According to a new survey by COUNTRY Financial folks are tapping into their savings rather than taking on new debt which is a good thing. "Nearly two-thirds (62 percent) of black Americans have cut back their spending and 64 percent have put less money into their savings or retirement to cope with the current economy."
However, the majority of savings are held in retirement accounts and withdrawing from your 401k can cost you big time in the form of penalties and taxes. Here are a few smart money moves you can make without helping Uncle Sam pay down the national debt ...
Adjust your current contributions. Many people were able to contribute the maximum to their 401k when gas wasn't almost five dollars a gallon. You can find extra money in your budget by contributing up to the amount of your employer match. Please take advantage of free money.
Contribute to a Roth IRA. If you have paid down debt and still have funds at the end of the year in your budget that you want to save contribute to a Roth IRA if you are eligible. You won't get to take a deduction on your contributions and you don't pay taxes when you start withdrawing in retirement. You can also have access to your principal balance penalty free after five years if you're a first time home buyer.
Loan yourself money. If your budget is really tight and the interest charges are adding up on your debt you can pay yourself the interest by taking a loan from your retirement plan. Many plans allow you to take out a hardship loan which you can then repay over a period. However if you leave your employer the loan has to be repaid immediately or it will be considered a withdrawal.
Withdrawal penalties on retirement accounts carry a 10% penalty and are taxed as ordinary income. A ten thousand dollar withdrawal can add up to four thousand dollars in penalties and income taxes. In other words, don't be penny wise and pound foolish.
What are you doing to pay down your debt during these troubling financial times?
Deborah Owens is author of Nickel and Dime Your Way To Wealth. Read an excerpt on her Web site at deborahowens.com
Comments: (22)
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By: bigdrob1[pain in the keister + the mouth of the south] on 7/24/2008 4:40AM
Lawdy have mercy on my Po ass soul! I owe everybody and then some!I have debts up the wazoo and still borrow from my debit card.I am old,in the 9th inning, don't got no future,and trying to maintain the past,today. One foot in the grave,one foot on a sliding bananna peel,going down!But at least I am enjoying the ride. Good thing I was a Soulja Boy in Vietnam at least I don't have to worry about where they will plant my black ass when the music is over,and its lights out bigdrob1!
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By: bigdrob1[pain in the keister + the mouth of the south] on 7/24/2008 4:45AM
Going way down, No money but got a brand new honey. That poontang is so good that I am gonna go bankrupt, get forclosed, and be dead in the water financially,but what the hell,nothing good last forever anyway and it won't make a damn bit of difference 100 years from now!
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By: Martha Cheers on 7/25/2008 8:56AM
why do all the advice columns assume that everyone has 401k's and savings enough for 4 months and retirement and all that...please..some helpful advice for those of us who are barely making it and living hand to mouth.
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By: Jimmy Jam on 7/25/2008 9:25AM
I am just living from check to check, if it weren't
for my rent being subsidized I'd be in trouble for
sure. I manage to keep afloat however, these white
folks still think McCain has a chance, huh, not if I have anything to do with it, which I WILL. I will go from door to door spreading the GOOD OLD Obama WORD.
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By: Shirley on 7/26/2008 2:06AM
I am getting rid of luxuries. Such as adjusting my cable channels- I have too many. Most families have several cell phones, house phone and car phone. How many cars do u really need? Why pay for newspaper when you can read it on line. Wash clohes at night.
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By: Roz on 7/30/2008 2:49PM
There's an article titled "The $723 Billion Dollar question on a website called "The Darker Shade of Sports" www.sportsflow.blogspot.com the author makes some interesting points on how blacks spend their money and how many of our youth programs struggle to stay open.
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By: jenny on 8/05/2008 7:44AM
In Nov. my job cut my wages. I am a teacher assistant who loves working with children, but I still need a decent income! I am in the process of filing bankrupty because everything is behind and I am tired of the harassing phone calls and checking the caller ID everytime the phone rings. I pay whats important to me like rent, lights, food. I did not get in this situation intentionally. I always tried to pay my creditors on time, but now I have to choose which bill is the most important to me.With all the damn interest credit cards charge they have gotten more than enough of the money i really owe them!
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By: Maureen Muck on 8/07/2008 1:59PM
The tongue is a fire, and it sets the course of life! Read the scriptures which tells you to say: "God be magnified, he has PLEASURE in the PROSPERITY of his servants". "It is HE who GIVES YOU THE POWER TO GET wealth". If you can never see yourself on top of the situation, then you will always be "UNDER the circumstances". Come on people...enough of the oppression. let's renew our minds! Stop repeating words of despair. Speak LIFE, LIBERTY and pursue HAPPINESS!
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By: Carol on 8/11/2008 6:58PM
Why do we always try to blame white man, job or others for our problems? We have been down this road so many times...with grandma and dem and mama dem we need to get it together. There are plenty of resourcesoptions to get help with our financal
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By: Angie on 8/21/2008 10:26PM
This is a prime example of why people need to use their head/mind. If you don't have a savings or 401k then start one now, you see what kind of shape you are in and it's not going to get any better except by your own doing. And if you are in debt, and the bill collectors are calling, there ain't nothing you can do about it. You will pay eventually. Blacks can not afford to have bad credit, because you won't be able to get diddly, nada, unless you want to pay three times the price of it.
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