By Ric Edelman

Question: Including my house, vehicle, student loans and credit cards, I am $254,104.83 in debt.

Currently, I am in the process of trying to sell my house.  I can not cut the price and take a loss because I do not have the money to bring to the closing table.  I am trying to just break even.

Last year, I tried to start a business, it did not do good so I shut it down.  That set me back about $16,000.00.  It is all on credit cards.

Since now I have been annexed into the city, my personal property taxes went up $1600.00.

Currently I believe my credit score is fair.  Due to my debt/income ratio, I do not see my credit score going up much until I do something about debt.  The income is not moving fast enough. Something has to be done about the debt.

Since the property taxes have gone up, I am unable to pay the Credit cards that have business expenses on them.  I have alraeady turned them over to a debt negoiation company.

Since I do not know when the house is going to sell, I am debating whether or not to borrow the money from my 401(K).

Should I wait a while before I borrow the money and see if the house sells or should borrow the money ASAP so that I can start turning things around?

-Brad from Tennessee

Answer: You should consider a short-sale. This enables you to return the house to the lender for its current value, and the lender will cancel the loan.

Do everything you can to avoid touching the money in your retirement plan.

If you haven't already, get a job (or two) that provides a real paycheck. Do not attempt to build your own business. Lack of capital is the #1 cause of failure, as you've discovered, and even after the business fails the debt it created remains. Too many people falsely believe that running your own business is the key to success, but this is simply not true for most people. And I say that as past winner of the Entrepreneur of the Year Award (for metro Washington, DC). You'll be much better off getting a real paycheck and real benefits. Only after you have built up plenty of cash and written a thorough, vetted business plan would you be ready to attempt the launch of a business.

Good luck to you!
Ric

EXCERPTED FROM RIC EDELMAN'S BOOK

The Lies About Money

Achieving Financial Security and True Wealth by Avoiding the Lies Others Tell Us-- and the Lies We Tell Ourselves

Publication Date: October 2, 2007

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