I feel your pain! But listen – I’m going to give you some tough love because I think you can handle it.
I want you to consider and act on every single option you have outside of liquidating your wife’s 401(k). Realize that if you decide to go down that lane you will face paying taxes on the income earned in the account plus early withdrawal penalties– altogether anywhere from 10% to 40% of that $30,000.
My questions to you ….
1. Do you have a 401(k) or separate retirement savings yourself? If not, then absolutely don’t touch your wife’s 401(k). Instead, roll it over to an IRA and continue to make contributions towards that. You need to save for your retirement. Saving for retirement should be a fixed expense, just like your housing and car payments. Especially with two kids, you can’t afford to only have $500 in savings. If you do have a 401(k) that you contribute to on a regular basis, consider these next steps before touching your wife’s retirement account.
2. Can your wife start a part-time job with the sole intent of helping to pay down your credit card debt? The incentive here for her is that this can be just a temporary gig. Listen, you can’t rack up $30,000 in credit card debt and not expect to work for it. But if she hates working outside the house, she can call this her “debt diet mission.” Make a timeline of goals. In two months I want to earn $2000, in six months, $5000. Brining in an extra $500 to $1000 a month can help you wipe out nearly a third of your credit card debt in six months. Can’t afford to leave your kids with a sitter while mom works? Call up relatives! Or a friendly neighbor that you can barter with. In this economy, you need to spread your wings and roll up your sleeves. Don’t be shy to ask for help – no one’s going to act surprised since they’re probably in your shoes, too.