Can I tell you a little secret? Very few people know about this, so consider yourself privileged. 😉
Our Debt Secret
Only two months into our marriage, we had to sell my husband’s car for TEN THOUSAND DOLLARS less than what he owed on it in order to get out of paying 18% interest on the thing for the rest of our blessed lives.
It was hard to pay for a car month after month that we could no longer enjoy or that we could have used to take us from point A to point B. Fortunately, we paid off the $10k in less than two years time. Of course, back then we didn’t have a house or children, but I was attending school full-time, so it was a bit of a sacrifice to put money towards an empty unfulfilling nothingness nothing.
You’d think I would have learned my lesson from that difficult time in our lives.
Uh-uh. Nope.
© a4stockphotos / Dollar Photo Club
Extending Our Credit Beyond Our Means
My third recent mistake as the family finance manager was allowing us to open not one, not two, but three store credit cards to buy things we didn’t need.
I could tell you that at the time, we really, really, really did need the shed, but now that our basement is people-less, we could probably fit all our crap stuff in there. So, yes, we are in debt for the shed. Big mistake, but at least we aren’t paying interest on it. We have until May 2015 to pay it off before interest kicks in. I’m trying to put as much money toward that store card each month to pay it off before the dreaded interest starts rolling in.
The other two cards were not so much because we didn’t have the cash to pay for what we purchased, but because there were incentives to getting the card. I ended up having to pay a late fee on one of the cards where the balance was a mere $40. The late fee was $25, so it was quite the wake-up call.
Knock on Wood
When I was working at my first full-time job after high school, a coworker told me that as an adult I would go through many periods in my life where I would need to use a credit card. You see, I was telling him that I had a debit card and that I would never get a credit card, knock on wood. Flash forward not even 3 years later, and I got my first credit card for the sole purpose to put our gas purchases on it. Now we use it for more than just gas. Luckily we’ve only had to pay a tiny bit of interest (like less than $1) on it over the last 5 years. We’ve actually received more than $250 just by using it on a regular basis.
What You Probably Buy With Credit
It’s pretty easy to buy most anything with a loan or credit card. It’s not so easy to pay things off or stop before you get into trouble. If you’re like most people, you’ll use credit for:
- Clothes
- A car
- A house
- Miscellaneous items for your house
- Vacations
- Christmas
I view every single one of those things as wants versus needs. The house because you can live in an apartment until you can afford to live in a house. If you want one of those things and you can’t afford it, well that’s just a recipe for disaster if you decide to purchase it with credit anyway. Truthfully, you should try your hardest to save money for all of those purchases to avoid the negative effects of credit as outlined below.
20 Reasons to Avoid Credit Card Debt
- Buyer’s Remorse – Great blog post right HERE from Creative Savings Blog if you want to read a personal story
- More bills
- Interest when you don’t pay it off
- More junk – When I buy a book, for example, that I don’t need, I am really excited for a few days to have it so I read it non-stop. Then I put it on the bookshelf and never pick it up again.
- You start to have the I want more, more, more mindset
- You are paying for the past – Instead of investing in your future, you have to pay for your past mistakes…literally!
- You will start applying for more credit cards – One credit card is not enough anymore. You have to have one for flying rewards, gas rewards, shopping rewards, etc.
- Your credit score might suffer, especially if you end up making late payments
- Your outward appearance becomes much more important to you than what you are feeling inside
- You lose sight of the little things that make life exciting
- You start buying things to fill the void in your life
- If you are married, you may end up having more and more arguments about money
- You will start to use it to pay for needs
- If you have a family, you are creating a difficult situation if you can’t pay for the things you need – THIS post (from The Latina Homemaker) is great to read if you are having trouble paying for utilities
- You’ll get to the point where you no longer have money to pay for anything but your debt, so you’ll need to do a spending freeze to get out of the mess you’ve created
- You might have to rely on others for your needs
- It gets more difficult to pay off and you might just skip paying for a few things here and there until you just don’t pay them. Then the debt collectors will start calling.
- You may end up losing your house and other possessions if you’re not careful
- In the end, you might have to declare bankruptcy
- You are setting a bad example – If you have children, they will learn from your actions instead of what you tell them.
