Money is often on the minds of most people. They may think about their next paycheck, how much they should spend on food or clothing, whether they have enough money for vacation, or how they will deal with their outstanding debts. Unfortunately, that last thought plagues many people, and you may be one of the numerous individuals who loses sleep each night wondering whether you will ever get out from under the outstanding balances you face.
It can prove immensely difficult to deal with debt, and you may think that chipping away little by little will help you keep your financial struggles under control. However, small steps may not always prove effective, especially when balances continue to increase due to interest rates and fees. The time may come for you to take more substantial action in hopes of achieving debt relief, but you may want to avoid making hasty decisions.
Using retirement funds
It may cross your mind to take funds out of your IRA or 401(k) in hopes of using that money to address your outstanding debts. You may think that since you are not using those funds now then it could not hurt to simply borrow money from the account and let it accrue again later. However, this action could prove more detrimental than beneficial. Withdrawing funds from retirement accounts early can result in penalties and stipulations that could make your financial situation more difficult to handle.
Though it may seem appealing to transfer some debt that is currently accruing interest to a new account that has a zero percent interest rate, a more in-depth look at this option may reveal some downsides. For instance, fees may come along with the balance transfer, which means you will need to pay more money. Additionally, these interest rates typically only last for a specified time period, and if you have not paid off that balance before that time period ends, you will again likely face high interest rates on your debt.
In some cases taking risks can pay off. However, trying to make bets and taking other gambles is not an effective way to deal with considerable debt. Gambles are so called because there is no guarantee of a beneficial outcome. Therefore, you may put up a chunk of cash in hopes of doubling (or otherwise bettering) your money, but you face a greater chance of losing that money and putting yourself deeper in the hole.
Tried and true methods
Rather than making a hasty decision by looking for a quick fix, you may wish to consider debt relief options that are backed by law and that have helped numerous people get back on track financially. Chapter 7 bankruptcy could help you address your financial concerns if you meet the qualifications. Therefore, you may want to learn more about this and other bankruptcy options to determine whether it could be in your best interests to pursue this route.