I’ve talked on this blog before about how I made some really bad financial decisions, especially related to my wedding. I had no self control. If I saw something and liked it, I threw it on plastic, never once paying attention to my balance, interest rate or fees. Then one day as I was paying bills, I realized that even though I’ve been paying the minimum payment every month on my cards, the total balance was still going up on some. That’s when I looked at the terms of my credit cards and realized how bad my situation was. It was worse than I ever thought it would be, and it was out of complete carelessness. I realized that if I was ever going to afford a house or a child, I had to make big changes quick. I decided to get my act together, tackle my debt, make a budget a financial plan to try and right my wrongs and get back on track.
I’m going to be very honest and open with my financial situation here. I know a lot of people are scared to reveal actual numbers, and I am too, but for the sake of being open and maybe possibly helping someone else, I’ll let it all out. Numbers and all. It’s incredibly embarassing to admit for me, and please don’t judge. Here we go.
I had a total of 11 credit cards. ELEVEN. At the height of it all, one month after my wedding, I carried around approximately $8,500 in total credit card debt. (Plus some more lost money in overdraft fees from my always-low checking account.) It was a lot for me.
It started out innocently enough. My senior year of high school I signed up for my first credit card at Express as a way of building some credit in the first place. I barely used it that first year at all. Then I got one at Victoria’s Secret in college because I worked there. I did pretty good with these two cards at first. But then it got out of control fast. I saw how easy it was to manage these two so I thought surely I could get some more and it’d be no biggie. I was lured into nearly all of them by sales associates talking me into the sign-up savings. How could I NOT save an extra 15% on those new pants at Macy’s?! There was no harm, right? Wrong. I said yes way too many times to that sales pitch at the register.
It only got worse. For a work trip at my former job, my checking account balance was super low and I knew I wouldn’t be able to even afford to buy meals for the week. At that job, we got reimbursed for expenses after the trip, so I had to find a way of funding my expenses upfront. Signed up for a new credit card before the trip and used it frequently. Got home and decided I wanted a new laptop so bought one with that same card. Then around wedding time, I was again lured into saving on our wedding bands, my dress, the groosmen’s tuxes AND our honeymoon flight by getting even more new cards. Oh yeah, and the entire time I was also eating out frequently, ordering delivery, getting fast food and shopping far too much. All on my cards.
The reality is, I saved nothing. I lost a lot. I never asked the credit card terms before signing up and got hit with loads of finance charges, high interest rates and who knows what else. Knowing that all that money could have gone toward my house savings infuriated me. I hated myself for being so irresponsible. But wallowing doesn’t fix anything so I had to get serious.
First I called my mom and confessed the trouble I got myself in. She agreed to “allow” me to dip into the savings account she had set up for me as an emergency/house fund to start chipping away at the debt. But to figure out which card needed paying off the most, I had to make a list (yay lists!). My first step was to make a spreadsheet detailing all my cards, interest rate, total balance, available credit and any yearly fees or other terms worth keeping in mind. I took $800 out of my house fund to pay off one card entirely – Zales, which had the highest interest rate of them all (28.99%! *cringe*).
Then for awhile after, I just paid a little more than the minimum due on all my cards. It was something, but it wasn’t enough. Enter Amberly. I found her Money & Marriage series and was intrigued. She introduced me to Dave Ramsey, and that very day I instituted his debt snowball. Slowly I started getting those balances down but only was able to close a couple cards that had small balances to begin with. I did feel victories with each, but I was egaer to knock the big ones out.
…and then my tax return came. Hallelujah! I got the biggest return I ever have thanks to filing as married for the first time. Together, Cal and I got $2,850, and we decided to split it in half. I applied every cent of that return to my credit cards (and his all went to his own student loan debt, which is another story in itself). With that, I was able to pay off two more cards entirely and half the balance of the card with the biggest total balance and next highest interest rate. This was the biggest win I have felt yet, and it feels so good.
I now only have four cards with balances, and with the money I’m saving from no more payments on those other cards, I can chip away at these four much more quickly. I also put a freeze on my remaining cards. I only actually carry one card with me to use in absolute emergency (which I did have to once when my car died on the side of the road and I simply didn’t have enough money in my checking at the time to cover the repairs). Otherwise, if I don’t have enough money in my checking or it’s not budgeted for, I don’t buy it. With continued hard work, I think and hope I can knock these last four out by the end of this year.
I also took some other small steps to cut back on spending itself. I started meal planning, which is saving me so much on eating out, buying groceries and wasting food. I coupon more. I took freelance jobs to have more money coming in. And in general, I try to live on less. That sometimes translates to saying no to fun things you otherwise would have said yes to. I declined concerts with friends, eating out, going for drinks and traveling to places that would require spending too much. And now when I do go out, you can bet it’s with a coupon or to catch a happy hour special. To go along with the new me, I wanted to do a good big clean up at our apartment, and I purged tons of items and donated them. Less stuff = less clutter = less stress = less spending.
