The Question

I remember being asked what I wanted to be when I grew up.

I told them happy.

They said I didn’t understand the question.

I said they didn’t understand life.

How to Eliminate your Credit Card Debt

Note — In my quest to not Suck at Life, this post is about the why and how of  how I came to eliminate $18,000 worth of credit card debt. The post contains a lot of the beliefs, philosophies, and methods I used to accomplish this. It worked for me, but it may not work for you. That being said, I still think it’s a pretty effective means of going about it, but user experience may vary.

Credit cards are one of the tools necessary for building a successful financial life in the modern world. With so much of the things you may want in life based upon your credit score (mortgages, car loans, even some job interviews), using a credit card wisely is one of the most effective means of getting what you want.

The key word there, is “wisely”. Like a lot of people, I had racked up a lot of credit card debt over the early parts of my adult life. It started in college when I used it to buy kegs for the parties at my off-campus apartment and continued on through my first years as a professional, maintaining a standard of living that I couldn’t really afford. By the end of 2008, I had $18,000 in credit card debt sitting on my back.

Then the economy, for lack of a better term, sh*t the bed. I remember all of a sudden thinking, with scores of people losing their jobs and large companies going out of business, that I should really be taking better care of my finances. I had that large chunk of credit card debt dangling over my head. I had no real savings to speak of. Most of all, there was no reason for either of those things because I was making a good money at the time as a consultant. Like a lot of my friends and others my age, I was living paycheck to paycheck and only making minimum payments on my credit card debt, and I didn’t want to do that anymore.

So I didn’t. I had to revamp my spending, my savings, and my entire outlook on personal finance, but in 1 year I had eliminated all of my credit card debt. Eliminating your credit card debt is something that you really should want to do. With the economy fluctuating up and down, you may be seeing that interest rates out there for things like home and auto loans are at some of the lowest points in history. Credit card interest rates, however, haven’t budged. And with the 2010 legislation meant to protect consumers from credit card company policies, the rates are probably higher than ever. Besides the peace of mind derived from it, paying off your credit card debt is just a good fiscal decision.

This is how I did it (results may vary):

I got in the mindset of really wanting to do something about my finances. Saying you want to do something is a good step, but actually executing it can be difficult unless your mind is in it. For me, I was sick of this feeling of spinning my wheels working because I know I had this mountain of debt that needed to be paid. I wanted to at some point in my life do work that I enjoyed and felt strongly about, despite the amount I would be compensated for it. High interest credit card debt did not fit into the picture.

Know that it took time for you to get into your debt situation and it will take time to get out of it. It took me almost 8 years to rack up that $18,000 in credit card debt, and I knew that it would be longer than a month or two before I would be rid of it. I didn’t particularly like that idea, because I didn’t want the burn of cutting back on the things I loved to do, get and purchase to linger… but the alternative was even less attractive a thing.

Change the mental picture of your finances from a savings model to a net worth model. Most people think of the amount of wealth they have as the cash that they have in savings. This is misleading because you could have $1,000,000 in savings, but it doesn’t mean anything if you have $1,250,000 in debt. That’s what your net worth is, simply your assets (cash, possessions, investments) minus your liabilities (debts). If it’s a negative number, then you could be doing a lot better with your money. Think in terms of your net worth and you begin to understand the importance of eliminating all debt and keeping it away from you like a plague.

Paying off debt equates simply to spending less than you earn. It’s that simple, really. This can be accomplished by either (a) cutting costs and expenses, (b) making more money, or both. Luckily I was making a good sum of money with my day job and just not making the best use of it. When I got my spending under control and re-prioritized to pay off the debt instead of immediately focusing on savings the debt started falling away fast. Making more money is a really good option too, better to some people even, but only if you don’t fall into the sand trap of lifestyle inflation, that being filling the gap of extra income with extra spending.

