My debt story is the classic tale of a young girl who had money but couldn’t manage it — and ended up losing a lot more than just her credit cards.
I graduated from college with more than $12,000 in student loans and $10,000 in credit card debt. I never learned about money as a kid because my parents never talked about it.
Money was just always there when I wanted a new toy, when I needed back-to-school clothes, or when we went on family vacations. I didn’t learn about the value of money because I never had to work for it — until I went to college.
I was accepted to university in a languages program, but quickly landed a part-time job at a bank and changed my major. I started working in customer service and became obsessed with money. I focused my studies on economics and pursued a financial planning certification after graduation.
You’d think I’d know better than to accumulate debt that I couldn’t pay off, but I didn’t. This is where the story of my debt mistakes begins.
Accumulating debt for non-justifiable reasons
Maybe it was naive, but I didn’t know that college students were supposed to be broke. In my early 20s, I applied for credit cards and spent money on all kinds of things that didn’t matter, like eating out with friends, decorating my apartment and buying new clothes every week. When I should have been eating ramen, I was ordering extra desserts at restaurants, and instead of packing granola bars for long days on campus I was sitting in the school cafeteria.
What did I learn from my very expensive mistakes? If you’re going to get into debt, make sure it’s for something that’s worth the financial burden. There’s a lot of stress that comes along with monthly credit card payments; if I would have properly set a budget in college, money would have been one less thing I needed to worry about.
Using credit to budget
After graduation I found a job in banking as a financial planner. I was a young professional making a six-figure income, but there was a catch — it was based on sales commissions. Every time I sold investments to clients I earned a percentage. I was a really good sales person, but not good enough to keep it consistent.
Looking back now, I know it wasn’t a very smart idea for a girl who couldn’t even manage a college budget to accept a full-time job based on variable income. On paper I had a good yearly income, but day-to-day living was tough to manage. Some months I had a lot of money and some months I had none.
So what did I do? I applied for more credit to get me through those weeks when sales commissions were low. That was my second mistake, one I see people make every day. I always advise clients not to get into more debt as a budgeting solution to pay off other debts, but I couldn’t take my own advice. This mistake landed me another $15,000 in debt.
Getting into debt to keep up with the Joneses
At 27 years old, I was $37,000 in debt with nothing to show for it. So what did I do? I did what every young professional does when they have to keep up appearances of success: I bought a brand new Honda Civic, even though I lived downtown and really didn’t need a car.
That was my third and probably the biggest financial mistake I ever made. Within a week my total debt skyrocketed to $67,000, and then the payments started.
People thought I had the perfect life. To the unknowing eye, I did. I was young, successful, and driving a brand new car. What they didn’t know is that under the designer suit and high heels, I was drowning in debt.
Debt is so much more than money
Living on credit and racking up tens of thousands of dollars in debt is not financially or emotionally healthy. The amount of stress that comes with deciding to buy groceries or pay your rent is more than anyone, especially a 27-year-old, should have to deal with.
One day, I sat on my sofa staring at my car loan payments, my credit card bills and my student loan statement and I just wanted to cry. I realized in that moment that something had to change. I decided to take financial responsibility for my mistakes. I had to make a plan and take action if I ever wanted to become debt free — so I did.
I got a second job, moved to a cheaper apartment outside of downtown and sold my car. I changed my spending habits and started making more than the minimum monthly payments. It took me almost four years to become debt free and now I try to live on a cash budget. I use my credit cards within reason and make sure I can afford to pay off the balance each month because I’ve been in debt and I’m never going back.
Because that’s the thing about debt — it accumulates very quickly when you’re not looking. But no matter how hard you stare at it, it won’t go away on its own. And it takes a very long time to pay off.