My Personal Finance Progress Report

the first step is admitting you have a problem...

"Hello, my name is Karen. I am a shop-a-holic..."

I write that jokingly, but it's completely true of myself, about 3+ years ago. At the time, I had no bills to speak of, was still at home with Mom & Dad, and made enough money that it could be frittered away on junk without looking back. I had no savings to speak of, nor a savings plan in mind. I was seriously addicted to shopping, particularly when it involved clothes. I would go shopping at least once a week, and especially when I felt depressed. Oh, and it had to be name brand, of course. After all, the boost I felt in my mood, walking through the mall with all those bags, was so worth it. Or so I thought. Friends were envious of me, thinking I had all this money (besides the fact that I had a great wardrobe). I didn't - I just had a lot of material things. I would go into stores and would pick up every item off the racks that interested me - and if I didn't have enough cash on hand, I'd just use my credit card. No big deal.

It wasn't technically - until I got laid off from my job, and continued my bad habit as if nothing had happened. After all, I had credit cards - no problem. I remember the day that my mother said to me (after about the 4th day in a row of the UPS truck pulling up to the house with shipments) "You do realize you're unemployed, right?" I just brushed her off at the time, but it started to catch up with me. Once you start spending on credit, it's hard to stop. I soon maxed out all my cards (did I mention I had 14? Yup - and one for every store I frequented) and it became difficult to simply pay my car insurance, gas, and the credit card bills. Which is very scary, since it's so little responsibility in the realm of things. So began the downward spiral where late payments continually occurred, creditors called the house, etc. Such an ugly mess, that I will never let myself go through again.

So what was my salvation? My current relationship. When I decided to move in with my boyfriend Nick 2 years ago, it was a big adjustment for me. Mom & Dad were still there, but I realized they weren't always going to save me. This realization made me grow up a little. I was now an hour away from my old job, so I decided I'd relocate to where I lived. Since it took about a month until I started my new job, Nick helped me pay my bills during that time (what a brave guy - I knew then he really must love me!). He was amazed at the mess I'd gotten myself into, which around that time amounted to somewhere around $10k of debt, I'd estimate, not counting my car loan as well. My problem was that I had so many credit cards, I couldn't keep up with the minimum payments, and I was very disorganized, leading to late fee upon late fee. I had no budget to speak of, I didn't even balance my checkbook or anything - I just had a guesstimate in my head of what was in my bank account. I'll never forget the day that Nick left for work, wishing me luck on my job search - and asking me to have each debt, total amount due, interest rate, and due dates written down, so we could review it together later that evening. He wanted to help me break this cycle. I will never forget how I felt after I did that, I was so depressed. I was shocked at how far I'd been living beyond my means, and honestly don't know how I had any money (or paid any bills) at all! I felt silly, because I hadn't even had any clue as to how bad my situation was before then.

I have come a long way since that point. I soaked up all the information I could on debt reduction, and formulated my own repayment plan. I am now down to 2 credit cards, soon to be one after the next pay period. I can't remember what 14 credit cards feels like. I have a budget, a savings plan, and goals for the future. I still continue to learn more and more about debt reduction, and am amazed at how naive I once was. I am extremely thankful that I changed my way of thinking, but am also grateful that I have the background to remind me of what damage debt can do. I have learned my lesson!

posted by Karen @ 12:12 PM