and don’t join an order I will start my contributions. It will take me way too long to pay off my student loans if I keep contributing, was what I was thinking.

Pax Christi tecum.

 

[Nanny_PK]

I would recommend you read Dave Ramsey’s book “The Total Money Makeover.” It will help you in setting up a strategy to become debt free. You could also listen to the radio show/tv show. Becoming debt free, whether you decide to join a religious order or stay in the secular business world,is a good thing.

 

[QuoVadis]

2 words
Dave
Ramsey

the man is a pro at fiances and does his best to give it from a christian perspective. he is on fox business news and has a nationally syndacated radio show. call him up and im sure you will know what to do afterwards.

I’ll second that.

Your first question about selling the car, carrying a $4,000 loan and buying a $3,000 car: Yes! Great idea. Do it.

Your second question about cashing out the 401(k): No! Don’t do it. You don’t have to keep contributing; take that $200/month and throw it against the loan of your expensive car, but don’t cash out the investment, even if it is small. If you leave your job, roll the investment over to a traditional IRA; if you enter the priesthood then you can continue contributing towards your retirement.

And you definitely need to check out Dave Ramsey. Can’t endorse him enough, he’s changed our lives dramatically in just 6 months.

 

[puzzleannie]

Well the reason I am thinking of emptying my 401k and not contributing is because I am considering the priesthood or religious life. It won’t be needed then.

Yes, it will be.

Trust me on this one.

yes you do need to fund your retirement even if your are a priest or religious. there is no guarantee your order will be around to take care of you when you get old. ask a few thousand elderly nuns and priests facing that situation today.

if you empty your 401K you incur great tax penalties, which you do not need.

 

[Friar_David_O.Carm]

yes you do need to fund your retirement even if your are a priest or religious. there is no guarantee your order will be around to take care of you when you get old. ask a few thousand elderly nuns and priests facing that situation today.

if you empty your 401K you incur great tax penalties, which you do not need.

Again this depends on what religious group you join but all the advice here is good.

If you do join one of the religious orders that take a vow of poverty then you can either turn over your retirement to the order or to anyone you choose.

 

[strugglingalong]

Thanks to all for the great advice! I really do appreciate it and it has helped me a lot!

Pax Christi tecum!