No. of Recommendations: 9
Step one - Stop spending!!!

I'll wager a cup of coffee your friend took a second mortgage to pay down the CC debt. Your friend continued to use the CC and the problem came back. She needs to stop buying things.

Step two - She needs to get a handle on her income and expenses. Make a budget and stick to it. She needs to Live Beneath Her Means.

Step three - Sell some of the crap she can't afford. Use the money to pay down the CC debt.

Step four - Don't buy more crap she can't afford after she sells the crap she couldn't afford.

Step five - Get a second job. Use the extra income to pay down the debt.

You didn't share the details of your friend's problem (amount of debt, income etc). You didn't need to though. Unless there was a medical emergency in your friend's family, the problem is obvious. It isn't that she doesn't have enough money to spend. Her problem is that she spends too much money. The spending MUST stop.

If she taps into the 401K, it will cost her about 40% more to pay down the debt. These costs come from taxes (I'm assuming 30% from State and Fed) plus a 10% penalty. What does she owe on her credit cards? Does your friend want to pay 40% more?

She'll also loose any growth that may come from the money in her 401K account. She's 10 years from retirement. At this point she needs every dollar she can get her hands on.

Bottom line - for your friend to get out of debt before she retires, she'll need to get control of her life and her finances. Cutting out the frivolous expenses and living within a budget is what she needs. She needs to tap into her 401K like she needs a hole in her head.
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