Fearing a layoff? Newspaper advises taking a home equity loan to pay down credit card debt and stopping 401k contributions.. good advice?

[w¡n9Nµ7 §£@¥€r 123]

You can't help but notice the little signs at work that layoffs are coming. The closed-door meetings. The buzzards in your parking space.

The economy is slowing, and that means you need to be prepared. You need to make sure that your household can withstand the loss of income.

• Your first step: Make a rainy-day fund. Financial planners often recommend that you keep three to six months' worth of salary as an emergency fund. They're talking about the amount of money you need to pay your bills each month.

Keep the cash in a money-market mutual fund or a bank money-market account. The average money fund yields just 4.2 percent, but you're not investing for the yield. You want access to your money whenever you need it.

• You also will need to reduce your expenses. Pay down your debts aggressively. Think of your debts as good debts and bad debts. Good debt is your mortgage, or any other loan that charges less than 6 percent in interest.

Bad debt is pretty much anything that charges more than 6 percent. A credit card balance that charges 18 percent interest? Bad debt.

• Consider taking out a home equity loan to get rid of your high-interest loans, if you don't have enough in savings to pay off the debt.

The catch: It's a lot easier to get a loan when you have a job. If you suspect you're going to be laid off, run to the loan office.

If you don't have a home equity loan available, cut up the card and stop making new charges on the account. Pay 5 percent of your balance this month. Pay the same amount each succeeding month.

• It could make sense to stop pouring money into your 401(k) plan and using it to pay down high-interest rate debt, said Kurt Brouwer, a Tiburon, Calif., financial planner. If your company matches your contribution, however, you should contribute at least enough to get the match.

http://www.lsj.com/apps/pbcs.dll/article?A...333/1004/news03

[Hilarious Clinton 452]

• Consider taking out a home equity loan to get rid of your high-interest loans, if you don't have enough in savings to pay off the debt.

bad advice.

if you lose your job and can't pay your bills.... don't pay CCs. what can they do? Don't pay your home equity loan and they take your home. up to you.

an emergency fund should be set up to cover 6 months expenses

[one...two...tree 2,762]

• Consider taking out a home equity loan to get rid of your high-interest loans, if you don't have enough in savings to pay off the debt.

bad advice.

if you lose your job and can't pay your bills.... don't pay CCs. what can they do? Don't pay your home equity loan and they take your home. up to you.

an emergency fund should be set up to cover 6 months expenses

I agree. Credit Cards are unsecured loans.

[Pinocchio Liberal 268]

Pullin Plastic is AKA! I cant fckin afford it. But i will certainly biotch about it later. Cut the plastic,get a part time job to get what you desire!

[peejay 327]

• Consider taking out a home equity loan to get rid of your high-interest loans, if you don't have enough in savings to pay off the debt.

bad advice.

if you lose your job and can't pay your bills.... don't pay CCs. what can they do? Don't pay your home equity loan and they take your home. up to you.

an emergency fund should be set up to cover 6 months expenses

I agree.

I'm old school and followed the lead of my parents that grew up during the Great Depression. Money in...money out. I always used credit cards as a convenience and pay them completely off every month. I save for big ticket items rather than finance them or just finance a small portion to get reasonable monthly payments that don't put me in a bind.

Of course people have emergencies, but I would imagine that a lot of people are their own worst enemy. They buy ####### they don't really need...with money they ain't got...to impress people they don't really like.

For a lot of these folks...any advice you give them is about like closing the gate after all the cows got loose.

[Jasman0717 9]

Credit cards are evil and the interest rates they charge

[Mr. Big Dog 10,747]

... lot of people are their own worst enemy. They buy ####### they don't really need...with money they ain't got...to impress people they don't really like.

That right there sums up much of what's wrong in America today.

Edited December 4, 2007 by Mr. Big Dog

[Ban Hammer 14,569]

... lot of people are their own worst enemy. They buy ####### they don't really need...with money they ain't got...to impress people they don't really like.

That right there sums up much of what's wrong in America today.

[Ladylethal 12]

Agreed.

We too pay off our entire CC debt every month, we only use it for the convenience (and for me, the foreign one, to build a credit here).

[GabachaYucateca 0]

Couldn't agree more, Big Dog.

I try to live by two things my family taught me: "Live within your means" and "a poor man can't afford to buy cheap shoes."

It's amazing to see how much STUFF people collect, stuff they certainly don't need and stuff they can't afford. I would never want the stress that comes with high credit card bills and mounting interests in exchange for a shiny car with monthly payments out of my range or a stereo system.

I'd never, ever carried a balance on my credit cards, and after four months of having hubby just arrived on a K1 and being underemployed while I searched for work has made me have a balance that makes me shudder. Now I'm full time and also have some work with the place I just left and a freelance gig. When it rains...

[Imua 0]

CCs are evil, but it is sad that sometimes there is no other way to rebuild your credit if you don't want to buy a car or a house and need good credit for the basics, i.e to rent an apartment and get a job...

[w¡n9Nµ7 §£@¥€r 123]

CCs are evil...

Pattu Rani, this rant isn't directed at you.

Credit cards are not evil. They are a financial tool borne out of some of the most innovative minds in human history. When used wisely, they are a valuable tool in anyones financial toolkit.

[Imua 0]

CCs are evil...

Pattu Rani, this rant isn't directed at you.

Credit cards are not evil. They are a financial tool borne out of some of the most innovative minds in human history. When used wisely, they are a valuable tool in anyones financial toolkit.

Sorry, I realize that was a little harsh - they aren't evil but like alcohol or sweets or a lot of other things they have the potential to be addictive and people who probably should avoid them sometimes may have no choice but to use them in order to build their credit.

[Alex+R 0]

We also use credit cards to build Rey's credit, but the best use of it is frequent flyer miles. This month I just reached enough miles for a free ticket to South America or Europe! Woohoo! (Probably will have to spend it on 2 within the US though.)

Seriously though I'm very afraid of CCs. Rey wants to pay them off at the end of every month and never have a balance; I go so far as freaking out if we spend what we don't have in our checking account right that moment.

How long is it supposed to take you to save 3 or 4 months worth of salary?

[ivona 0]

We also use credit cards to build Rey's credit, but the best use of it is frequent flyer miles. This month I just reached enough miles for a free ticket to South America or Europe! Woohoo!

If you don't mind me asking which CC do you have that earns frequent miles, that's what we are looking for, because of the prices to Croatia?