I also knew it was important to get my savings account built up again, so I changed my direct deposit at work to send $20 every month straight into it, and I have vowed to not touch it again, pending disaster, emergency or when we’re ready to use it to buy a house. It’s not a big contribution, but it’s better than nothing. I should also note that I compared just about every bank in my town and picked out the one savings account at the one credit union that would yield the most interest earned and lowest (read: no) fees. Seeing that savings number very slowly go up again gives me even more confidence. Little steps lead to big changes, I’m telling you.
Not gonna lie. Getting your finances back on track is TOUGH. I’ve slipped a few times, but I try to make up for it and am far more aware of it now. Getting closer to my end goal of being debt free with a nice savings and owning a home is so worth it.
I’ve seen a lot improvement already. Freeing up paying so many cards has given me more money to work with paying off the ones that are left. In turn, my credit score is going back up and my credit utilizaton rate (or total balance versus available credit) is pretty darn good too.
I should note as well that I’m purposely keeping all my paid off cards open a little longer. I’m saying no to temptation to use them by stashing them in my nightstand and never carrying them with me. But to keep that credit utilization low, I need that total credit to be high as my balances get lower. This gives me a better overall credit score and will work in my favor when we do apply for a home loan. As soon as we’re to that point and the loan has gone though, I plan to close at least half of my cards.
What I’ve also learned is that now that I’ve changed my bad behaviors, there are benefits to keeping just a few cards. I plan to keep Victoria’s Secret and Express simply for the discounts and rewards from each store, but will always pay off all balances immediately. These two cards were never a problem for me in the first place, so it makes sense to keep them. I’m also keeping Tires Plus because the card has good terms and is peace of mind in case one of our cars needs a repair more costly than we can afford in our checking. I’ll be keeping my Wells Fargo visa as the general emergency card because it has the lowest interest rate of them all (9%! what what!). I’m on the fence about keeping my Target card though. I like that I get 5% off using it, but it’s been the card that I’ve got in the most trouble with, and the interest rate and fees are higher than I’d like. I may keep it for awhile and see if I can keep self control having it but stick to paying it off right away.
This all being said, my last point is that just because I’m on a budget and am trying hard to pay off debt, doesn’t mean I allow myself no fun. You have to make some exceptions now and then, or else you become so upset with all work and no play that you self sabotage. Like I mentioned, I still go out occasionally, but when I do, it’s with coupons or for happy hour deals, or I try to find free things to do with friends instead. I say yes to far fewer concerts than I once did, but I make exceptions for events that I absolutely love. An Alice in Wonderland ballet will be happening here in April and I splurged on tickets to see that because I know I will love it.
I also prioritized my other expenses outside of credit cards to find other places to cut back. I rate shopped for car insurance to make sure I was getting the best deal for the best coverage (and I am. Progressive FTW!). I’m going to cut out the DVD plan on our Netflix and only have streaming. We got rid of our garage at our apartment to save $30 a month on renting that. I only pay for one fecal test at the vet now (instead of two because if one has worms the other will too! durr.). One thing that’s super important to me though is TV. I pay a lot for DirecTV every month, but it’s an expense I find worth it. I LOVE my TV, and while I could live without it or with a cheaper plan, right now it’s simply not something I’m willing to give up. #Sorrynotsorry.
Tips for You: My Takeaway
-Check out Dave Ramsey’s resources. His “seven baby steps to financial peace” helped inspire me a lot and start my financial plan, including the debt snowball.
-Comparison shop for banks and make sure you’re at the instituation where you can get the highest interest and lowest fees. Also shop for new car insurance, TV or Internet service, etc., to make sure you’re getting the best deal you can.
-Make a list and evaluate all of your monthly expenses and see where you can cut back. Try using Mint.com to track everything and help you budget.
-Find ways to earn extra income and put that toward either savings or paying off your debts. Take on freelance work, find a side job, sell some clothes, offer to clean your friends’ houses, babysit or mow lawns for a small fee, or if you’re crafty, set up a shop on Etsy. I firmly believe there’s always something you can do to make some money; you just might need to get creative.
-Make other lifestyle changes for an even bigger impact, including couponing, watching sales and specials, budgeting, meal planning, savings contributions, even the envelope system if you think that’s right for you.
-Give yourself goals and challenges to make sure you stay on track and build in accountability. I also like giving yourself rewards when you do well and discipline when I mess up.
-Don’t get too rigid or strict about it. Allow yourself to still have some fun!
Do you struggle with debt too? What tips do you have?