Monday, August 08, 2005

How to get yourself into $30K of debt

I've received enough comments that express mild amazement and puzzlement at the magnitude of my debt that I feel it again time to explain how I got myself into this mess in the first place. My very first post does a good job of setting the scene but I can't expect all you late comers to sift through all my posts to get the full story. So here goes...take notes; it's a skill to accumulate so much debt in just a few years.

It all basically started when I was 19 years old and did a study abroad program in Paris. I had received a Platinum credit card with a limit of $5,000 not too long before my departure. At that time I was pretty responsible with my credit cards; I used them but always paid off the full balance every month. Why they decided to give a 19 year old full time student with only a part time job is beyond me...but they did.

I had loads of fun while I was abroad. Too much fun in fact. Money wasn't real to me. The ATM never told me what my balance was and I wasn't receiving any statements or bills in the mail so I was completely oblivious to how much I was spending. I went out all the time and could easily blow $50-$100 a night on dinner, drinks, and taxi fare. WTF was I thinking? I don't know. Anyways, I would aslo travel on the weekend going to other cities and spending money on hotels, souvenirs, more drinking and going out, clothes, who knows what else. My rationale was that I would only be able to do this once so I might as well live it up while I was there. Instead of using cash for all of these things I ended up using my credit card and it was all downhill from there.

By the time I came back I had amassed a couple thousand in debt. Can't remember exactly how much. Problem was was that I didn't have a job so I had to borrow money from my credit card to pay for the credit card. Smart, I know. Even smarter was that when I came back my spending habits were still out of control. More shopping, more going out, more stupidity.

I also went back to Europe to visit some friends and backpacked for about 3 weeks. I didn't have the money to do it so I just put it on the credit card.

By the time I was going to transfer to UC Berkeley I think I had about $6k in debt and I was living off of financial aid. I finally got my act together but was living off of about $17k/year paying $800 for one bedroom sharing an apartment with 4 other people, tuition, books, and a credit card payment to boot. So I didn't make much progress on paying it off. In fact, it just got worse because I had to pay for furniture, dental work, lord knows what else. I think once or twice I had to put rent on the credit card. But I was living honestly like a monk; I never went out; I never bought clothes. It was crap. By the time I graduated I was about $11k in debt.

So when I graduated I didn't have a car. I bought a car. And it wasn't cheap. I think I paid about $18,000 for my car. Please don't say anything. I eventually transferred my car loan to my credit card so I could get a lower rate and so I would only have one bill every month.

So there you have it. All my stupid mistakes laid out for all to see. But I've reformed and am determined to learn from my mistakes and try to start over with a clean slate. Initially I wanted to pay it off in 2 years from when I graduated college but instead I've revised my plan to do it in 3 years (2 years from when I started this blog).

I hope you've enjoyed this little blast to the past and don't think I'm too crazy. ;)

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Leanne said...

Oh how I can totally relate! When I finally pulled my head out of the sand I was close to $30,000 in the hole too. My was from going out a lot while in college and having WAY too much fun, hence my relating to you! :) Then I bought a car too, also about $18,000. Well, when I finally looked at the debt total, I was shocked, then mad! Then I buckled down like you and got to work. In January of 2004 I was close to $30,000 in debt, today I paid bills and I'm happy to say, I dipped below $10,000!! Seems like such a magical number! :) good luck to you, you are doing great and are also very inspiring to me as I continue to get this all under control. Thanks!

Anonymous said...

After falling victem to a nigerian scam, I was pennyless. I borrowed all that I could from family and friends. Finally I had to declare bankrupcy. I started over new, and now have about $10,000 in debt. With my girlfriend pregnant and my mom sick, i've decided to turn my life around. Thanks for the great source of information!

Bailey said...

Not crazy, fairly normal.
Thanks for the re-telling of the story.

Dan said...

Just wanted to say keep at it guys!

Chris said...

No, you are crazy, but then so are most who do things like that without thinking it through... myself included!

It would be interesting to see statistics on *when* people start falling into debt. The more you get in, the harder it is to get out, and unless there is a massive change in behavior, you won't get out of it. If you end up doing it in 3 years, my hats off to you. It took me 5 years to dig myself out of the grave.

Anonymous said...

I'm still trying to dig myself out of this debt but your blog is inspiring to me and I check it once in a while bc it motivates me to do the same. Ever since I had a reality check i have a spreadsheet no more charging and I see how my debt goes down every month. Im at 21k so wish me luck! I'm all into Suze Orman and debt calculators. Ever since you talked about breaking your payments into twice a month instead of monthly im on it! Thanks for it all don't leave your parents home and keep up the good work!

ncnblog said...

When we were 24, my wife and I bought a 33k SUV...making about 45K in salary. It took us YEARS to pay for the stupid thing, and when we traded it in, we were still "upside"-down. That is why I got so serious in April. Keep up the good work, there is powere in focused effort.

Ilaiy said...

Nice post ..


Signed, the Masked Marauder said...

You are not alone. Even us "older" folks (40) can be this far in debt. It's good you are doing something and learning from it. Good luck! said...

really phenomenal and the thing is that it is so easy to do and people don't even realize that debt can accumulate so quicly and hold you prisoner for years to come.

i have added a debt section to the right side of my blog to help me keep track in paying down my debt. thanks for the motivation to keep going!