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Feb

23

My Debt Story (Part One): Stumbling Into Slavery

This is part one of a three-part series on how I got out of, and into, debt.

Downtown Seattle
I’ve been thinking about my debt less and less over the last few months, which is a big relief from how it was a year ago. There was a time when I could not stop thinking about money - I simply couldn’t get away from the debt I was swimming in. Declined debit cards, bounced checks, and maxed-out credit cards were a way of life for me in late 2005 and most of 2006. The worst part was that I refused to admit to anyone (especially myself) that I had a problem.

But life is different now. I’m not yet out of debt, but my life has changed completely. I have money in savings (first time ever), only one credit card (down from 11), and a total balance on my card under $4000! I hope to hit the “under $3,000″ mark this month
While my life is going the right direction now, I don’t forget the dark days of being up to my eyeballs in debt. It wasn’t fun, I can sure tell you that. And because I remember that time so clearly, I don’t find it hard to sympathize with those who are still there. I’d like to share my story with you so that you may learn from it, by way of hearing warnings on getting into, and details on how to get out of, debt.

Stumbling Into Slavery: It’s a Mindless Game

…the borrower is a slave to the lender. - Proverbs 22:7

It’s not hard to get into debt. The oversweeping problem with debt in general is that a lot of people WANT you to be in debt. Banks, credit card companies, and all lenders make their money by charging you interest and dropping fees on you whenever they get the chance. The best way to simply avoid debt altogether is to never borrow money, ever. But this is not as easy as it sounds. We’re trained to believe that we want - nay, need - a car. That we need a house and expensive clothing and new “toys.”

One of the reasons it’s so easy to get into debt is this consumer mentality we seem to all have. It’s trained into us when we’re little. Sure, we might not all be whiny adult-children who demand new expensive things all the time, but chances are we’ve all thought about buying a new expensive something at some point when we couldn’t really afford it. And it’s almost guaranteed that you or someone you know is in a mortgage with a (maybe) good interest rate, locked in for 30 years with no possibility of getting it paid off in less than 25. This is the reality we live in.

We could easily excuse having debt as something “everybody does” to get by - and that statement would be true. It doesn’t mean it’s right, though.

The other reason it’s so easy to get into debt is that we’re prey to the lenders every freaking day of our lives. I don’t know about you, but before I opted myself out, I was getting 3-5 credit card offers by mail a day. If you listen to the radio or watch TV, count how many commercials you encounter that encourage you to finance something. It’s about 70% by my records. It’s so easy to get into debt because so many people want you to be in debt to them - and with so many individuals carrying credit cards and financing everything they own, it’s sometimes hard to see ourselves NOT following the same path.

And Lead Us Not Into Temptation…

The struggle of mind is difficult when trying to survive in our debt-plagued world, and keeping reign on our wants is a real challenge for most of us. We want things - it’s only natural. We’re made up of our needs, wants, and feelings, and battling those wants is occasionally a real difficulty. After all, don’t we deserve only the best?

I’d like to posit that the best for us is to be free and at peace, and I find neither of these joys come with debt. Yes, it is a struggle to defer pleasure - like saving up for a vacation rather than going now and charging it. But the inner work that has to be done to keep ourselves in check makes us better people in the long run. And who’s to say we can’t take a vacation in the backyard while we wait for the day of prosperity to come?
It’s all in the media, and the “consume now” messages that bombard us daily. The only way to keep ahead of the game is to train ourselves to know better, and to have control over our spending.

My Story

Cap Hill Apt In 2005 I was living alone on Capitol Hill in Seattle.

Capitol Hill is the crazy, fun, hipster-run community in the east section of downtown. Filled with boutiques, great restaurants, and six blocks from the posh downtown Seattle shopping district, it’s a place of spending. I found myself living there in a beautiful sixth-floor studio overlooking the city for $650 a month. It was a modest apartment, but I absolutely loved it. I owned no car and walked everywhere - my work was two miles away. I had one credit card to Old Navy which I paid off every month.

During this time in my life I was going through a lot of personal searching. I had just moved home after living in Italy for six months, ended a two-and-a-half-year-long relationship, and started living alone for the first time in my life. My life was slow and fun and I was content.

