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Before dipping into a 401(k) for living expenses, try a frugal spending plan while looking for a job.

The Debt Advisor

by Steve Bucci

The Debt Advisor

by Steve Bucci

Dear Debt Adviser,

I have been unemployed since July 2009 and am running out of savings, with no job prospects on the horizon. Does it make sense to withdraw funds from my 401(k) plan to pay off my credits cards, totaling $18,000, and enough to pay my mortgage -- $2,000 per month -- through December? I don't want to risk foreclosure on my home. I'm 55 years old. I know there's a stiff penalty, but I have no other option. Thank you for any advice you can offer.
-- Barbara

Dear Barbara,

I have been in your shoes and understand that three months without work can seem like an eternity. To keep yourself from going insane, you need a realistic plan. Without one, each day can become a descent into a black hole. I suggest a spending plan that will cover you for your anticipated unemployment period. An old rule of thumb is that if you are a professional or manager searching for work nationally, meaning you are willing to relocate, you should allow about one month for every $10,000 of income. Executives have other options, such as opening a business or consulting, and a trade person's timeline will vary widely by industry. Two other big factors are the unemployment rate and your age. You do not have an advantage in either of these categories.

Your age, in another regard, may be your friend. The rules for withdrawing from a 401(k) allow persons who are 55 years old and older and who leave their job to withdraw from the account without paying the 10 percent penalty. You will still have to pay income taxes on the amount you withdraw but will save the hefty early withdrawal penalty. With your diminished income from unemployment insurance, any taxes should be modest.

So, now that you know you can withdraw the amount you need without penalty, if need be, let's take a look at how you plan to manage your finances moving forward. Using the method above, make a ballpark estimate of how long you will unemployed. Next, look at a bare-bones budget and get a good estimate of what it will take to get you though the months ahead. Also, in your budget, figure in your unemployment compensation and any part-time job or temporary income you might be able to get.

This is an emergency, so any accumulated emergency funds can be used too. I would not pay your credit cards off using retirement money. If you are maxed out, then I would only pay the minimum. If you are not, I would judiciously use your remaining credit line(s) to fund essential expenses while you job hunt. You need to conserve your cash at this time. If you have no alternative, then using your 401(k) to cover your mortgage might be OK.

You may be a youthful 55-year-old, but it will still be hard for you to make up for any money that is withdrawn. So, if you begin taking money from your 401(k) starting now, you may have to defer retirement or take the chance you will outlive the amount you have saved. I know you said you have no job prospects on the horizon, so let me suggest that you expand your horizons.

When companies start to rehire, chances are they will use temp agencies first, keeping only the employees they like. This is more cost-effective than hiring full-time employees and safer legally if the employee doesn't work out. You may be able to increase your likelihood of some income by signing up with a number of temp agencies. They also may provide you with some interim work and with enough funds to leave your retirement account intact for a while longer.

Remember, you are not trying to replace your old income. You're just trying to fund a bare-bones budget so you can continue to look for the job you want and need.

Don't forget that networking takes time, but is an essential part of the job search. Be sure to get feedback on your networking and search so you can make positive changes. Finally, part of the reason for networking is to get support from others. Let your church, friends and relatives know you are looking. And be sure to not isolate yourself. Help will find you faster, if you keep yourself visible.

Good luck!

The Debt Adviser, Steve Bucci, is the president of Money Management International Financial Education Foundation and the author of "Credit Repair Kit for Dummies."


Low-stress, last minute gift ideas

With Christmas right around the corner, the mad dash to the mall is on. For many it is crunch time to check off the final items off their gift list, get them wrapped, and placed under the tree or delivered in time for December 25. The holidays usually present a shopping frenzy, which is why it is understandable many people put off the madness until the last minute. One up side to procrastination is many retailers offer more promotions and special offers than they did in past weeks. According to the National Retail Federation (NRF), American consumers will spend an estimated $437.6 billion on holiday gifts this season, so the extra discounts are well worth the wait.

Finding the perfect gift at the last minute may be difficult, but the experts at Money Management International are here to help ease the tension with the following gift ideas.

Buy gift cards - Gift cards are great gift options for all occasions. You can either choose a gift card from the recipient’s favorite store or a generic gift card such as VISA or American Express. Many online retailers allow you to create your own card design. Gift cards give recipients the option and freedom to buy something they’ll love. Just be sure to check the store’s policy. Most gift cards are invalid after a certain date and cannot be redeemed for cash. For more gift card ideas visit,

Offer homemade treats - Give your loved ones a heartwarming treat from the oven. Bake homemade sweet bread, gingerbread cookies, or mini raspberry cupcakes. Deliver the treats in festive containers. Your family and friends will be pleasantly surprised with the edible delights.

Regift - Sometimes you don’t have to travel far to find great gift ideas. Sometimes it’s as nearby as your own closet. Skip the crowded malls and high prices and consider regifting this year. Acceptable regifts include any unused gift. For successful regifting, make sure you don’t regift to the original giver and give a regift that someone would actually enjoy. For more tips and ideas on regifting, visit

The holiday season is a time to spend with family and friends and nothing shows affection more than something meaningful from the heart. Great gifts don’t have to come packaged in decorative holiday wrapping. Consider making a charitable donation to a charity in the recipient’s name. Choose an organization that has the most meaning for the recipient.

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National Regifting Day goes legit!

Posted by Kim McGrigg
MMI Community Manager 

In honor of holiday office parties and the "unique" gifts exchanged at them, the creators of (that would be us) have declared today to be National Regifting Day.

This date is particularly appropriate since, according to our unscientific research, the third Thursday of December it is the most common day for a holiday office party. And, according to our very scientific research, 4 in 10 regifters (41%) target coworkers as the recipients of their regifts.

In case you aren't sure whether or not National Regifting Day is a holiday, I am pleased to announce that last week's mail contained a very official looking document. Harris County Commissioner Sylvia Garcia proclaimed December 17 as National Regifting Day! (No, you can't leave work early!)

National Regifting Day

 Merry Regifting Day!  And don't forget to share your regifting story for a chance to win a $500 Amazon gift card. 

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MMI Debt Management Plan Client Corner
Tips for Success

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Update your account balances online. When you receive your monthly statement from your creditors, login to your MMI account and update your balances. It is important that we have the most accurate balance information possible on file. 

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Interested in following trending twitter topics about all things financial? If so, check out the popular feeds on In just once click, you’ll be able to see what is on people’s minds right now (in 140-characters or less!) Social media expertise is not required!

This summer has brought record breaking temperatures to much of the country. That’s no exception for Texas where, in Houston alone, we have topped 100 degrees more than a few times this summer – a record that hasn’t been broken since 1980. Although we’re quite used to the heat, these higher than average temperatures have brought higher than average energy bills along with them. Desperate times call for desperate measures, and high electricity bills coupled with a down economy has many resorting to clever ways to save money.

About Money Management International Management International

Money Management International (MMI) is a nonprofit, full-service credit counseling agency, providing confidential financial guidance, financial education, counseling and debt management assistance to consumers since 1958. MMI helps consumers trim their expenses, develop a spending plan and repay debts. Counseling is available by appointment in branch offices and 24/7 by telephone and Internet. Services are available in English or Spanish. To learn more, call
800-762-2271 or visit

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