The Beginning of the End For My Credit Card Debt

My name is Meghan. I’m 21 years old, I live just outside Toronto, and I have upwards of $3000 in consumer debt.

I work at my family’s business full-time, and go to college for an accounting diploma at night, which the company foots the bill for. I have no expenses besides my cellphone bill and my nicotine habit. I live with my grandfather, so I don’t pay rent, and he buys the groceries and pays for all household expenses. When I use the family car, mostly to get to school, my gas is paid for.

So if I have so much disposable income, how did I end up in so much debt?

When I applied for my first credit card in 2010, I thought it would be a good way for me to work on my credit. I was worried that I wouldn’t be approved because of my lack of history, but lo and behold I got a call that I had been approved for a card with a $5000 limit. I thought that was a little high, thank god, so I dropped it down to $1000. My sending spree began.

The first month, I spent $400. Whatever, I paid it all off from my next paycheck- but that left me with only $200 and change, so I racked it up again and continued, always spending a little bit more than I made. Eventually I maxed myself out. I got extremely upset with myself, paid as much as I could off, and finished off the balance with my tax return. I started using it with more wisdom, until I got my second credit card in July of 2011.

Again, I was approved for $5000, but this time I kept it. I started it off by buying some new pairs of shoes (I deserved it, after all).  Then I bought my mom a lavish birthday present, because where would I be without her? It snowballed from there. Around Christmas, I had about $500 on the first card and $1700 on the second. Then, after spending the past two months painstakingly putting $200 a paycheck into my savings account, I realized I needed a new laptop for school. No problem, that’s what savings are for, right? So I withdrew and spent my $800 all in one day, ordering the laptop online and putting it on my credit card. I did transfer the full amount to the credit card, but I depleted my savings and had to use my credit card later that week for an emergency that wouldn’t have been a problem if I’d bought a less expensive laptop. My Christmas bonus went entirely towards my cards, even after I promised my mom I’d save it. I lied to my family and friends about how much debt I was in. I even gave payment advice to a friend who was going through collection with her credit card company. I deluded myself that I was different; I was only carrying a balance because things kept coming up, and I’d eventually pay it off in full. Besides, I had a full-time job, right?

I very rarely checked my balance, especially on the second card. I knew the balances were creeping up, but I just continued splitting $300 a paycheck between the two cards. I figured I couldn’t possibly spend more than $300 on my cards in two weeks, on top of the $400 left in my paycheck. But I could, and I did.

It wasn’t until last week that I realized this had to stop. I was excited to get my taxes done, because last year my refund was over $1000. I’d been planning for months to take my refund and knock off some of my debt. My co-worker took my T-4 and entered all my deduction information into Turbo Tax so that I could see what I could expect to get back. When I looked at his screen, I was FLOORED. According to Turbo Tax, I owed the CRA $173. My spending over the past couple months LITERALLY flashed before my eyes. The concerts, Christmas presents, fast-food runs, leaving the mall with $200 of merchandise, buying dinner out for various friends and family- all of it done because I thought my tax return would be my buffer. I almost started crying right there in the office. Now I had to pay the CRA on top of what I owed?

Later, after calming down and talking to my family, they told me that they allowed me to deduct my one year at university last tax year, which was why my refund was so high. In addition, there was a deduction limit of $5000 a year for school expenses, so I would probably still get a refund because the amount can be rolled over. That conversation was eye-opening (how had I not looked at my taxes last year after our accountant sent them back?), but I had also been humbled by the experience of seeing what I owe without that deduction. I realized that I can’t expect to get money from anyone, let alone the government, to cover my extravagances. For many people using credit cards is a necessity after a job loss or illness, but for me it was absolute stupidity and an entitlement complex. I work in finance for god’s sake! I’m in Accounts Receivable! I deal with customers who owe us large amounts every day, and I’m meticulous at work making sure I bring in every penny I can to cover our costs. I’m very good at handling money when it comes to my job, but when I’m dealing with my own finances I’m like a fish out of water. Admittedly, I’m a spoiled brat. I basically got everything handed to me for the last 10 years of my life, but it stops today.

The day I found out about my tax return, I cut up my first credit card. I bought one more thing on the second (a textbook I needed for school that was paid off from my savings), and cut it up today. On Friday, I started to pay it down religiously. It will take at least 6 months, less if I receive a refund with my school deduction. If I do get a refund, half will go towards debt and the other half will be put in my savings account.

I’ll post exact numbers and a budget tomorrow, as well as a bit more about myself. This blog will continue after I pay off my debt, as I increase my net worth, save religiously, get my designation, and become financially independent.

Feel free to comment and leave me your blog address, so I can follow your journeys as well.

This is it- I’m finally growing up and just doing it.


2 responses to “The Beginning of the End For My Credit Card Debt

  1. It’s amazing how one purchase, which seems either harmless or justified somehow can snowball, like you said. I’ve been there with the type of spending you did, and of course where I am now. I put my life coaching courses on the card which i somehow justified, instead of being realistic about it and actually saving for awhile to pay for the classes in cash. The funny part is one of the instructors even told me going into debt was OK because your passion about what you want to do far outweighs the debt. I hated that instructor btw. Are you kidding me??? As coaches we want our clients to do the best they can to take care of themselves…financial anxiety being one of them!! Anyway, you are very smart and wise to get a handle on this while you’re young. If you start saving just a little bit now with compound interest…you’ll be set! Good luck, and I’ll keep following your journey!

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