19 July 2013

Hampered by Debt: The Beginning

I've made passing references to my debt several times in the past. However, I've never really done a complete reveal of it. Not even to myself, which is probably why it continues to haunt me. Today, that changes. As many of you well know, getting out of debt can be no easy task. The following is my story of how I spiraled down into debt and what I'm now doing to get back out. At first, I though I could do this all in one take. But it's turning out to be quite a lengthy project, so welcome to a new series!

The Early Days

While most college freshmen fret in the spring about what they're doing in the summer, I already had a full-time job lined up and waiting: the same one I'd had in high school. In an extremely generous move, they kept me hired on when I went out of state for college with the understanding that I would work during breaks, which is what I did. Every break during that year, I flew back home and worked. Usually, the money earned just barely covered the cost of the plane ticket. But coming home allowed me to also see my family and girlfriend of the time, which was also important.

For various reasons, I didn't want to return to the school where I'd completed my freshman year. Instead, I opted to attend a local state university. Going there allowed me to live at home with my parents and keep my job. In hindsight, it was a fantastic deal that many college students would just about kill to have. Since I was still living at home, I should've been able to easily afford the cost of college with the money I was making working. And that's before considering the tuition reimbursement available through my job!

Instead, my money began to disappear at an alarming rate. Looking back, I realize that I had two big siphons on my money: my two cars. In true naivety, one was my "daily beater" and the other was my "project" car. Translation: both needed quite a bit of work, which became costly fast.

A "Savior" Appears

Near the end of summer, I received a something in the mail. While I certainly don't remember the exact wording now, I can imagine how it read: "You're pre-approved for a credit card with up to $5000 limit!" Really?! That's awesome, I can finally fix the cars! Count me in! I logged on to the computer using the access code and completed the application.

A couple weeks later, I received the card in the mail. At that point, two possible problems should have been evident: credit limit was most certainly not as high as they'd "promised" (wasn't even $1000) and the interest rate was a bit over 20%. The correct course of action would've been to calmly put the card away for use only in a dire emergency. In actuality, I quickly got to work ordering car parts and the card was soon running a (relatively) high balance. I reassured myself that this was the "proper" way to use credit cards. Buy a big-ticket item then pay it off over time to build consistent history.

One problem. I started also using it for small purchases too. Although I had a debit card, I started whipping out the credit everywhere because it was a "rewards" card too. Restaurants. Gas. School books. More car parts. As a result, my balance would always teeter ever higher. But I also figured that was okay too since I was paying much more than the minimum off every month. Yet try as I might, the balance barely ever moved.

Dire as this may sound, it's barely the beginning. Part II coming soon, so stay tuned.

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