As you can see, one thing leads to another when you start using your credit card for what you really shouldn’t.
Have any more ideas?
Linked to: Thrifty Thursday
If you’d like to read more about my job as the family finance manager and what I am doing to improve, click on the links below:
You Need a Bill Pay System
My Struggles as the Family Finance “Manager”
Mistake #1 – Quit budgeting
Mistake #2 – Mixed up wants and needs
Mistake #3 – Used credit cards for things we couldn’t afford
Mistake #4 – Overcomplicated our budget
Mistake #5 – Checked over our accounts less often
Mistake #6 – Saved $0
Mistake #7 – Spent bonuses
Mistake #8 – Bought low-quality appliances
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Don’t you wish that you didn’t have to live and learn? That you could just read a list like this and be like “yes, I will take this persons word for it and I will be smart”. But nope. Seems like we all have to learn the hard way. We were no exception. We finally finished paying off a business debt of my husbands that has been haunting us and sucking us dry and it feels so GOOD. And also ever since the business debt fiasco we got rid of all our credit cards and have since paid them all off. We still have some medical debt and of course our house and one vehicle. . . but man if only we had made better choices when we first got married. Live and learn. We have no credit cards and have been sticking to a budget. And life is so much better.
Thank you, Leilani, for sharing your experience! What a relief to be rid of debt, huh?
We have two credit cards that we use ONLY for gas. I really, really hate having them even for just that. It’s a slippery slope though because credit cards are one of the best ways to build credit. So stupid. As soon as we buy a house those cards are getting cut up! When my husband and I got them we felt like we were sinning. 🙂 I’m proud to say we haven’t use them for anything else and sometimes even forget to use them for gas.
Seriously, why is building credit so ridiculous? I bought a radio stereo with a store card to build credit, even though I could have bought it with cash. Good for you guys for being so strict and using your card wisely!
We don’t have credit cards. We only have debit cards and I am still sticking to my guns of never ever applying for one. They look tempting, they look promising but in all honesty it’s spending money you don’t actually have in the first place. I hope we stay that way.
Agreed, Ana Lynn! You are strong!! I wish I had never fallen for the temptation to get gas rewards.
I got my first card about one year ago. I made sure I could function without one, and then got it just for the rewards. They are so, so dangerous, though. My husband just turned down a great offer on one because he knew the temptation to spend would be too great. Love this post. Consequences can be dire!
Hey, at least you are super aware of the slippery slope! I’m all for the rewards, too, as long as I pay it off each month. Now I just have to start thinking like I used to and quit spending more than I should!
When I was in my early 20’s I got my first credit card. I learned the hard way that credit cards are not meant to be used when you can’t afford stuff.
After that harsh lesson and paying it off I decided I would use my credit card as a “debit” card. Each month I paid everything back and just use it for it’s perks: cash back and discounts.
Then two years ago my husband started a new business. Long story short we had to use the credit card to cover our basic needs and bills. We finally paid them off but owing that much money was horrible.
I hope we are never in that situation again. Never.
Carolina, thanks for sharing your experience. I hope my husband doesn’t get us into the same situation with his business. It’s a nightmare I don’t want to face.
I totally agree, I try and use cash as much as possible. Im a firm believer that if I don’t have the cash for it, I truly don’t need it. I do have a credit card, don’t get me wrong but like you mentioned… the interest kills me, so I rarely use it and keep it very minimal, if at all. Those credit cards, they sure sound great in theory, right!!! 🙂 Great post Charlee
Thank you so much, Heather, for your feedback. I hate paying interest, no matter how small, so it’s really annoying when I see our credit card bill getting bigger and bigger each month and wondering if we’re going to be able to pay it off. I don’t know how I’d do with cash. I already know I’m terrible at keeping track of it!
I wish I could hand you over all my paychecks and bills and have you manage my money. I think you would be a really great financial manager because I don’t think you’ would entertain any of my silly justifications. I need someone that will put their foot down even if I don’t like it!
Hahahahaha! I really am very strict with myself, but I just couldn’t be that way with others’ finances! Or maybe I could. Do you wanna try it out and see how it goes? 😉