Let's Talk: Credit Cards

I listen to the Bob and Sheri show almost every morning during my commute to work and I absolutely love them and their show.  They have the most interesting people call-in and it's fascinating to me (probably in the same way blogs and reality TV can be) to hear the various snippets of their lives.  Today, people called in with stories about when they told, or someone told them, "You're not going to like this, but..."

So, this morning, a woman calls in to say that she is about to tell her dad that she and her husband are $130,000 in debt (roughly 50K in mortgage or HELOC or something and 80K in credit cards)!  That's a LOT of debt!  Sheri asks the chick to give a brief laundry list of stuff she's purchased to cause so much debt and the woman responds that she and her hubby were bored last week, so they bought 2 brand new 4-wheelers.  Also, they got 2 brand new TV's recently (one a 52" to replace the 42" they already had), got new tires for both of their cars (because they didn't like the ones they had), and though I can't really remember anything else they bought off the top of my head, I believe they were having renovations done on their house.  I am both baffled and saddened at hearing this story.

As for me, I have been working extremely hard for the past year and half to pay off a credit card.  Actually, I've been working hard to pay off 2 credit cards and my iMac.  In the last year, I've busted my hiney, cutting out as much "fun" shopping as possible and watching my expenses so I can put as much money as possible towards this debt.  I'm happy to report that in the past year, I've managed to pay off 1 of those credit cards and should be paying off the other this month (yay!).  This past year has been one of the most frustrating, financially speaking, since I feel like I've been saving tons of money, but have no savings left to show for it.  All my hard work is going towards stuff that has already been purchased and though there has been little reward month-to-month to me for paying off something owed rather than saving up for something I want, I know I will feel an incredible sense of relief once this is all over.  I think the hardest part of this whole thing for me is that I so badly want a house (and have wanted for the last couple years), but am so busy paying off this credit card, I can't do anything to save money for a house.

I'm not sure that I can define an individual lesson learned from this experience, but I have definitely learned a lot that I hope to apply to my life going forward (some things I already knew, but it's one thing to know better and another to actually do) and I think, in general, the biggest help to me in these efforts has been a change in my attitude towards money:

• It's better to save for something you want, rather than buying it on credit and paying off later.
• You don't need to spend every cent you make.
• Little things add up quickly.  A Starbucks latte seems like an innocent treat, but a latte everyday can turn into $1000 a year!  This is why I have Bagel-Monday and Starbucks-Friday.
• If you feel like you're shopping smart, but money seems to be disappearing from your bank account, try noting every cent you spend (either write it down or track it in an Excel, etc) and you'll see where it is all going to.
• Eating in instead of eating out (for breakfast, lunch, dinner and even snacks) can save you a lot of money (and is probably better for your health, too).
• When you get the urge to buy something new, think about what you already have and if you can make do without the new item.  Try to use what you already have...it will help keep clutter down, too.
• Instead of thinking about what you don't have, be thankful for what you do have.

I totally understand why my dad hates credit cards so much now.

For more financial advice (along with other goodies), check out Fabulously Broke in the City - the chick has some great advice!

Reader Question: Are you working on paying off debt?  What are you going to do to celebrate when it's gone?

Comments

[Amy]

DH and I pay off our credit card bill each month. We don't put money on the credit card that we don't have; we use our debit card most of the time, but for online purchases we prefer to use the credit card because it's easier to dispute charges if someone were to charge the wrong amount or swipe the number or something.

We had 2 education loans, but I paid off one in full this year. We had been paying the loan off over the course of 10 years because the interest rate was so low and we could invest the money that we weren't using to pay it off and receive a higher rate of income than what we were paying in interest. But the last year we weren't making money on our investments because of the whole stock market/economy tanking thing.

So now I pay extra on one of our mortgages with the money that was going towards the student loan. It would be great to get one of our home loans paid off early! I don't have any celebration plans, just the lack of debt and less interest paid.

[Maggie]

The only debt I have ever had is student loans. But I still have them :( I never bought anything else (besides education) that I didn't have the money for. I'm not sure when they'll be paid off. I was hoping to finish them this year, but now that I'm not working I'm not sure anymore. Luckily Bobby helps me out with other things, but I do want to pay off the student loans on my own. We don't own a house (yet) but I'm sure that we'll have a mortgage when that does happen. I'm not sure what I'll do when I finish the student loans - back to school maybe?? Haha :)

[Jen]

Have you ever heard of Dave Ramsey? My husband and I follow his guidelines to finances. We have one credit card that we NEVER use, its basically an emergency thing just to have on hand and it helps to actually build credit. Aside from my own student loans that I had no choice in getting at the time, that is our only debt. Our motto is, if we dont have the money for something then we dont buy it. We are working on a continuing to build our savings up for investments in the next couple of years. My husband's father is very very much investment/business smart and has helped us tremendously in guidance with the above.

That story truly made me sad!!!

[Fabulously Broke]

Aw... THANKS for ze link! :)

My other favourite PF people that you may like are:

Larry Winget (tell it like it is)
Gail Vaz-Oxlade

As for paying off my debt, it was anti-climatic when I finally did, but the journey was exhilarating to see that balance drop lower and lower..

It was such an indescribable high.

[Lys]

Oy - where to begin... I'm paying down the debt and am one paycheck away from paying off two credit card and then I'm working on the others... I know I know - bad Lys. I haven't really charged anything since the holidays and it's been nice to work on getting that number down since I plan on buying a house in the next couple of years.

However, since you brought up FB, that gal (and her site) are FABULOUS! Thanks to her budgeting sheet (and my lovely overworked financial excel book) I feel like I have a strong grasp on my finances and can stop wincing when I look at my bank accounts.

[Marie]

This post hit home. I am paying off a huge debt (mine not my husband's) because of my addiction to shopping. People might laugh but it really is an addiction like other things can be. Anyway, I've learned my lesson the hard way and have been very very good and trying to pay cash for things that are necessities. Being in debt is miserable and depressing and it seems like its never going to end. Especially when its incurred late in life (40+ age).

Don't let credit cards get the best of you - they are evil. Save them for medical emergencies and things of that nature.

[april]

Hi Marie! Right there with you. I would love to chat! I have learned my lesson one final time. Here's to being debt free. Thanks Di for the post!!!