Last week while I was on Facebook reading through my friends’ updates I saw a great quote -“Everything happens for a reason. But sometimes that reason is that you’re stupid and you make bad decisions.” I got a laugh from it, but it reminded me that sometimes our problems, including money, are brought on by our own bad decisions. While they can be big problems, like a huge amount of debt the good news is that you can usually get out of them by making better decisions with our money.
I found that out firsthand a few years back when I made a dumb money mistake.
College Student with Credit Cards
It seemed that as soon as I started my first semester in college, I was getting flooded with credit card offers. Every major company had some special student card that had great rewards that I could use or a 0% interest rate for a few months. I had heard from others that having a credit card would help my credit score if I used it responsibly. I decided to go ahead and open a couple of accounts to give a boost down the road.
Fast forward a bit and I had 3 credit card accounts. I ended up with in about $2,500 in debt. For two of the cards I went over the limit, which incurred even more fees. It may not sound like much, but keep in mind I was a full-time college student which meant my credit card debt was much higher than my small, part-time job income could handle. I mean I was working at the local concert a few times a month selling beer along with my fast food job.
The minimum payments were only about $20 each, so I thought I was keeping my credit cards in check, even though those payments weren’t doing anything to my overall balance. I tried paying down the debt in chunks, but then with available credit now on the cards I used them and stayed in debt. I wasn’t buying flat screen TVs or computers with my credit cards, I was treating friends to meals, going to the movies once in awhile, basically having a good time. I was a hard working college student and I felt like I deserved a treat now and then.
Learning from My Mistakes and Getting Out of Debt
I’m happy to say that I was able to pay off those credit card debts. What was my motivation? Well, it was a few things things really, but getting engaged was the catalyst in a way. My fiance and I had a chat about our finances and I noticed that the only debt he had was a small student loan for the last semester’s tuition. No credit card debt, no car loan. He had just graduated a few months before and was working at an entry level job. Not great income, but with no debt, his finances looked good.
When I looked at my numbers I saw the opposite. I had a car loan that I could barely afford and I had my credit card debts. My income had a grew a bit, but so it my debts. I decided that I wanted to get rid of my credit card debt before I got married.
I started by getting my finances organized so I can see what was coming in and where it was going. I used Quicken to set goals and manage my money. I tried keeping a paper budget, but I wasn’t disciplined enough yet to track every transaction. If that’s your problem, please try Quicken or Mint – reduce your headache and get some progress made today.
I also kept up with personal finance blogs that were out at the time like Get Rich Slowly, The Simple Dollar, and I Will Teach You to Be Rich. They provided the motivation and the ideas on how I could get my money to work for me.
When creating my debt snowball, I focused on being realistic. I wanted to create a plan that was sustainable. I needed to stay on this plan until the credit card debts were eliminated. I looked over my budget and started notching down my spending. That money was then redirected towards my debts. (Now there are free options like ReadyForZero to help you take control of your debt.)
Looking back, I’m really happy that I had a chat with my husband about money. It was a bit awkward; no one wants to lay out all their money problems, but it really helped me to get started.
Keeping Spending in Check
I have closed all but one of my older credit card accounts. I now watch how I spend Mint online. It’s free and it was very quick to set up. If there is any usually spending I get an email sent to me. Every month when we look over our finances, we can quickly spot any potential problems and adjust them quickly. We’re a team and we try to keep each other motivated.
I’m happy to say I’ve learned my lesson.
Sharing Money Mistakes
I shared one of my biggest money mistakes and how I fixed it. I’d love to hear from you about your victories. What financial mistake have you’ve made that you learned from? How did you fix your money problems? What would you do differently now?
Disclosures: Some of the links I included are affiliate links.