Should I downsize my apartment so that I can focus on paying off my credit card debt, 401(k) loan and car payment?
I am 27 years old and I earn $50,000 annually. I have $30,000 saved in my 401(k), with approximately $10,000 in credit card debit at 18% interest, a $4,000 401(k) loan (which I will have paid off in the next six months) and a $22,000 car note at 3% interest. I have been working overtime hours consistently and have been making more than the minimum payments in order to significantly lower my debt by several thousand dollars in the last five months. Do you recommend downsizing my apartment and renting a room from a roommate, so I can focus on paying off more of my debt and saving, should or continue to pay off the debt the way I am doing now?
Congratulations, on having the determination to keep working towards this goal. Moving in with a roommate might be helpful in reducing costs but just make sure that you address whatever lead to the debt. One additional recommendation that might be helpful is to refinance your credit card debt. If you can get a lower rate while you pay it off that will help you to pay it off faster. Just make sure to keep thinking "big picture" and working towards what's important for you in your financial life. Hope this helps.
Renting a room from a roommate will free up some of your cash flow to be put towards paying off debt faster. If that doesn't require a significant lifestyle change you should do it! You'd want to start by paying off your highest interest rate debt first, that being your credit card. You could consider using your 401(k) to pay off all your credit card debt, however, you have to understand the risks in doing so. By taking a 401(k) loan you're essentially foregoing the potential return the funds could have earned in a tax-advantaged account for x amount of years. You could also be "double taxed", since you're paying yourself back with after-tax dollars.
Your car loan is low at 3%, however, in the future, consider spending more within your means when it comes to cars. They're depreciating assets, and it's tilting your balance sheet into the debt side more than it should.
Any additional cash flow that you can free up to pay off your credit card debt would further accelerate paying it down.
Best of luck,