Looking Back From a Debtor’s Perspective
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Well everyone, it has been one year and eight months since I paid off my credit card debt. That time of my life was definitely a journey and one I would rather not take again. I sometimes get comments or emails over on my blog about how I have become out of touch with people currently in debt.
Since I talk a lot about creating more income and even using credit cards, some think I am slipping. I tend to disagree with them, so I figured I would look back at my journey and see where I came from and where I am going. This is a look back from a debtor’s perspective.
The First Misstep
It all began when I got into college. My dad told me that I should think about getting a credit card, so I could have some credit history. While I agree with the premise now, my execution was extremely poor. I don’t know how it is on college campuses now, but when I started, it was super easy to get a credit card. I think I got a shirt for signing up, plus some other trinkets. What a score! 😉
No one explained credit to me, so it was a trial by fire. I had to learn how to use it, but the bigger story was to use it wisely. I did not do that part. There are always two sides to a coin, but I forgot to flip the coin over. I took time to learn about credit, but I failed to learn how to use it wisely. I mean, why not go on a spending spree? I could just pay it off over time and not worry about it. There are so many cool things to buy as a college student. The opportunities were limitless!
Looking back on my first credit card experience, I don’t regret getting one. What I do regret was using it like I did. I bought things left and right, and paid the minimum balance when it came due. Terrible mistake!
The Credit Card Game
After I got my first credit card and maxed it out, then I had to look into getting more. My first credit card only had a $800 credit limit. After some time with the card, the bank increased that to $2,000. Not sure why, but I didn’t even have to ask. Now I had more money to play with! 😉
I didn’t feel that one credit card was enough. I started searching for better offers with lower interest rates. It didn’t take long for me to find one. I picked another up and was on my way. I would use both cards in tandem, then pay the minimum balances on both. I would then start looking for another card, then another.
The credit card game, as I like to call it, was fueled by my desire to start an e-commerce business I needed capital to get it off the ground and I had plenty of it with my credit cards. By the time it was all said and done, I had 7 or 8 credit cards with a credit limit well over $100,000! Yes, I could have charged well over $100,000, but I kept my wits and only charged closer to $70,000! 🙁
OK, that last sentence was a little pun. There were no wits involved, just stupidity! Some of you that know me see my story about how I paid off over $50,000 of credit card debt, yet the number above was around $70,000. What gives? Well, when I shut down my online business, I sold some parts of it and was able to get about $20,000, so I put that directly toward the credit card balance. This left me with closer to $50,000 in credit card debt.
Looking back at this time of my life, I realize that I did it all wrong. I got complacent with the fact that I could just pay the minimum. If I would have stopped and looked at how long I would be paying the debt, I would have figured it out sooner. I also would have never used my credit cards to fund the business like I did. I made many mistakes during this time, but I learned some valuable lessons as well.
The Harsh Realization of Debt
My reality came crashing down when I finally started looking at the numbers. I was paying nearly $800 a month in just minimum payments. It would have taken me until I was 80 to pay off the debt. I needed to make a change. Not only that, but I needed to change how I looked at money, how I used it, and how I was going to pay it off. This started my long four-year journey to debt freedom.
I took down my debt a number of ways. First, I went with the debt avalanche method. I wanted to go mathematical and hit the highest interest rate first. This worked out well for me, saving me thousands in interest payments. I also learned how to make more money on the side. Without this, I wouldn’t have paid off my debt in the time frame that I did. On top of those strategies, I also learned how to invest and save my money. Yes, I saved while paying off debt. I used a method that I developed, which I call the savings allocation method. This method allowed me to learn how to save my money, yet still pay off my debt.
Looking back at this part of my journey, I wouldn’t change a thing. I went with the debt repayment method that worked for me. I never missed a payment with my credit card companies and I always paid on time, except for one payment. I especially would have saved and paid down debt again. It showed me what I can do with my money. It changed my money mentality and moved me from being a spender to a saver.
The Final Look Back
Since I have been credit card debt free going on two years, I realize that I might be a little removed from paying off debt. While that is true, I still fully understand the journey others are going through. I was in the trenches just like any other debtor. I fought with my spending mentality and I won. I changed my ways and now I am moving on from debt. I learned how to use credit wisely and I still use it. I learned how to use credit cards wisely and I use them every day.
Looking back from a debtor’s perspective, I realize that the whole thing is a learning experience. The key is what you take out of the experience. Do you learn from it or do you just go through the motions?
If you have been in debt, what do you see when you look back? What lessons did you learn? What method did you use to get out of debt?
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