“Have you ever wondered if your sole purpose in life is to serve as a warning to others?!” – Unknown
Sometimes I think that there is more to be learned from other people’s mistakes than their successes, and so, for this post, I thought I would share my own journey into (and out of) debt in the hope that it might serve as a warning or an encouragement depending on your circumstances!
It’s said that what doesn’t kill you makes you strong and I’m pretty sure that makes me the human equivalent of titanium. I know it could have been worse, but I also know it could have been so much better if I’d made different choices. However, life is a journey and this is the story of my debt detour:
I remember, as a teenager, swearing that I would never apply for a credit card because I knew I’d have a hard time resisting the temptation to spend too much. Then one day, a few weeks before Christmas, a letter arrived in the mail from my bank informing me that I’d been pre-approved for a credit card. All I had to do was sign the attached form, pop it into the mail and my shiny new card would be in my hands within days. I’m still not sure what made me sign and return that form, but it was the first step on an increasingly slippery slope into debt and financial mismanagement that has cost me dearly.
Of course, my dance with debt wasn’t an instant disaster. It started out steadily enough, with me making small purchases and paying off everything I owed each month on time. Then one month, I was a bit short on cash so I only made the minimum payment and, from that point on, I carried a balance. The numbers grew bigger and so I stopped looking at the total balance and started focusing on the minimum amount because that was a more manageable number. Every time I got close to the limit the bank would conveniently increase my credit limit and so I kept on spending.
Then, one month I was a couple of days late making a payment and, in my mind, it was the end of the world. I rushed to the bank, apologized to the teller (who didn’t seem to think it was a big deal at all) and then a few months later, it happened again. This time I was over a week late making my payment and to my surprise, nothing terrible happened. No calls from the bank, no letters in the mail, nothing. I’m sure that, somewhere in the bank’s systems, some piece of software noted that I was falling behind and perhaps a few numbers dropped on my credit score but, in my sphere of reality, nothing changed.
Once I realized that I wasn’t going to (immediately) get into any real trouble, I lost a lot of my motivation to stay on top of things. More cards were added to my armory; mostly store cards that I applied for in order to get a 10% initial discount and then, despite my best intentions, never got around to paying off or cancelling. The limits kept increasing, even though I was a student making less than $200/month, and so did the balances, especially once I discovered that the store cards allowed cash advances.
Like most people my age, I hadn’t been taught about money management or how credit worked. I didn’t understand how interest on credit card debt was calculated or appreciate how far I had fallen into debt until I was up to my neck in it. My parents are great money managers, but they’re part of a generation that doesn’t talk about money so, apart from being told not to borrow money, none of what they had learned was really shared with their children until we coaxed it out of them as adults.
Once I graduated from university and had a “real” job, I applied for a consolidation loan that cleaned up the store cards, but I couldn’t seem to keep my credit card and overdraft at zero, and gradually the balances crept up again. It was a cycle that repeated itself over and over throughout my twenties and early thirties: build it up, pay it down, build it up again, pay it down again. There was a brief respite when I moved to Canada at age 24 where I (thankfully) didn’t qualify for credit for a few years, but because I was still sending money back to England to pay off my UK debts (at an exchange rate that definitely did not work in my favour!) even that wasn’t an opportunity to get ahead.
Over time, I learned the basics of saving and investing (thank you Dave Chilton!) and started to apply what I was learning. I found a better job, started earning more money, did some more reading and started to make progress in getting out from under the debt pile. In my early thirties, I decided to get serious (finally) and managed to pay off $14,000 of debt in 12 months. Then the curveballs hit: a house purchase; followed by a marriage breakdown; followed by extensive renovations (funded by the credit cards I’d just finished paying off); followed by a job loss (all within the space of four months) left me reeling financially and emotionally. Almost overnight, I went from a combined household income of $8000/month, to a single income of $5000/month, to EI income of $1650/month. With the debt I’d worked so hard to pay off, run right back up to the max, plus all the expenses associated with owning a home, it didn’t take long for me to fall deeper into debt and further behind with my bills.
I look back on it now and it makes me nauseous to think about how different my situation would have been had I known just a little more about money at 19 or been more willing to apply what I learned from the people around me about saving and investing when I first settled in Canada. While you can’t avoid life’s curveballs, you can build buffers to protect yourself from their full impact. Allowing myself to be that vulnerable to a financial curveball is something that I will never let happen again! Having said that, though, I do believe that things happen for a reason and I know that my situation today wouldn’t be anywhere near as bright had I not hit rock bottom five years ago. Losing my job forced me to build a side business into a full-time business and also led me into financial services. My experiences gave me a unique ability to help others who were struggling with debt and money management and allowed me to develop public speaking and writing abilities that I had been afraid to explore previously.
Ultimately, hitting rock bottom led me to my dream job, a move to a city I love and the ability to clear almost $60,000 of debt over the past 20 months. It hasn’t been easy, in fact, at times it’s been downright demoralizing, but today, as I look back over how dramatically my life has changed in the past five years and especially in the past two, I am excited by what the future holds and that’s a really good feeling.
So if you’re overwhelmed by your finances, drowning in debt or struggling to make ends meet, my advice would be to focus first on what you can control and to let go of worrying about anything you can’t control. Focus on changing yourself, not other people, and be open to the possibility that the solution to your problems might not appear in the form that you’re expecting. Be willing to work as hard as you need to in order to make your situation better and align yourself with people who have the ability to help you get to where you want to go rather than with people who want to keep you where you are. Learn as much as you can about money, debt, saving and investing and then apply what you learn. Set goals, make plans to achieve them and then celebrate every success along the way.
If you’re in debt and looking for a quick fix, I can tell you first hand that there’s a good chance that you’ll be disappointed. The journey to financial freedom isn’t easy, but if you’re willing to invest your time and energy into conquering the debt mountain and building a solid financial future, I can tell you that it’s worth every ounce of effort.