The Winner of the April 2014 Call to Action!

The Winner of the April 2014 Call to Action!

ian hullHere at LearnVest, April was devoted to financial literacy: We shared everything from our 50 best money tips ever to our graphic guide to staying financially healthy. We hope you've enjoyed boosting your money smarts along the way.

In a nod to our theme, we also challenged our readers to contribute some money savvy of their own. Our April Call to Action prompt: What’s the toughest financial lesson you ever learned?

We enjoyed reading over 100 smart responses—from the woman whose parents' retirement struggles stirred her to get her own finances in shape to the reader who realized she needed to invest in her career in order to grow her income. Thank you to everyone who shared their lesson learned.

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We'd also like to congratulate the winner of our April Call to Action, who will receive $100 to put toward his goals: Ian Hull, 29, a statistician from the Washington, D.C., area.

Below, check out Ian's response:

"The toughest lesson I learned is that it is probably never a good idea to pull out a loan from your 401(k)—in my case, in order to help cover a down payment on a house.

I recently relocated to the D.C. metropolitan area because of work, and the costs to rent here are extremely high. I knew I would be in the area for some time to come, and so decided it was time to buy a home.

I did not have a lot of money saved for a down payment, but I always heard people talking about withdrawing money from their 401(k) as "free" or "easy" money; I looked into it and the terms seemed very positive. I pulled out about $20,000.

However, in the last year, I began to realize the problems with my loan. The aspect of "easy" or "free" money is completely false. I am paying—through lost investment earning potential—every second the loan is out. Last year alone, my 401(k) account increased by roughly 25%. By withdrawing approximately $20,000, I lost about $5,000 in investment earnings last year alone. This will be compounded for decades to come, but my house will never appreciate to the same degree.

After nearly one year of status quo payments, I am now working to repay the loan as quickly as possible—while continuing to max out my 401(k) and Roth IRA at the same time. I have cut expenses in nearly every other aspect of my life to place more and more toward the loan every month. I've directed nearly all of my bonuses and tax refunds to the loan. Though I was given 15 years to repay the loan, I now hope to pay it off in the next 18 months.

In hindsight, I would have withdrawn a smaller amount by downsizing the home I bought (a 1,650-square-foot, two-level condominium), or waited a little longer to purchase while saving for the down payment. I would also not have waited a year to really start paying down the loan with determination. I realized how critical my retirement savings are, and I have a changed mind-set.

I am, however, pleased that I have learned this lesson—I am now more strategic with my investments."

Thank you, Ian!

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