A reader tipped me off to an article (thank you!). The most interesting part of the article is a quote from a Christmas shopper:
“This year, we’ve decided to just go for broke. Yeah, the economy might be in bad shape, and times might be tight, but putting another four or five hundred dollars to the debt we already owe isn’t going to make that much of a difference…”
[Via NorthJersey.com]
Here’s my confession - I don’t know how many times I’ve felt that way. I know it was a lot and I acted on it a lot. After all, we were over $37,000 in credit card debt way back then. But the thing is - I still deal with those thoughts. Why not charge a few hundred on our cards and then turn around and pay it off in a few months? We are in debt so what is a few hundred more tacked onto it?
Even though I still get those thoughts, I can talk myself of them pretty easily now. How? Well, I think back to how our debt started. My credit card only had a limit of $500 and my thought was that I could pay it off in a few months. I did pay money towards the card, but I kept using it. Then the credit limit was raised. So I charged more. I dug a pretty big financial hole on my own and then the bad habits continued after I got married and had access to more available credit. Very vicious cycle (*shiver*).
Anyways, I think about that and how stuck we felt at times due to our debt. I don’t want to be there again. I am so glad we are where we are right now financially with everything going on with the economy. Back in April of 2006, our total debt payments were $1,753/month. Today, they are $729/month (mortgage, school loans and our credit card). That is a difference of $1,024!
Because we are no longer paying for all of that debt, we have extra money for other things - like health insurance and life insurance. We also have money to pay for things that come up like car repairs or medical bills. If we don’t have enough in our checking account, we have a savings account to pull from. I think about my stress levels back then compared to now. I really like how much better I feel now that our financial situation is better.
Sure, there are times where I think about going for broke. But we’ve been there before and I don’t want to go back there again. Some of you have shared with me how great it feels to be debt free. I believe it and that helps to keep me going with this until every last cent of our credit card debt is paid off.
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Credit Card Debt
- Starting = $37,614
- Paid Off = $31,615
- Current = $5,999
- $25 ING Savings Bonus
Savings Account
- Current = $3,750
Posted: December 3rd, 2008 at 10:28 pm
I confess that in the past, when I was younger, I would do really good at paying down my debt but then all of a sudden I would get into the mindset “I could die tomorrow so why not?”
I have since grown out of it, I only wish I had done so sooner
- Neko
Posted: December 3rd, 2008 at 10:39 pm
The same could be said about food and gaining weight. I’ve had days where I’ve eaten a lot of crap and instead of trying to eat healthy for the rest of the day, I rationalize that I’ve already blown it for the day so why bother. What’s a few more calories?
Posted: December 4th, 2008 at 2:10 am
Oh, I shutter at the thought of “going for broke”. We have too much debt than I care to think about, but I refuse to charge Christmas. I hate that “sick” feeling of having a bill after Christmas.
We have 2 little ones and I have come to realize that they only really care about the little things. The small gifts are the best.
The best birthday gift that our oldest (5) got was a $5 Tonka truck that his brother (3) picked out. Priceless. It doesn’t matter how much you spend, but the thought that is put forth.
Posted: December 4th, 2008 at 3:52 am
Here’s an interesting (slightly religious) video celebrating not spending at Christmas and it’s my sediments exactly
http://uk.youtube.com/watch?v=eVqqj1v-ZBU
Posted: December 4th, 2008 at 5:37 am
Well done on keeping your credit card down way low. It’s amazing how much you realise you can actually keep once those debts and the interest aren’t being paid off. You also realise how much happiness you get when you finally pay off that one last bit - it’s purely amazing.
Posted: December 4th, 2008 at 8:34 am
I can see how those thoughts can creep back in. What keeps me from giving in is knowing how hard it has been just to get our debt down as far as I have gotten it. In one single trip to the store I could blow all that hard work. Just not worth it. You are doing a fantastic job. I’m in admiration.
Posted: December 4th, 2008 at 8:52 am
I too, am motivated by the thought of being debt-free. Well, credit card debt-free, to start with! We put $500 a month toward our two remaining cards, which is well above our minimums. I don’t even think about this money as something we could save or spend on something else. But now that we’re within six months of being CC debt-free, I’ve been thinking about that $500. I mean, that’s $6,000 this year, alone! Crazy.
I don’t think I could go whole hog, so to speak. I still use the cards for necessities like groceries and gas, but I don’t think of it as “magic money.” As soon as I charge something, I go online and pay it off.
Posted: December 4th, 2008 at 11:24 am
I have felt that way so many times. I just can’t go there anymore - it’s too scary. Thanks Tricia for the inspiration! I work at a hotel and don’t normally get tips. Well, last night I got $7.50 in tips! I put it in the bank this morning and it felt soooo good. It’s not much, but it adds up. Thanks again!
Posted: December 4th, 2008 at 3:06 pm
They’re going for broke and will end up just that, broke. Any time you start to think this way just look at the time value of your money. $500 with compound interest over 20-30 years is a lot of money.
Posted: December 4th, 2008 at 3:50 pm
I have to say it used to be very easy for me to convince myself to spend the extra $$$$ and i would figure out the financial back lash later. But since I was laid off and didn’t have a job for 6 months my mind set has changed dramatically. Not as easy for me to shop and spend a will. I still want to buy only I’m more inclined to look for a good deal.
Remember think about the BIG PICTURE not only on the immediate gratification.
Posted: December 4th, 2008 at 3:53 pm
When your in a good place it can be hard to keep those thought of why not at bay.