Don’t bother with savings until you pay off your credit card debt. That credit card debt is costing you a lot of money each month in interest and you want to get rid of it as soon as possible. If you’ve cut expenses and/or are making more money and have money available to pay off the credit card debt, do that instead of putting into savings. A lot of people believe in building up an emergency fund prior to working on the credit card debt, but I don’t. I was living paycheck to paycheck anyway, so keeping on with doing that until I had the credit cards paid off wasn’t going to kill me. Put everything you have to paying off those cards asap.

Don’t bother with debt consolidation companies. Yes, it will reduce your monthly payment but it also lengthens the amount of time you will be paying that debt off. You’re just paying the debt consolidation company instead of the credit card company and chances are if you do the math out, you will end up spending more money in the long run than if you just paid the money right to the credit card company.

I actually didn’t bother with a budget. I knew I wouldn’t stick to it if it were too complicated and I frankly didn’t have the attention span for it anyway. Instead I did a one time assessment of my monthly spending and set a few guidelines.

• I was already banking electronically (which you should be doing 100% anyway because it’s just easier) and examined all of the money that went out for my essential expenses like, rent, utilities, car payment, insurance, gas, groceries (not restaurants), cable/internet, student loans, and credit card minimum payments. This was the money I HAD to spend every month.
• I then gave myself a weekly cash allowance for discretionary spending. Beyond this amount, I wasn’t dipping into my wallet for a credit card or my ATM card for more cash. I took it out on pay day and that was it, whatever I spent that on and whenever I spent it was it for the week. This amount, at first, was $40/week (Later on as I paid off some of the debt, I upped this to $60). As a result, I became more conscious of my spending. I also didn’t do so much out and about. I still had fun, but fun became hanging out at a friends’ house on a saturday night with a six-pack playing cards instead of bar and club hopping.
• I took what was left and dumped it into a credit card, one at a time, until the balances were paid off. I didn’t split it up between all of the cards because I wanted to knock off the card balances completely before moving onto the next one. This was a big psychological win (something picked up from the Dave Ramsey school of thought he calls the “debt snowball”) and got me amped to keep going.

That’s it, seriously. I had just turned 28 when I started and for my 29th birthday I gave myself the present of making my last credit card payment to pay off my existing balances. This year I’m buying myself a house, fulfilling another desire of mine that I wouldn’t have been able to accomplish with all of that credit card debt, in having peace of mind in my home as well as in my finances.

I still follow a lot of the guidelines I listed out above. The money that I was spending to knock off the credit card debts and to pay the existing card minimum payments now mostly go to savings and investments. I still use my credit cards too. I have one main card with a points award program where I pay all of the bills I can on with. I pay that off each month and never carry a balance on it. I have my other cards still too, with each one carrying an automatic payment for a magazine subscription. The reason for that is so that I can have multiple credit lines in use and paid off each month to work up my credit score. I also still give myself the discretionary cash allowance each week, though its higher than it was in the past. The way I view things now, without credit card debt looming out there, is if my bills are paid and I’m accomplishing my goals for savings and investments, what does it matter what happens to the rest of it?

Paying off your credit card debt is not a glamorous or really at all fun of a thing to do, but it gives you something that’s worth more than having all those things you were buying with your credit cards, or even just in having the money itself. It gives you peace of mind. I still work my day job but I really believe that I enjoy it more now that I know I’m not there because I have to be, but more because I want to. You can’t put a price on that kind of freedom.

Unqualified Ramblings on Relationships

Note: I was hoping not to do this, but here I am at 10:30 pm on Monday night working on a blog post. When I said that I was going to post twice a week on Monday’s and Thursday’s, I figured that with a set schedule of writing I would be able to post something at regular interval with some sort of planning rather than slapping together whatever was on my mind at the time into something intelligible. But sometimes even the best laid plans (or apparently half-assed in this case) go awry. Anyway…

This week one of my friends would be celebrating 11 years together with, and 4 years of marriage, to his wife if not for the fact that their marriage came to an abrupt and very bitter end some 6 months ago. In fact, at this time a year ago I had 6 couples counted among my friends who were happily married. Right now, only 2 of those couples are still together.

