Financial decisions are often no-brainers. (Do you really have to think about whether it's smarter to buy the pricey car of your dreams or opt for a cheaper model and put the leftover money in savings?) But sometimes you're faced with two less-than-ideal options, and choosing the wrong one could mean digging yourself into a deeper hole. For each of the tricky situations that follow, see if you can figure out the better of two not-so-great alternatives.

The Choice: Withdraw money from a Roth IRA or take out a loan from a traditional 401(k)


Withdrawing contributions made to your Roth means you forfeit the opportunity to let that part of your investment grow over time, but it doesn't trigger penalties or taxes. A 401(k) loan is more problematic: If you lose your job, you must repay any outstanding loans quickly; otherwise, they can be treated as early withdrawals and subject to taxes as well as a penalty if you're under 59½. While you're focused on repaying our loan, it's likely you'll have to reduce future contributions—that's no way to build retirement security.
The Better Bet: Roth IRA

The Choice: Fall behind on student loans or on credit card minimum


Credit card companies can hit you with hefty fees and raise your interest rates if you don't pay at least the minimum amount due on your bill. But if you're delinquent on your student loans, your wages can be garnished and the government can intercept your tax refund. Plus, if you were forced to declare bankruptcy, your credit card balances might be forgiven, but your student loan debt (in most cases) would not.
The Better Bet: Credit card

Next: Social Security benefits, retirement savings, and more
From the August 2014 issue of O, The Oprah Magazine

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