Then I got a new job. I went from making $26k a year to $30k and for some reason I thought this extra four thousand dollars made me rich. The new job would end up being one of the best things that ever happened to me, but a lot of things changed when I took this job. First of all, I got a car. I didn’t have to - the job was only two and a half miles from home. I walked until winter came and then instead of facing the Seattle rains for five months, I took on my dad’s old 1985 Mercedes for $10. Thank you, Dad :D. It was a great little old car, and when my job moved 25 miles away, I kept the job and took on a long commute instead.

And then I started living like I made a million bucks. I don’t really know when the shift happened - sometime in fall of 2005 - which is why I say now “constant vigilance!” Because debt can sneak up on you. I started charging everything to credit cards, mostly clothing and gifts. I started opening up credit cards at all my favorite stores - Victoria’s Secret and Nordstrom being the most-used. Let’s quote my livejournal from November, 2005:

In celebration I bought two utterly fantastic pairs of shoes. Ooohohh! Look at them! (Stilettos, of course. *dies*)

I have quite a collection now… I just realized that exactly 50% of my shoes are BCBG - most of them being Maxazria. Shut up. No, I didn’t do statistical math about my shoes just now.

Doing the math, actually, *ahem* I could probably sell all my shoes and retire on the money. But who would want to be retired without a collection of shoes to retire IN?!?!!

Not me.

By Christmas of 2005 I had around $7,000 in debt. In three months! What the *&%^?! I somehow had spent a third of my take-home pay on clothing and shoes.

I was talking about my debt at work one day and a co-worker gave me The Automatic Millionaire to read. Over the holidays in ‘05 I read the book twice and devised a plan. I was going to get out of debt and invest and save! It never occurred to me to return some of the things I bought.

I don’t know why I chose to buy so much stuff I knew I couldn’t afford, although in restospect I know it was somewhat social pressures to look and feel successful and beautiful, and a bit from an “I deserve it! So what?” mentality.

Part of me excuses the charges as “mindless,” but the other part knows that I knew at the time that I was triple- and quadruple-earmarking my salary for bills. I’d find a dress I loved and think, “I can pay for this with $100 out of my next check, no problem.” And then I’d buy a pair of shoes and allot that $100 for the shoes instead, completely dismissing the knowledge that I had already “spent” that $100 on a dress.

When I read The Automatic Millionaire, I was at a point of no return. I was making less than my minimum payments each month, and charging everyday things like gas and groceries to my credit cards. I still remember the dread I felt daily during that time in my life - driving up to the gas station and thinking “I really have no money to pay for this.” I knew I was in over my head, but I saw no other way out and begrudgingly would fill up the tank, knowing that next month the bills would only be harder to pay. It was in that dark time that I chose to fight my way out. After reading the book, I decided that I deserved better than this misery and tried my best to be fired up about debt reduction.

This mind-shift wasn’t an overnight thing, though. I may have felt inspired, but it took me another year of waffling around, wallowing in self-loathing and doubt before I actually went after my debt with any consistency.

This takes us into part two: The Long Road Ahead.

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Filed Under Just My Life - Stories, Etc., money and finance

Comments

4 Responses to “My Debt Story (Part One): Stumbling Into Slavery”

Early Retirement Extreme on February 23rd, 2008 6:09 pm

Cool story!

I never really though of living in a shoe collection after I retired, but …. ;-P
Lynnae @ Being Frugal.net on February 23rd, 2008 8:32 pm

Isn’t it funny how a raise is supposed to help you out, but you end up spending more than your raise and going into debt? My husband and I have done the same thing.

I’m glad the Automatic Millionaire had such a good impact on you. I haven’t read it yet, but it’s on my “want to read” list.
shanti on February 24th, 2008 12:56 pm

@ Jacob
I guess I should have written “with” Heh.

@ Lynnae
In the end a raise did help me… but that’s in part two I know - it’s the mentality about getting more money. We temporarily feel rich and spend more than we got raised! I’ve since learned this and finally live below my means. It has a hard thing to learn, though
shanti on February 24th, 2008 1:00 pm

Ah, and @ Lynnae
I have a book review written for The Automatic Millionaire written but I haven’t posted it yet