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Financial Planning: Pay Down Your Debt

Financial Planning: Pay Down Debt Without Taking a Loan From Your 401K

January 23, 2013 by Thomas Mullooly

https://media.blubrry.com/invest/p/content.blubrry.com/invest/II_Saving_Money_and_Your_Retirement_Plan_podcast.mp3

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Last week on the Mullooly Asset Management podcast, Tom and Brendan discussed the foundation of financial planning. This is a continuation of that discussion on saving money and your retirement plan. Tom and Brendan talked about taking loans from your 401k account at work in the last podcast. This week they talk about an alternative way that could be used to write off outstanding council debts or to pay down a personal debt.

In a scenario where a person has a debt to pay, but is also contributing to their 401k account at work; they are likely finding it difficult to make ends meet each month. Potentially a person could pay off their debt by NOT CONTRIBUTING to their retirement plan for a year or two. This would leave the extra money that would have been contributed to their 401k to quickly pay down the debt they owe. So instead of taking a loan from their retirement account and creating a five year re-paymenFinancial Planning: Pay Down Your Debtt plan, the debt is paid off in a year or two. Keep in mind that this is RISKY, and most people in the financial planning industry would not recommend this.

The risk that is involved with not contributing to your retirement account to pay off debt is that you never start contributing again. Many people do not have the kind of discipline it takes to pay off the debt and begin stocking away money again. You have to know yourself, and feel confident that you are capable of contributing again.

Tom and Brendan also talk about another frequently asked question they receive about financial planning. Should I save for my retirement or my kid’s college education? Tom answers this question simply by explaining that you can ALWAYS borrow money for college, but you can NOT borrow money for retirement. Tom also explains why he is not a fan of prepaid college tuition, and makes note that there will be a future podcast that discusses saving for college. Topics covered on the college saving podcast will include Custodial accounts and 529 plans.

Mullooly Asset Management strongly urges our listeners and readers talk with their personal investment adviser before making any choice to buy or sell any investments. None of the securities mentioned in this podcast or blog post are considered investment advice. If you do not have an investment adviser please do not hesitate to contact Mullooly Asset Management through phone call or email.

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Filed Under: Podcasts, Financial Planning Tagged With: Financial Planner

About Thomas Mullooly

Thomas Mullooly is owner and founder of Mullooly Asset Management, Inc. In 2002 Tom opened Mullooly Asset Management, a fee-only investment advisory firm. As an investment advisor, and not a broker, Tom works strictly for his clients. With the help of point and figure charting, Tom builds a realistic game plan for clients.

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The information on this website and blog do not involve the rendering of personalized investment advice. A professional advisor should be consulted before implementing any of the options presented. None of the content contained in this website should be construed as legal or tax advice. Always consult an attorney or tax professional regarding your specific legal or tax situation.

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