Living on a Budget: A Decade of Debt

A Post By Katie

Confession: My first credit card was a pink Visa from Victoria’s Secret. I was twenty years old. I was buying underwear I couldn’t afford. I didn’t ask about the interest rate.  I didn’t read the fine print. And when the first bill came in the mail, I didn’t even open the envelope.

Thankfully I wasn’t a total moron and after the interest on the VS card mounted to over $100 I paid it off and closed it immediately. Unfortunately, my first foray into the land of credit was soon followed by a Wells Fargo credit card, multiple credit cards from Chase and finally one from Barclay.

Over the past ten-years I’ve used credit cards to purchase countless cups of coffee, restaurant meals, plane tickets and the occasional clothing item. I purchased my first professional camera with a credit card. I got laid off, I got married, I built my own business. All the while my credit card balances increased, and unbeknownst to me (because I’m a dumbass and wasn’t paying attention), so did my interest rates.

Then one day, two years ago, I got inspired and did the math. My debt had reached its height of $22,000. And that cup of coffee I bought at Starbucks in 2005 had compounded at a rate of 13%, costing me a grand total of $30.33. (The only phrases that can appropriately describe how I feel about spending $30.33 on a cup of coffee are full of creatively-spun expletives which Paul has advised me to leave out of this post, so I will refrain.)

How had my financial situation gotten so bad? Am I really passive enough to be swindled by credit card companies? Somehow I’d failed the advice and good influence of my parents and repeatedly told myself that debt was ok and normal. I mean, the whole country is in debt. Isn’t this the way we are supposed to live?

It is our duty to shop, even if it means buying on credit.

We live in a diverse world with many cultures living in many different ways. Unfortunately, the culture that the majority of us are immersed in tells us repeatedly that we are fat, ugly, stupid, lonely, dirty, and in imminent danger of death by terrorists, communists, wolves, sharks and serial killers. Furthermore we are incessantly reminded that all it takes to uncover our beautiful, thin, smart, edgy and immortal selves is to purchase magical products that make life PERFECT. Stressed? Sad? Happy? Afraid? Go shopping! Fill that icky, empty feeling inside of you with shoes, diet drinks, lipstick, diamonds, flowbees and chia pets! 

Consider ‘Black Friday’ for a minute. Less than 24-hours after sitting with our families to give thanks for all that we have, we dash out the door to the nearest Walmart and join in the fun of stabbing each other over DVD-players.  On this day, our nation’s economy walks into the doctor’s office, turns his head and coughs, and awaits the results. Economists sit on the edge of their seats, mouths frothing… Have the citizens of the United States of America been shopping enough??? Hopefully!! Otherwise people lose their jobs. Families lose their homes. Children even go hungry. 

In this culture, our very survival depends not on our collective ability to construct a fish trap or butcher a caribou, but on our ability to purchase cheap, plastic junk from China. It is our patriotic duty to shop, even if it means buying on credit.

I debated long and hard about even writing this post. I mean, who really wants to air their terrible financial decisions on the World Wide Web? But then my dear friend and accountant reminded me that I’m not the only one. On this very day in November 2013, about 68% of Americans are slogging through life with a Sherpa-sized knapsack of credit card debt on their backs. And the sad thing is, we are ashamed to talk about it. We pretend that all is well and continue to buy things that we don’t need, all the while, secretly hoping that our fairy godmother will fall from the sky in the form of a wealthy and forgiving benefactress.

Not only is this a horrible personal debt. It’s a horrible debt to society. When we live outside of our material means at age 20, we forgo our future dreams, creations and freedoms. The world-saving ideas that we are all capable of are hijacked by the stress of debt and the distraction of bright, shiny objects. Like deer in headlights, much of my generation is paralyzed by the very foundation our economy is built upon.

Enough Katie, end your tangent and get on with it.

One decade later, I’m 30 years old, a tiny bit wiser but still buried under a small mountain of debt. As much as I like blaming other people, the debt is mine. A product of my very own ignorance and lack of self-control. One Decade of Debt. 

Over the past two-years I’ve managed to cut my debt in half.  The remaining $11,000 is all that separates me from the freedom to save for the future and even turn down paid work once in a while to pursue some of the photography projects I dreamt of back when I was twenty.

