Don't steal from your 401(k), consider these nine things first
So, there is a lot going on right now (that might be the UNDERSTATEMENT of the YEAR). People are sick, losing jobs and experiencing significant losses in their investment accounts. It can all be overwhelming and if your cash flow is feeling light, you may be looking for ways to supplement the money (not) currently coming in. Lawmakers “did us a favor” and loosened the reins on our 401(k)s to make it easier/less expensive to remove cash. But I’d argue that taking money out of your 401(k) today, is setting your future self (YFS) up for failure. For this reason, I’d say that removing cash from your 401(k) is an EXTREME measure that should be your very LAST resort. I’m not going into the details of how to do this, you can Google it, or why it’s such a bad idea (feel free to message/email me and set up a private consultation), but here is a list of nine options to consider (and exhaust) before you resort to stealing from YFS:
1. Create a spending plan (a.k.a. Budget) - Most people who live life w/o a budget can find 10% or more “leakage” – money spent unintentionally or spent with little satisfaction in return. Create a budget and limit it to those things that are necessary (e.g., rent, groceries, insurance, debt repayment) and/or that provide high levels of satisfaction (i.e., allow you to live your best life).
2. Cut non-essential expenses - Once you have a budget, take a second look and figure out what items can be downgraded (e.g., cable / internet subscriptions) or put on hold (e.g., gym memberships) until your normal cash flow resumes.
3. Sell/lend stuff – Been meaning to put an unused appliance or piece of furniture on Craigslist or Facebook Marketplace? Do you have a designer wardrobe or pieces that you could can rent? What are you waiting for, do it today!
4. Barter – Do you have things or services in demand by others? Babysitting, yard work, DIY skills, meal prep - what services can you provide that could be traded as currency for things that you need but can’t currently afford to pay for? Get creative.
5. Start a side hustle – If you can barter it, you could also sell it. Get selling.
6. Research loans, grants and charities – If your hardship is based on medical or employment hardships, there are lots of organizations available to help. From free meals offered by your church or school district to the SBA offering forgivable loans to small business owners, a little research could go a long way.
7. Negotiate with your lenders – Many lenders today are fully aware of the hardship people across the country are facing. From student loans, to landlords and mortgage companies, many lenders are prepared to make concessions in light of these unprecedented times.
8. Save on student loans – speaking of student loans, the CARES Act allows “administrative forbearance” on most federal student loans through the end of September. This means, if your loans qualify, you don’t have to make payments during this time and interest won’t accrue. Contact your loan servicer to confirm your loan’s eligibility.
9. Apply for unemployment – the CARES Act also expanded who is eligible to receive unemployment benefits and the length of time payments will be made. If you were a “gig” worker or suffered a job loss directly or indirectly related to COVID-19, you may be eligible for unemployment benefits.
