As a newly married couple living in my in laws’ granny flat/garage, money was too tight to mention. I was a full-time student, pregnant and working part-time. My husband was straight out of university and was working in a temporary contract position, basically earning minimum wage. Although I was recently married to the love of my life, love doesn’t pay the bills. (If it did, we would have been making it rain $100 bills wherever we went!). Together we were just making enough to pay a small rent and buy food and necessities. How could we to get ahead? We wanted our own place (as few things quash newlywed romance like the sound of your husband’s parents bickering over what to make for dinner), we wanted to give our baby a good start in life, let’s face it, we just wanted to be able to afford to eat avocado some days!
I remember arriving home from university one afternoon, opening the mailbox and finding an offer from a credit card company inviting us to apply for a credit card. I thought, “This is it. This is how we’ll have more money!” So I convinced my husband to apply and we were approved. We had an extra FIVE THOUSAND DOLLARS. And so we began living large, making it rain wherever we went. I’d buy a burrito and ask for extra avocado (+$3.50!). I’d buy another pair of shoes for work just because I could. We went on an interstate holiday. We made it rain until we were bone dry.
Where did we go wrong? Getting into credit card debt can be likened to peeing your pants – warm at first, manageable even, but then it gets uncomfortable and you have to sit in your own stench. We never thought of the consequences of our spending (those buzz-kill things like interest, our credit rating or the chunk of our wages the monthly repayments would require).
The following year we received our tax refund, for just under $5000. We’d just had our first child and though it was tough buying diapers and formula, without hesitation we decided to use that refund to pay back our credit card debt. We felt burdened with the debt constantly looming over us. As a final grand gesture, we cut that credit card up into tiny plastic fragments. Lesson learned!
Please, please, please don’t feel discouraged or beat yourself up about being in debt. Most of us are, in one way or another (mortgage, student loans, medical bills, credit cards, etc.) In the words of the great Maya Angelou, “I did then what I knew how to do. Now that I know better, I do better.”
OK, I know, I hear you, not everyone gets a lump sum of $5000 to pay off their credit card debt. So little steps…what can you do?
1. Go Cold Turkey
Stop using your credit card! (It sounds simple, but can actually be pretty challenging at first.) Do not use it until you get your debt under control. (You don’t have to cut it up like me. Someone I know literally froze it in a Tupperware full of water so she has to defrost it from a big block of ice if she wants to use it.)
2. Get Yourself Together
In order to tackle your debt, you need to know what cards you have and how much is owed. Whether you put it on an Excel spreadsheet or write it in a Batman notebook you swiped from your son’s bedroom, just keep track.
3. Aim For Monogamy, Then Celibacy
If you have multiple credit cards, aim to pay off the card with the highest interest rate first, while continuing to pay the minimum amount on the other cards. As you pay off each card, apply the amount of that monthly repayment to the next card. As you systematically pay off each credit card (one at a time), eventually you’ll have an avalanche of combined monthly repayment money to pay off your final credit card!
4. Use Your Powers of Persuasion
Don’t think you have any? You do! (Remember that time you convinced the airline to seat you in the Exit Row for free?) Ring the credit card company or bank and ask for a lower interest rate. You’ll be surprised how obliging they can be. After all, they want your business.
5. Stick To The Budget
Don’t spend unnecessarily on things. What works for me is writing down everything I spend. (It’s just a little Batman notebook.) The fact that I have to write it down makes me think twice about spending money on that new dress/NutriBullet/miracle anti-aging cream.
6. Find Extra Cash
I bet you’re rolling your eyes, but there are lots of creative ways to increase your cash flow! You can de-clutter your home (increasing your coolness factor at the same time as minimalism is all the rage) and discover lots of things you don’t need to sell in a garage sale or online. You’ll be surprised at what other people are willing to pay money for – Someone’s trash is another person’s treasure! You can also ask for extra hours at work or even look into getting a second job (circumstances permitting, of course). My point is, there are many ways to come up with some extra dough you can use to pay off your credit card debt.
Living within your means is the ability to use the money you earn to pay for ALL of life’s costs and expenditures. Life is expensive; I understand that. We have five sons and they are not cheap by any means! Living within your means is not so much about how much you earn, but how much you spend. Account for each dollar. Know where your money is going. Save for the future. Save for the rainy day when unforeseen expenses come up. From this experience many moons ago I learned the vital importance of having a financial budget.
Fifteen years and five children later we still don’t have a credit card. We’ve done just fine living life on a budget and paying for everything in cash. I don’t think credit cards are all bad. I just think you need to set the ground rules for yourself and understand that credit is not free money. Giving up extra avocado on the side is worth it!