I am a software salesman to the car wash industry. With the slowdown of the economy I have taken an almost 50% decrease in pay ($100K down to $50K). It looks like my income this year will be in the $40K area. I have a family of 4 beautiful kids (all girls) and a wife who works part time ($800 per month). Also, I am coming into the slow period of the industry which means my income for the next 3 months will only be enough to cover my primary mortgage (it is automatically deducted with my paycheck). I am slowly getting behind in my household bills (not my mortgage). I have about $15K in my 401K.
Should I take out my 401K to tide us over? I don’t have any equity in my house to borrow against.
The 401k option is such a bad idea on so many levels. See a question I just answered for more information, “Would it be Wise to Pull the Cash Out of the 401k and Pay Towards Our Debt? – Brandy“.
The 401k money would only be a temporary solution and what will you do once that is gone and things have not improved?
I think what you should do immediately is cancel the automatic deduction of your mortgage payment to prevent any wave of bounced checks that can cost hundreds of dollars in fees and penalties if the mortgage check hits and bounces everything behind it.
If anything, it would be better at this time to talk to your mortgage company about what options may be available to you to lower your mortgage payment.
I think you see what the cause of this situation is, a 60% reduction in income. It sounds like you are at a break even or less point and unless you can see a way to increase income then you’ve got bigger troubles ahead than the 401k money would solve.