I'm gonna share something that's been an embarrassment to me, but you can't make fun of me because it turned out to be an enlightened act...
Like so many others these days, I was living beyond my means.
I didn't want to change my 401k contribution, (18% of my before-tax pay goes into it every pay period), but I had more outgo than income. So out came the credit cards. It was when I started charging Big Bubba's college tuition to the credit card that I realized something had to give. I started looking for the least painless way to pay off the credit card debt. A couple quick possibilities came to mind-
A home equity loan, or a 401k loan.
A little research showed that for me, the 401k loan seemed the best alternative. I'd be borrowing the money from myself, and paying the money back to myself at 9% interest. Loan payments would be deducted automatically from my paycheck, and would not affect my normal 401k deductions. I could spread the payments out over a 36 month period, and had the option of paying off the loan in full at any time.
-The money I borrowed would no longer be at work earning interest/dividends in the 401k.
-If I lose my job the loan must be paid off immediately or there will be substantial penalties.
So now I've nearly paid off the loan. While the rest of my 401K has lost half its value, I've been paying myself a solid 9% return. The credit card I paid off was charging me 18%, so I avoided that usury rate. Something I was forced to do because of lack of discipline and stupidity on my part ends up looking like absolute brilliance.
And here's something funny...
I'm considering doing it again. A guaranteed 9% payback to my 401K is looking mighty attractive right now.
How secure is your job?
If your prospects are pretty solid, maybe you should consider it too?