Dear Dave,
My wife and I make $100,000 a year combined, and we have about $12,000 in credit card debt. We also owe another $80,000 in student loans, and our kidsí private school education costs $1,000 a month. Is it OK for me to take a loan against my 401(k), which is invested in mutual funds, to clean up the credit card bills?
Stephen

Dear Stephen,
I wouldnít do that. If your 401(k) is invested in good mutual funds, itís likely youíll miss out on some pretty good rates of return. But thatís not the biggest reason this is a bad idea.
The biggest reason is that when you leave your company ó and you will leave, whether itís because you get a better job, you get fired, or you die ó that loan is considered an early withdrawal. If you donít repay it within 60 days, youíll get hammered with a 10 percent penalty plus your tax rate. You could easily lose almost half of whatís in the account.
If you want to start paying off debt, my advice is to start doing things to generate extra income and begin living on a tight budget. Grab an extra, part-time job for a while, too, and have a big garage sale. Sell so much stuff the kids think theyíre next! You need to work a serious debt-busting plan.
The good news is itís only $12,000. Knocking out the credit card debt wonít be so bad, and with your income, the kidsí school isnít unreasonable. Itís the $80,000 in student loans thatís killing you. Scrape together and save every penny you can find each month, and put that toward paying off the credit card debt. Then, roll that amount over, add anything else you can come up with, and attack those student loans.
You can do it, Stephen!
óDave


Kicked out, starting out

Dear Dave,
Iím 19 years old, and I just got kicked out of the house after wrecking my dadís truck. Iíve got a job making $12 an hour working about 40 hours a week, and Iím currently living with a friend at his apartment. I have a goal of going to college, and Iíd like to get out of my friendís place as soon as possible. Do you have any advice some someone just starting out?
Brandon

Dear Brandon,
Thatís a tough situation, buddy. Iím sorry things worked out that way with your dad. Youíre going to need more money than whatís coming in, so letís prioritize things.
Your first goal is food, and your second goal is to help your friend a little bit with the rent. After that, you need to save up and get a car as quickly as possible. Iím talking about a total beater ó a $500 to $1,000, mechanically sound, basic, ugly car. Theyíre hard to find, but they are out there.
After youíve done this and gotten some stability in your life, start thinking about saving for a little bit better car. This may mean picking up an extra part-time job for a while. Then comes piling up some cash so you can get your own place. Letís get all this out of the way before you start thinking about school. Right now you barely have a place to live, and youíve got nothing to drive.
Listen, I love your motivation and the fact that you have dreams and a goal to better yourself. Youíve been through a lot, but letís get the basics taken care of first, introduce a little stability into your life, and then we can start coming up with a plan for school and a long-term future. Good luck, Brandon!
óDave

ó Dave Ramsey is Americaís trusted voice on money and business, and CEO of Ramsey Solutions. He has authored seven best-selling books. The Dave Ramsey Show is heard by more than 11 million listeners each week on more than 550 radio stations and digital outlets. Follow Dave on Twitter at @DaveRamsey and on the web at daveramsey.com.