Credit Card Debt – How I Learned My Lesson

I know you’ve heard and read countless stories about people amassing huge amounts of debt and finding themselves helpless to crawl out from under it. I’m aware of how much literature there is floating around (on this site and elsewhere) about how to educate kids and college students on the proper use of a credit card. The story of how I personally racked up – and then eliminated — $23,000 in credit card debt is a unique one, though, and I’m hoping someone else out there can find some solace and a few lessons in the roller coaster ride that has been the last eight years of my financial life.

Too Much Debt – How It All Began
Ironically, I had just used the income and some stock options I had picked up at a shiny new job in order to pay off the $5,000 in credit card debt I had been sitting on since college. I was 22, and the dot com boom was just spreading its wings. I was living in Manhattan, NYC and had a technology job. Nothing could have been better – life was grand.

Well, believe it or not, the company went belly-up within a year (go figure!), and I suddenly found myself without a job. Not too worried (the dot com bubble hadn’t burst just yet), I decided to take some well-deserved time off and get a little traveling under my belt. When I got home, I just couldn’t bring myself to look for work, I was still sitting on a nice little pile of cash from the rest of the stock options I’d traded in, and I was sure something would present itself when the time was right. Ahem…
Before too long, my money had run out and I was living exclusively off of credit cards. Mind you, I was now trying to find a job – any job – in earnest, but the economy was in a post-September 11th tailspin, and nothing was turning up. I decided against moving to a cheaper apartment, and was trying not to eat out too often or buy new clothes, but the debt was piling up faster than you can say “convenience check.” I was in trouble.

Getting Out of Debt
By the time I finally found a job (complete with a 35-mile commute and half the salary I had become accustomed to), I was $23,000 in debt to my credit cards. No joke. It has dramatically affected every day, week, and month of my life since. Have I gotten out of it? Yes. Well, almost – I have it at a relatively manageable $8,000 at this stage of the game.

Only Spend Money On What I Need Not On What I Want – Except Travel
How, exactly, I went about reducing my debt without having too much income at any one time since is a somewhat more involved matter. I’ve been a freelancer or part-time employee almost exclusively throughout these last eight years, and I strongly prefer this lifestyle, even if the pay isn’t great. Considering with the heap of debt I have to come face-to-face with every month, though, maintaining my lifestyle has meant living in low-rent situations, never having a newer car, and not being able to spend money on anything – and I mean anything – remotely frivolous. I love to travel, and that has been my sole significant expense beyond keeping food on my table and a roof over my head.

Get Lowest Possible Interest Rate Credit Card And Always Pay On Time
In terms of managing the debt itself, I’ve always made sure to keep as much of it as possible at 0%. All of it is under 5%. I make no exceptions to this rule, and the way I’m able to do it is by making on-time payments every month, no matter what happens.
This keeps my credit score on the up-and-up, which earns me great offers from credit card companies. If I don’t have the money to make the minimums, I borrow from Peter to pay Paul – or MasterCard to pay Visa, as the case may be. Bear in mind, I do this as a very last resort, if the money just isn’t there. Since the debt is kept at an average APR of about 2.3%, I hold a chunk of money in a CD that yields 4.5%, using its dividends to pay off more debt. It helps.

You Can Get out of Debt
It’s not the most dramatic story in the world, and I suppose I am still $8,000 in debt … but again, I hope this shows you that it’s possible to climb out of debt. Even if you’re not making much money, can’t afford the fancy clothes and family vacations you rightly deserve, and have to put off the dream of homeownership for a few more years … well, you can do it. If you want to avoid bankruptcy or debt settlement, the tools are at your disposal. I’m living proof.