I’ve read on some news sources and the web that the divorce rate in this country is 50%. I checked on this via the all-mighty power of a google search and found on divorcerate.org that number is actually what is a projection of the divorce rates could be if current trends continue. What I found interesting from the website is that when broken down by age brackets the group with the highest rates of divorce were married between ages 20 to 24 years old. Clearly age and maturity come into play there, but all of my friends were married in the second highest age bracket for divorce, ages 25 to 29 years old (16.4% for Women and 22.3% for Men).

What is the reason for that?

I wish I knew the answer. My friends going through their divorces have asked that same question to anyone who will listen, from therapists to bar tenders, for the better part of a year. I’m actually half-convinced that those people going through the divorce, on both ends, don’t really know the answer either. There are the superficial reasons, such as some cataclysmic event or series of events that would inevitably cause them to forget the reasons they loved their spouse to begin with. But I believe there are also other reasons, incepted and nurtured within the social group dynamic that lead to this breaking point as well.

By themselves, the average human being is reasonably intelligent and logical. Get humans together in groups and they become dumb and panicky. Think of going Christmas shopping… the only thing that spawns that bit of madness is the sheer number of people in the store who are all trying to get the best gift, get to the front of the line and wait the least amount of time to get out of there. So too when a group of humans get together they inevitably get to their relationships and add some frustration to the mix that the same crowd mode thinking of always coming out on top of a situation takes over. Once the crowd starts encouraging it, right or wrong, the sheer feeling of acceptance in one’s thinking can be a huge motivating factor, for better or for worse.

Its been said many times that our modern culture propagating a feeling of “instant gratification” is the cause for a lot of the emotional turmoil associated with failed relationships, that because we can’t have what we want at the moment and can’t have it right in that moment, that we immediately drop and run for the next big thing because otherwise we aren’t getting what we deserve. I agree with that… kind of… because I think it more so points to this idea that we shouldn’t settle for what we have.

I think these things are factors that hit harder with the younger age brackets as we seek more than anything else for social acceptance. The question then remains though, if what we have is making us happy then why should we consider it settling for something? And even more so, what are the foundations for a good relationship and/or marriage?

Honestly, I don’t have a damn clue. Being 30 and single, I’m likely one of the least qualified to answer that. Barring the obvious things like not beating each other, cheating on each other, etc… here are some of my thoughts.

Love and passion are the likely starts. In most cases, those two will be enough to stem off most other negative factors… for a while. There are other things that aren’t always considered that I believe do have an gnawing affect on the condition of a good relationship.

Goals are important. I’m not just talking about personal goals for yourself. I mean what exactly are you trying to accomplish in your time together? Is it just to wake up each morning with someone next to you? Is it someone to help you retire a multi-millionaire? Is it someone to visit every country of the world with? Someone to have 3 children with (bad one, in my opinion)? Fine… whatever… just make sure you are both on the same page about it.

Tastes in music matter. Don’t ask me why, but they just do. You can have and live with a lot of differences in your lives, but when it comes to music, like at least some of the same stuff or you are doomed.

Forget the word “compromise”. Seriously, forget it even exists. Compromise is a negative word and implies that you gave up or lost something. People don’t like to give concessions just to make peace… look at the Germans after World War I. I like the word “understanding” better, since all you stand to gain is knowledge, of yourself and your partner.

You can’t make someone else happy until you are happy. This crap about he/she making you happy has got to stop. You open up the door to pushing them away because you are too clingy. Self-empower yourself… be happy with yourself and no one will ever want to leave you alone.

Be your own person with your own opinions. If you love your significant other and you are making progress on your goals together, what does it matter that you friend thinks you should have gotten together with their co-worker because they just bought a boat or huge house? Chances are your friend is single anyway.

Know that fundamentally all humans are linked by a common goal of happiness. This is one of the foundations of Buddhist thought. It can be interpreted as both the quest for happiness or for the easing of unhappiness. Just by understanding that you open up to a whole new level of knowing how people work, knowing how you work and fitting the pieces of life together to make it all work.

The short of it could be said that a good foundation for a life with others starts with a good foundation of the self. Do you agree? Disagree? I’d love to hear some feedback on this one.