Image credit: LotusHead, www.pixelpusher.co.za
This is a guest post by a great blogger, Lisa. We met at a local techy get together in February and she opened up about her personal finance story. Show her some love and check out her tumblr blogs, I Love Columbus and Modest Pomp.
Hi, my name is Lisa, and I’m an emotional spender. Perhaps if you’re reading this, you can relate. Or maybe you know a someone who is feeling too overwhelmed by debt to begin taking control of their finances. If so, I hope to help by sharing my story.
How does one go from zero to five digits in credit card debt over the course of three years? It’s easy. In my case, most of those plastic dollars were spent on fleeting desires. I love nice things, good food, wine, last-minute plans, throwing caution to the wind, and feeling free to do what I want when I want. But when I’m stressed, I turn to those things in a very impulsive and insatiable way. While the impractical and expressive aspects of my personality have often brought me luck (both professionally and personally), they can also be my worst enemy. Woops…$20,000 in debt later and I found myself backed into a corner. This year, I decided to take some monumental steps in facing that number and take action through a debt management plan. It’s a daunting subject to tackle, so I’d like to share five tips that have helped me to begin managing my money better.
1. Love it or leave it. Even before I took the step towards debt management, I started implementing a “two week rule” when shopping for things that I don’t need. Picture this: I’m walking around the mall after work to blow off steam. I see a really great pair of $40 earrings. In that moment, I think I love them…but I’m also looking for something to make me feel instantly gratified after a particularly frustrating day. Will I still care after the thrill of wearing them out for the first time is done with? I stop, I take note of how I’m feeling, and allow anywhere from two weeks to two months (depending on the price of the object) before making a decision. If I’m still obsessing about those earrings every day for fourteen days…SOLD. The result: less impulsive buys and a stronger relationship with my belongings.
2. Think small, be consistent. What!? For people like me – who enjoy the extremes in life – this sounds horrifying. Have you ever tried to carry every single grocery bag from the car trunk to the front door in one trip? If so, you know how exhausting it can be. And let’s be real, you probably didn’t tackle that task any faster than the person who made it in three trips. And you pulled a muscle. And you broke the eggs. And you had to put all the bags down to fumble with your keys at the door anyway. Getting to my point, my parents also happened to lend me a sum of money right out of college that I still haven’t paid back. That was over ten years ago! The reason I’ve carried this weight around on my shoulders for so long is because I refused to make small and consistent payments from the get-go. I’d promise to pay back a large amount one month, and fail the next, because I was short on money elsewhere (or completely emotionally unwilling to part with the amount I’d promised). It was disappointing to my parents and I felt guilty about it throughout my twenties. Two years ago, I put my pride aside, took my mother’s advice, and begin sending my parents a check for $100 every month. It’s a small amount, and it will take time to pay the lump sum down – but it sure won’t take ten more years. Consistency has proven to add value to my small monthly payment; my mom trusts me to deliver, and we both have peace of mind knowing that the amount I owe is dwindling steadily. I had a teacher in college who used to say, “Pennies make cents.” That has never felt more true.
3. Stop putting your pleasure on credit. Credit isn’t YOUR money. Late last year, it became clear that my monthly credit card payments – plus interest – were beginning to cannibalize MY OWN hard-earned money. The number of cards I had maxed out, combined with their ultimate sum plus interest added, was overwhelming. I just couldn’t get ahead. Facing that number and saying it out loud to someone else was the first, most difficult step in dealing with the $20,000 I’d racked up in credit card bills. After a candid conversation with my mother, and a search on the National Foundation for Credit Counseling (NFCC) website, I made an appointment with a credit counseling agency in my area. Here’s the deal: a fixed dollar amount is withdrawn from your checking account every month and distributed to your creditors in order to pay the debt off in 4-5 years. This means no more credit cards. Someone is monitoring that aspect of my life. It seems hard to believe, but I am so much more at peace now, knowing that I can focus on living within the boundaries of my paycheck.
4. It’s okay to make practical decisions for now, in order have more flexibility later. The second best choice I made last year was to take a stable corporate Design job, rather than freelancing. I was lucky to find a great company that provides a great level of health, happiness, and consistent paycheck to compliment my plan to eliminate credit card debt. Is that my dream – to work 9-5 in a cubicle? No. But there’s also not much room to nurture personal dreams when you’re buried under the weight of what you owe to the bank every month.
5. Don’t beat yourself up for slipping up: Once a spendthrift, always a spendthrift. Maintaining better habits will always be hard work, but what good habits don’t require hard work and patience? I’ve had weeks where I’ve failed to adhere to my rules in tip #1. Fine. Each time you fall back into old ways, there is an opportunity to create new solutions, ask for advice, and try new methods. Don’t waste time worrying about all the things you haven’t even started yet (like opening a savings account); they will only be possible if you pick right back up again and keep moving forward. Don’t give in to shame or regret; simply refer to tip #2 again. It’s okay to start small, just start somewhere.
Right now, I’m working with these five points. Managing debt is a process that’s both humbling and challenging, but I can tell you it’s also a relief. Cheers!
Image credit: LotusHead, www.pixelpusher.co.za