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Published on November 2nd, 2017 | by The Local Staff


Four Letter Words

With four wild boys running around our house, you can imagine how often I’m using four-letter words, right? You know the ones – Work! Wash! Hush! What? There are several others that have echoed through the halls of our household on rare occasion – but their mother’s a kind, sweet soul nonetheless.


But that’s not the point, really. Nope. The four-letter word that can really get a household in a bind is debt. According to the good folks at The United States Federal Reserve System, the average American household credit card debt is roughly $6,000. If you count only balance-carrying households, that number rises to over $16,000.00. This is not a warning on the dangers of debt, however. For if it were, I’d be giving you a few catch phrases like the following:


You’ll sleep better wanting, than owing.

Don’t confuse quality of life with standard of living.

You raise your standard of living with debt, but you increase your quality of life with discipline.

There are two kinds of people in this world, people who pay interest, and people who earn interest. Be someone who earns interest.


The above are brought to you by Andy Stanley on the subject of personal finance.


But there’s another four-letter word we need to consider. Cash. It’s pretty easy to look at a written budget and determine, “I have more money going out than I have coming in. I need to cut something out!” And upon closer inspection, you may indeed find areas in which you’re overspending – vacations, eating out, cable/internet, dry cleaning and entertainment to name a

few culprits. But at some point, you may realize you’ve cut about everything you can.

So what do you do when you’ve cut all you can cut and you’re left with only four-letter words?


You raise your income.


1) EARN a pay increase at your existing job.

2) Get a new job – one that pays MORE.

3) WORK overtime if applicable.

4) If you have a spouse who’s ABLE to work, but isn’t currently? Look into it.

5) You’re particularly, uniquely talented? Then GIVE lessons.

6) You have one job? Can you TAKE on a second?

I’m certainly not saying these are easy solutions, but if spending at your current rate and earning at your current level just won’t play nicely, then you need to do something. You need to earn more. Find a solution that’s workable, knowing there’ll be some give and take. Here’s what I do know. Your situation won’t take care of itself. It’ll get worse. Much worse. And financial stress isn’t just a matter of numbers. You know this. It affects the family.


Now you may say, “You don’t get it, Billy. Another job just isn’t happening. We’re up to our eyeballs holding down the jobs we have while taking care of the family. Why can’t I just pay off my debt from my IRA. It’s my money, right? Why not use it?”


Good question. I have several reasons: There’s a 10% penalty on the withdrawal if you’re under 59.5. That means 10% of your withdrawal doesn’t go toward debt…it just goes. So kiss that money goodbye. And depending on the amount you pull out, you may have just bumped yourself into a higher tax bracket. Strapped for cash and paying more taxes? Not good. (As if Uncle Sam knows what to do with your money.) And finally, that money was put into your IRA for retirement. It’s not a boat account, a car account or even a debt account. It was put there to take advantage of compounding returns and hopefully secure a comfortable retirement one day. And now it’s being used to pay off something you may not even use anymore. Is it a possible solution? Yes. Is it going to kill you? No.Will it solve the problem? No. Not by a long shot. It’s treating the symptom and not the cause.


Let’s say you’re able to pay off most or even all of your debt with your IRA. If your income is X, and your expenses are X + Y, then one day, you’ll be right. back. where. you started – with a smaller IRA.Consider additional income when further cutting is no longer an option, and you may be introducing a new four letter word to your home: Extra. Oops, that’s five. I added…but look what it got me:



I could do this all day.


Billy McCarthy is a Wealth Manager with CapSouth Partners in Dothan, Alabama.


Contact Billy at 334.673.8600.


Investment advisory services are offered through CapSouth Partners, Inc., an independent Registered Investment Advisory firm. Nothing contained in this article is intended as, nor should be construed as, an individual investment recommendation.

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