It’s part of learning a new behavior, it take time and effort.
Posted: December 4th, 2008 at 4:09 pm
Guilty!
Well, I used to be guilty of thinking that way… then I realized 2 things:
1). That was the kind of thinking that got me over $12,000 in debt to begin with
2). It wasn’t only X dollars more to the debt - it was X more months/years before I would be out of debt!.
Keep fighting!
-Joe
Posted: December 4th, 2008 at 5:51 pm
I keep trying to explain to my husband how much money we will have when we are debt free. He doesn’t seem to get it. If we didn’t have debt we would have about $1500 a month extra each month. There wouldn’t be anything we couldn’t handle with that much cash flow. I get it…so I am moving forward with getting it paid off!
You have done such a good job of staying on course!
Posted: December 4th, 2008 at 9:02 pm
Dangerous short term thinking, for sure. At least if you eat dessert when you can’t “afford” it, exercise to counter it is easier arrange than finding a second or third job. As you said, the real self discipline comes from realizing how much that $500 will be at usury credit card interest rates for the ten years it will sit there. Back of the envelope gives me more than $1400 in payments to pay back that $500. That’s insane. You really want your money working for you, not the other way around. Yeah, debt slaves willingly adding more shackles.
Keep your eyes on the prize as someone famous once said.
Posted: December 5th, 2008 at 4:23 pm
I have the same mind tricks where I tell myself I don’t need to have money in savings or I don’t need to make an extra payment on my credit card. I want more stuff instead. I have worked very hard to change that whole mind set.
Posted: December 5th, 2008 at 11:43 pm
This is my first time visiting your blog and your story is very inspiring. I think there are plenty of people out there that can learn from it. I look forward to reading more.
Posted: December 6th, 2008 at 2:44 pm
The reason this train of thought is so seductive is that for people who haven’t budgeted out their income for the month into the various categories it needs to be allocated into, they have no idea what their actual “discretionary” income is.
If you pause to think, “ok, if I buy this for $500 on credit, exactly which items am I not going to buy over the next 4 months to pay for it? Let me make a list and see it’s doable, then decide whether a new (*whatever*) is worth cutting out all that other stuff”. About 10 times out of 10, the answer will be that it isn’t. But you need to develop a) knowledge of your actual monthly cash flow and budget situation and b) develop the mental habit of asking these questions before buying things.
Echoing other commenters, it was important to me to realize how counterproductive the “charge and I’ll somehow pay it some unspecific time later” mentality was in my personal life. If it managed to get me into $20,000 of debt over the last 15 years, inhibiting me from pursuing all kinds of life options, maybe I should reject it as a line of thought if I want to actually get anywhere in life and have security and a fulfilled life.
Posted: December 6th, 2008 at 2:45 pm
Also, The buck stops here, now, not next month.
Posted: December 6th, 2008 at 2:54 pm
Someone said above that $500 compounded over 20 years is a lot of money. But the kicker is, it really isn’t. And you need SAVINGS of at least 2,000-3,000 times that 500 dollars (in today’s dollars. if you are going to retire with any hope of financial security. That means putting $500 into savings some 2000 or 3000 times between now and the time you retire, without taking any out. So really it is incumbent upon you to start doing that, on whatever scale you currently can, as opposed to spending on unneccessary stuff.
Someone above wrote:
“We put $500 a month toward our two remaining cards, which is well above our minimums. I don’t even think about this money as something we could save or spend on something else. But now that we’re within six months of being CC debt-free, I’ve been thinking about that $500.”
The thing for that person to realizie is that that $500 per month actually represents $500 worth of savings, but applied against their credit card debt and not to a savings account per se. But it is STILL $500 worth of savings, and it would be good to start thinking of it like that, as SAVINGS, so that when you get to the end of the credit card debt you are able to simply direct it into either an interest bearing account or other investments. It really isn’t money available for spending, at least for many if not most of us, it needs to be put away and we will be doing ourselves a favor by putting it away.
Posted: December 6th, 2008 at 2:57 pm
Just to clarify, the reason I say above that the $500 dollars a month towards the credit card bill is savings is that an economist’s *definition* of savings is the difference between what you earned and what you spent. Only if you spent less than you earned in a given period do you have savings for that period. So if you are putting $500 per month towards a debt, that means you had to spend at least 500 less than you earned that month in order to do that.
Posted: December 9th, 2008 at 1:32 am
Steve again.
To get a sense of the kind of savings that requires, to acquire $1 million dollars in todays money, assuming no growth in capital over the 30 years, you need $2777 per month for 30 years, adjusting upward each month my the monthly rate of inflation. This is $33,333 per year.
Or $2083 per month for 40 years. (25,000 per year)
Hopefully you will be able to gain some kind of capital growth in your deposits over that period, but I prefer to keep it simple and look at the calculation as straight savings. Any capital growth (above the rate of inflation) would be gravy.
For many of us, figures like this can help to get back on track and make you realize that you really *can’t* afford that new bauble, that there are some other items that you would like to purchase instead–such as a sound financial future.
Posted: December 10th, 2008 at 1:02 pm
I love this post because it is so honest. So many people struggle with this. My commitment to my budget and savings does tend to go in waves. And, man it is easy to start spending and get off track and stay off track. This is what I do - I have a weekly calendar appointment for me to review my finances and budget. It’s only 15 minutes usually - but helps me make sure that I’m on track and nothing funny is going on (e.g. incorrect charges).
I love your blog by the way. I just started one myself.