Financial problems rarely go away on their own, even if you hope that they will. Numerous New Jersey residents struggle with overwhelming debt, and though they may want their finances to get back on track quickly, finding the best method for addressing that debt could prove difficult. Though you may initially feel that you could spend the rest of your life trying to avoid creditors, various useful debt relief methods could help you work toward a fresh financial start.
Of course, while there are useful methods, other options that may seem beneficial could actually hurt in the long run. Therefore, you may want to avoid certain ways of paying off debt due to the detrimental effects that could take place.
Using retirement funds
If you have an IRA or a 401(k) retirement account, you may think that using those funds to pay off existing debt could get rid of your financial problems. However, using money meant for retirement could hit you hard now and later. For instance, if you withdraw funds from an IRA early, you could face a 10 percent penalty as well as taxes on the withdrawn funds. This extra financial impact means that you would likely need to take out more money than what would only cover existing debts.
Additionally, taking funds from a retirement account would mean that you have less money to grow into a greater amount over time. As a result, when you hit retirement age, you may miss out on thousands of dollars. Even if you borrow from a 401(k) and attempt to repay your balance over time, the chance exists that circumstances could prevent you from successfully borrowing and paying back the money as intended.
Though getting rich quick may cross many people's minds at some point, it may not be the best option for taking care of debt. Though placing a bet or taking a risk on a lottery ticket may have the chance of paying off big if you win, the more likely outcome involves you simply losing out on the money placed on these gambles. As a result, you could face additional hardships due to trying to find a quick-fix for your debt.
Though these options may first come to mind, given more thought, you may realize that other reliable methods may work more to your benefit. Bankruptcy, for example, could help you get your finances in order while protecting retirement funds. Therefore, you may wish to find out more information on this route.