Is this a smart idea, to take a loan out of my 401k for?

I think you should start a side fund, if you can, to save money for your venture, rather than to touch your 401K. I was in a financial pinch a while back for about the same amount of money and our “guy” at work that I would submit the paperwork through told me that should be your absoulte LAST resort.

If it’s something that can wait a month or two for you to pull together the money, I’d wait and save.

IMHO, the only good reason to borrow from a 401K is to pay off existing high interest debt. In fact, I believe there are limitations to what you can borrow from a 401K for, but that might vary from state to state (not really sure).

So, why don’t you just start off with a single game? Either sell an existing game you already own or purchase one strictly for resale. Put the profits aside for the purchase of the next one that comes along. If you are disciplined and keep all your gains to re-invest you will soon be bitching about how the IRS sucks all your hard earned profits away just like the rest of those “rich” small business owners out there.

I would never borrow from my 401K unless I was about to be thrown out on the street. Maybe not even then. Far too many who borrow never end up paying it back. That means you lose significant penalties on it. It’s not just losing the capital gains or losses.

If you can’t come up with a thousand dollars fairly soon, then you are already spending too much money. You should be saving in addition to your 401K savings. That will not be enough for retirement. For every dollar in the 401K, I try to have fifty cents for my after tax savings account—the is the money I use when big expenses come up.

If you don’t have enough money for your venture and you can’t cut your expenses enough to allow for expenses now, then I would rather see you reduce your 401K contribution than borrow from the 401K. Remember, you may lose your 401K employer contribution if you do that.

The whole point here is to think very seriously about how valuable this hobby is. If it’s worth being poorer when you are old, then sure, borrow the money. But if this is money you would sorely miss when you were older, don’t do it.

It’s only a thousand dollars, so it doesn’t seem very significant to me. So if you should be able to pay it back easily. But if a thousand dollars is going to put a crimp in your style and it will be a problem paying it back, then don’t do it. But a thousand dollars is so little money, that it seems to me if you have a concern about it, you shouldn’t borrow it.

@wundayatta The payments on the loan would be taken directly from my paycheck, I would not be able to miss a payment (except for the seemingly unlikely event of me losing my job). Since it would be a loan from myself I can model the repayment however I want as well, be it one month, 12 months, 3 years (all changing the amount I would be paying back per bi-weekly check and how much total interest).

I can’t come up with $1000 (which in fairness I would probably only need several hundred, $1000 is just the smallest I can take out, I would repay the excess immediately if I’m allowed, which I’m waiting to hear if I am) fairly quickly because I pay an incredibly amount (over $700) a month in student loans. I do save money into a general stock market account, but it’s to the tune of $50 a month (most of my spare money goes directly into the student loans), so I would either have to sacrifice my “savings” or wait in excess of a year to accrue the money.

@YoBob I hadn’t thought of selling my existing games. I’ll have to go home and give them a good hard look to see how attached I am to them. The downside is the majority were purchased off ebay/amazon already, so I would see no profit. But it would give me some start up cash.

@tedd – Plus, being “in the business” chances are you will run across that particular game again in the future so you can buy it back if you really miss it.

I haven’t done this but my wife has (not video games but selling on Ebay). Be prepared to have a shipping/receiving operation in you living room or garage. I’ve noticed that a lot of the items on Ebay go cheap but the profit is in the shipping cost. And keep good records. You can do it with a spreadsheet but make sure you do it.

Wouldn’t it just be easier to have a garage sale?

Or you could call who handles your student loans and tell them that you can only pay $500 next month. They probably won’t mind.