How to Break Your Bad Spending Habits and Overcome Credit Card Debt – A Love Story

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Spending money is easy. If you give anyone a $50 bill, they will know how, when, where and what to spend it on.

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Growing up, whenever I received money for my birthday or Christmas, I knew exactly what to spend it on. Usually, it went to clothes, shoes, video games, or compact discs. Nowadays, I guess it still would have been clothes, shoes, video games, and oh yeah, a new iPhone! As a kid, I didn’t worry about paying rent, utilities or groceries. I was one of five kids, a first-generation American with immigrant parents trying to live the American dream. We didn’t have many luxuries, but our parents met our needs for food and shelter. Any extra money was for fun, and I had no trouble spending it!

In college, my parents and I took out student loans to cover my tuition and housing costs. When I worked a few hours at the student union, the money I earned was mainly for books or spending cash. However, that money wasn’t enough to cover books throughout the year, let alone being enough to fund a college social life. So, I needed a lifeline… Behold! My first credit card. As a new cardholder, my credit limit was only around $500. Yet, in the fine print, my interest was 24.99%. I didn’t worry about the interest rate. At the time, I was only focused on my new limit; $500! As long as I paid at least the minimum balance, I knew I wouldn’t have a problem keeping the card.

Within a few weeks, I was within reach of my limit. The credit card company was even more aware of this than I was. Just as I was realizing my new spending source was drying up, I received a letter from the credit card company. The heading said, “Congratulations! We’ve increased your limit to $1,500!” So I said to myself, “I’ll take it! Thank you!” And away I went to easy spending.

When I was in college, I didn’t view my spending as frivolous by any means because I saw other kids spending way more money than me. They had the nice cars and fancy clothes. With my new credit card, I was able to keep up to some extent. I’ve never been much of a clubber, but the credit card let me go out to movies, bars, and sporting events in addition to wooing the ladies (see I told you this was going to be a love story). When I graduated from college in December of 2004, I had two credit cards and was in thousands of dollars of credit card debt. I hadn’t meant to dig myself into this hole, but I also wasn’t fully aware of how interest on a credit card balance worked. As long as I at least paid the minimum, and had a steady income, I thought I’d be okay and that the credit card debt would eventually go away if I curbed my spending.

Mentally curbing your spending vs. actually spending less are two different scenarios. I didn’t have a budget in college because I didn’t think I needed one, and I didn’t understand the actual benefits of having one. I figured that if I worked hard, got promotions at work, and increased my income, then I would be able to pay off my debts and eventually have a positive net cash flow. Unfortunately, it didn’t quite work out that way for me. Within 6 months of graduating, my payments for my student loans were due. I also had a car payment and other living expenses. I was able to pay some of the debt down month by month, but something else would come up that needed to be paid. What I had mentally hoped would go into savings at the end of the month went to other bills. I didn’t cut my spending much because I still had to eat and the bills just kept coming. I had no accurate idea of where all my hard-earned money was going, which was the consequence of not having a budget. Spending money was too easy, and I wasn’t saving anything to reduce my debt.

If this sounds like you, then trust me, you’re in the majority. Spending money on things we enjoy and things that are valuable to us is our natural inclination. However, the one item we often neglect to spend on is our future selves. Saving is spending too, in a way–it’s money coming out of your paycheck. However, that “spending” is an investment in yourself. I may sound like a broken record, but a budget will help you keep savings money rather than spending it on the next shiny thing. With a budget, you can invest in your own future via retirement accounts or other savings plans.Those accounts grow exponentially by compounding interest vs. the newest tech gadget or car that’s so tempting to buy but depreciates immediately.

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I’ve overcome credit card debt. Budgeting is never an instant fix, especially depending on how much debt you’re in. Digging out of my credit card debt took years of hard work, and frugal spending, but I’m glad that albatross is off my shoulders. In a future post, I will explain how I got out of credit card debt.

Spending money is easy. But spending money towards the future, what most people call “saving,” will yield more money for later in your life. Plant that money now and let it grow for you.

 

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