Guest Blogger: Debt Confessions
As the first in my family to get their college degree, I left my school with the highest hopes and a feeling that I had arrived. My degree got me an entry-level job as a newspaper reporter (when that was still a thing…is it still?) and commanded a whopping $23,000 a year. Sure I had some student loan debt, and not much money in my bank account, but damn it I HAD ARRIVED!
I walked into the Ford dealership about to make my first major purchase…a brand new red mustang. It was pretty and fast and, well, I felt like I deserved a new car to go along with my new degree and my new job. “How would you like to take care of the downpayment?” the salesman asked? Downpayment? Like $3,000??? I guess I hadn’t really thought about that.
“Do you take credit cards?” I asked. It was OK, I thought to myself, this was a reward for all my hard work and I knew I’d pay it off in the next few months. It was incredibly easy…swipe the card, sign the loan papers and I zipped out of there windows down and music blaring.
What I didn’t realize was that starting your new, independent life is pretty expensive. There was first and last month’s rent (the card took care of that!) and furniture and the first month’s groceries. But it was OK, I was a college grad and I really deserved it.
So paying it off in a few months became making the minimum payments. And the minimum payments got bigger with each passing month because, well, you have to take roadtrips and enjoy life a little. About the time I started worrying about the balance on my card…hallelujah, a zero percent balance transfer offer from a competing card showed up in my mailbox. It seemed like a great way out. Zero interest and no payments for six months. Just the break I needed to make ends meet.
It went on this way for about two years. I got raises but they never quite seemed like enough for me to live the good life I deserved. I didn’t really budget because my friend the card was always there for me…I could do what I wanted and just sign at the end of the night. It worked right up until I accumulated nearly $18,000 in debt and couldn’t make my payments anymore. I tried to get a side job, but my work schedule made it very difficult. I probably limped along for another six months until the first collection agency started calling. “Yes, I’ll make that payment Friday,” I lied. But the money just wasn’t there. I had spent myself into too deep of a hole. So I decided to do the hardest thing you can do. I swallowed my pride.
I called my parents and they agreed to cosign a consolidation loan on the condition I move back home. My freedom was gone, but so was the monthly rent check (and some of my food bill). I still found money to go out and have fun with friends, but I scaled back the longer vacations and looked for happy hours and low-cost ways to enjoy myself. It wasn’t fun, but I got to keep the shiny car, my job was good and I was watching the balance on my loan go down as I made double and even triple payments.
Looking back, it seems silly to have gotten in so deep. I learned 3 lessons from the experience:
1. Always keep a budget. If I’d done this one thing, I would’ve realized that I couldn’t afford the new car. It was a big first step on a slippery slope.
2. Save for major purchases. It’s easy to put a car on an 80 month term and get lower payments. But saving for the downpayment can save thousands in interest. Money that stays in your pockets.
3. Buy what you can afford, not what you think you deserve. My biggest life lesson. It’s easy to look around you and think you need everything. But wants aren’t needs and “lifestyle creep” can be crippling.
I was asked to tell my story and I hope it helps someone avoid the traps I so easily fell into. Living within your means is hard.