So, when I left off in “Bad decisions Part 2: Easy credit, hard payments” recall, I had just started using my credit card how the credit card companies wanted me to use it. Racking up debt way beyond what I could pay off each month, and continually adding to it, to inevitably have a lifelong bill and interest payments to “the man”. Remember, they have all the loopholes and technicalities taken care of so a late payment, jump interest to 14%, another late payment, 16%, it rained today? 22%, haha! Okay that didn’t happen, but it sure seems like it could have with the ways the interest rate would keep increasing. I didn’t really understand that higher interest rate means I’m paying way more for my borrowed money than it’s worth.
I lived on the edge like that with no savings per se (recall the student loan post) but then, I broke my collarbone mountain biking. At the time, I had decent health coverage through work, but it didn’t cover the unpaid time-off that I had to take to heal. So, while I spent 12 weeks healing, my bills grew higher and higher since I no longer had any income. After that incident, I had a temporary glimpse of how bad the situation was. I focused and was eventually able to catch up on rent and utility bills, and then I declared in earnest to pay off the credit card. Well, I didn’t, and I kept using it like it would never have to get paid off. I’d get it close, but then the alternator would go out on the car, or I’d have to fly home for the holidays, or Widespread Panic was in town for a show… I blame myself, but also the company I kept. They lived by the “we can make more tomorrow” philosophy since they were mostly restaurant servers and could pick up extra shifts and have $100-$300 cash in hand at the end of the night. I was in the kitchen, paid hourly every 2 weeks and had no hope of earning extra cash…
What happened next, wasn’t me putting the card away and paying it off. Instead, I got ‘ smart’ and thought I’d go a different route and play the credit card game against them. Remember, I suck at good financial decisions, I can make bad ones all day long. Anyway, I decided that I’d get a NEW card and transfer the balance to that card for 0% interest for 12 months, and pay it off that way. I planned to take that extra $100 from interest on the old card that I was now saving, and use it to pay down the principle on the new card. Except, now I had TWO credit cards, and one was empty! I told myself that I would just use the old card a little bit. But next thing I knew, I was in a restaurant ordering microbrews and dinner and realizing, “I don’t have the cash for this, I should go before the tab gets too big.” I was constantly telling myself that this was the last time – tomorrow I would stop spending and pay down the bill…
But, the credit card didn’t get put away, and it became easier to use that card too. Except now, I have two cards, and I’m putting more and more on them. Enter Christmases, birthdays, Opening Day at Coors Field, subsequent ball games, plus music at Red Rocks, Filmore East, The Bluebird, and Boulder Theater! (Have I mentioned how much I love seeing live music?) I love it! Denver has a great music scene and man did I revel in it. But it costs a lot. The best example of this was when Neil Young came to Red Rocks for a 3 day show. For the first time ever, I wistfully sat to the side and said “I don’t have enough $$ to go. I can’t afford it.” I was in school with some people that went to the first night and it sounded epic, a first set of all electric, then acoustic, then electric (did I mention Chrissie Hynde and the Pretenders were there too?) So, come the third night after hearing stories of these epic shows, I decided this is it! I’ve had all I can stand, and I can’t stand no more! I’m going to the show! I marched downstairs after class, went straight to the ATM and it said Checking: $23…. damn…. Savings: $60…. double damn… Well, I get paid Friday (this was Wed) I’m working the rest of the week, what the hell. I emptied my savings and walked out to my car. I stopped at a store to get a sixer for the show, and headed out to Red Rocks. I hit the off-ramp and found many people willing to sell tickets, but I was down to $40. After some haggling I got my ticket for $40! It was an amazing show, one of my top 5 ever, but this was typical of most of most of my financial decisions. Impulse, impulse, impulse, and no thought to future.
Eventually, I set up a system to pay the cards down. I would always write a check towards the cards first thing when I got paid. This worked, but it took $750 off the top of each paycheck just to pay down debt. That’s ridiculous! That’s about $9000/yr towards paying down debt, so why wasn’t it all paid off in a year? Well, I had a LOT of debt, and instead of “sniper-ing” one card at a time, I was paying $300 to Discover, $300 to Visa, and $150 to Target, yep I even got a Target card…. I mean for 5% off purchases? Yeah, it didn’t pay out for me at all. Plus, by splitting it up over 3 cards, I still spent close to the amount I paid for each card each month through dumb decisions. Maybe one month I’d spend $300 on Discover, then the next month on Visa, the next month on Target. This was not helping me pay down debt. I at least had been at this a good year or so before I met Mrs. SSC, and when we joined financial forces, I still brought in almost $9,500 of credit card debt to the relationship alone.
Looking back, I realize I could’ve been more efficient with my attempts at paying the credit cards down. By going after the highest interest first, then the next I could’ve save us a year or more of work, but no…Spreading it around and paying a little toward each card just wasn’t effective. However, on the bright side, I was consciously working toward paying them off.
What do you notice that tends to be a recurring negative trend in your finances? What, you’re not tracking them? At ALL?! Whoa, right now, open an excel sheet and type “My money” in the upper cell, and start listing where your money goes each month. It’s that simple. Even starting with large categories like, credit card, mortgage, car payment, insurance, etc… can be eye opening as to where you can cut costs. You’ll probably be as amazed as I was when I actually started “budgeting”. In a few days, I’ll be posting about my relationship with budgets in my Bad Decisions Part 4: Budgets are a four letter word!