My top priority over the next year is to pay this debt down. Hence the move out of New York City and into a travel trailer in rural Oregon, 20-miles away from the nearest coffee shop.* The $1,200 previously spent on rent every month in Brooklyn will now go toward credit card bills. With a realistic but strict budget and a lot of self-control I will be debt free by November 2014.

Stay tuned as I pay off every penny and walk away from the detrimental mind trap of consumer culture.

Better yet, join me on my journey to debt freedom by taking the following steps:

1. Create an account on www.readyforzero.com

2. Track your debt by checking your account at least once a week.

3. Stop eating out. Period.

4. Make your own coffee, every morning.

5. Start riding your bike or carpooling to work.

6. Put all of your credit cards into an envelope. Lick it. Seal it. Bury it.

7. Create a Fun Money Budget and stick to it.

8. Follow the debt payment plan like it’s your new religion.

9. When you need inspiration watch this video about the guy who paid of $91,000 of debt in 10-months!

10. Send us your success stories and we will share them here!

 

* To those of you who saw me boarding Alaska Airlines Flight 41 at 6AM this morning with a Starbucks cup in hand, I'd like to inform you that it was purchased with a gift card given to me for my birthday last year.

** During my research today I came across a suprising factoid... the state with the highest average credit card debt is... Alaska!

 

 

 

 

 

 

 

 

 

Comments

[Selena Malone]

I've seen this recent movement of people posting about their journeys to financial freedom. Dave Ramsey's The Total Money Makeover: A Proven Plan for Financial Fitness, is a book frequently credited as an inspiration. Whatever the motivation is, it's nice to hear about the shift away from consumerism. Good luck and thanks for sharing this very personal matter with your followers.

[Kathleen]

Good for you, Katie! It's a hard lesson to learn, but it pays off big time in giving you options in your life. When S was offered a buyout which would let him retire early and keep health insurance for both of us, we did the math. Because we had been very careful about incurring debt, he was able to take the buyout even though it meant a tighter budget. Other employees had to turn down the offer and hope they weren't part of layoffs because they just owed too much money.

[Katie]

Selena - Thanks for reading! I'm excited about the increasing trend to pay off debt. I haven't picked up that book yet but I've had a couple people recommend it to me.

[Katie]

Kathleen - It's so important to retire when you can and enjoy life! Congrats to you both for putting yourselves in the position to take that opportunity when it came. I hope to follow in your footsteps someday...

[Laura Ellsworth]

LOVE this post! I'm currently in part two of my scheme to pay off all debt. After taking a second job I've been able to eliminate 17K of consumer debt and will hopefully slash my 23K of student loan debt by September of 2014. The community of those who are looking for financial autonomy is growing! It's so great to hear about your success.

[Liam G]

My wife and I are on the long strange trip to zero consumer debt (we do have some rental property debt, but the tenants are paying those bills). For us, we had a crazy 24 month period in our lives where we went from approximately $32,000 in consumer and student debt to zero (an unfortunate event in my life gave us the benefactor money you describe), we started a family, our income was cut in half and we (again) got caught in bright shiny consumer debt. This time, the debt ballooned to only $6,000 before the warning flares were fired off. I found a few blogs about frugal living (Mr. Money Mustache and Afford Anything are two of my favorites). We've cut expenses ($25/month for 'unlimited' smart phone plans), we've started cooking even more at home (we were avid cooks to begin with, we've just ratcheted it up a few notches) and we've started to direct every free cent at debt elimination. We are fortunate enough to have a net take home of $3300/month (currently). By directing every free penny towards debt elimination, we were able to pay off almost $2,800 this past month, even though we had 'fixed' expenses of almost $2,500. I'm not entirely sure how we were able to spend that much to reduce debt, but we did. We reduced our debt by more in the past month, than we did over the previous 5 months combined. We are trying to keep this momentum into the New Year. Once we are debt free (hopefully by mid-Jan), we are going to start directing most of our debt-pay-off money towards non-consumer debt (mortgages), or investments (future rental properties and/or stocks).

[Katie]

Wow! Liam that is such an inspiring story. I'm an avid MMM reader as well. I'll check out Afford Anything - I hadn't heard of that before. I think the hardest part is making the initial lifestyle changes and getting the momentum going. I try to look at it all like its a big game.. how little can I spend today? How much can we pay off this month? Thanks for reading! Keep us posted on your progress.