Friday, September 2, 2011

The Truth About Money -- Part I

Please excuse the fact that this photo has little to do with this post. But I didn't want to resort to the standard piggy bank or pile of loose change photo that usually accompanies posts about money. And a post without a photo is just no fun, so here you go, a vase with a pretty but dead and dried out weed. But guess what, that weed was free! I picked it out of the ground and look how lovely! How's that for frugal?! :)

So now on to the big changes that I alluded to a few posts back. As I mentioned here, my relationship with money was something that had to improve, and improve it has. But I think to understand the improvements, you'll need to know more about where I'm coming from, so here's the truth about my money...

For most of my 20s, I lived off credit. The concept of living within my means is not something that dawned on me for a second. I never said to myself, oh I don't have enough cash for x-thing-I-don't-need; I just whipped out my friend Mr. Credit Card. And when you're that young, a certain amount of it feels necessary, you're in what I now like to refer to as the "accumulative phase." You're on your own for the first time in your life and there are things you need, like, you know, a mattress. But why stop there? How about a million design books off Amazon? And that expensive make-up set you've always wanted? And those designer jeans? I'm a grown up, I make money, why can't I have what I want even though I can't pay for it with cash?

Well, here's why. Credit card companies are not your friends. When the economy is good and your credit history is all fresh and new, they love you to pieces, but when things turn, suddenly they're perfectly happy to leave you stranded in the middle of the desert. That sounds a bit hyperbolic, but that's exactly how I felt when the economy took a turn in 2008 and the bank I'd had three clean lines of credit with for years suddenly changed the game.

It all started simple enough. I got two letters from them regarding my two smaller-balance credit cards. They were informing me that they'd be raising my interest rate to 29.9%! And since I didn't wish to pour my hard-earned money down the drain, I promptly opted out, so they closed my accounts and kept my interest rate as it was. Whew! I wondered a little why I hadn't gotten a letter about the third, the granddaddy balance of them all, but I thought well, I've had that card so long, since college, maybe they're trying to honor that relationship and aren't planning to raise my rate. WRONG. A few months later, I looked at my bill, and shock! horror! they had indeed raised my interest rate to 29.9% on a balance that I couldn't afford to pay off anytime soon. Let's pause for a minute to be clear about what that means:
The balance on that card was not in the hundreds. It was in the thousands. 29.9% interest is damn near a third. So, without spending a single additional dime, I'd be paying several hundred dollars of interest every month for the foreseeable future.
Surely there's been a mistake, I thought, so I called them up. Apparently the letter got lost in the mail. But instead of working with me once I'd realized what happened, they simply said "Well, we sent you a letter." When I responded "But I opted out of my other two cards when I got the letters for those. Why would I not do the same in this case? Clearly I didn't get the letter," they repeated their claim "Ma'm, we sent you a letter." And then I felt sick, sad, and panicked all at once, and started to sob and plead. Nothing. Then I went for the kill, the line that works in all unpleasant customer service interactions: "I will never ever apply for a line of credit with your bank again. You have lost a customer for life." Crickets. They. Did. Not. Care. I repeat. They. Did. Not. Care. Not your friends.

So, after that slap in the face, I walked away from credit for good and started paying off my debt. If I can't pay for it in cash, I don't buy it. Simple as that.

Only it's not quite so simple, at least not in the beginning. As I'm sure you know if you've ever tried. So I'll be sharing more over the coming weeks about how I've made it work.


Beryl said...

Love your honesty and openess in this post and looking forward to seeing what else you are going to share. This is going to benefit lots of people I am sure. I remember the days of charging it all. I did quite a bit of that too during college. Thanks goodness Brendan came along and saved me from the evil credit monsters. Guess who gets an allowance now from her husband. This girl. But it's what works for us and keeps me from going too crazy. I digress. I am really excited to see you taking control of your finances and I am sure you must be proud!

BlackBetty said...

I've been there. If you come up with a strict budget and make it your mission to pay it off, it's possible. I conquered more than 10k in debt by getting serious. Just be patient but ruthless. Good luck!

Carla said...

I've been there and I'm still getting myself out of debt. I have never felt so powerless when it came to actually getting things I actually needed. Yea - credit would have came in handy. But when I was younger, I wasn't even considering that. My credit cards heighted my materialism. At least until I hit rock bottom. But I slowly began rebuilding - and I was able to finance a car at a reasonable rate, and the rebuilding continues.

I hope to have rid myself of my debt by the time I'm ready to apply for a job after I obtain my BS. It is still a constant struggle but it is easier to deal with.

Can't wait to read Part II.

mysskay said...

thanks for your honesty... looking fwd to the next post

acalways said...

Hi Belle, love this post. I recently (maybe almost two years ago) made the switch to cash. i wasn't using a lot of credit cards but i was using my debit card heavily. I remembered back to when i worked as a teller. the customers who didn't have a debit card and who were adament about not getting one always had a good size balance. it was one of the things that motivated me so i made the switch. I kept my d.c. and one c.c.(for certain things you will always need one) but i don't use them. I created a budget and it was hard in the begining (especially because i only get paid once a month) but I noticed that my savings was growing and I had more financial freedom than my friends who made 5-20,000 more than me! I was like ok this is cool. but i still have to check myself for a couple of reasons. sometimes i overestimate my newly acquired skill and thus overspend (it's a work in process). other times, and this is weird to say, but other times i'm too conscious of money spending. I'll set a goal and then i'll say "no that's not enough, I need more" it sets off this weird feeling in me like now instead of spontaneously buying things i'm chasing money. and it makes me think about what is my sense of worth because it's not money, right? but i wonder how much it's being influenced by it (and i'd be palying myself to think there no influence at all). anyway that's too deep, lol, maybe another conversation. The other thing is i sometimes say "oh i cant' afford it" when really i can. I have to remember that sometimes it's ok to treat yourself (as long as it's not credit!). Also it feels very disrespectful to my friends and and other communities (communities from which I came from) that really can't afford things. But then again it's that same discipline that keeps me (a little) financially stable. so yeah, you know, there are always these checks and balances. but it's been an interesting journey that i'm happy i decided to engage in now instead of in ten years :) Thanks for sharing your story. would love to swap tips. sorry so long :)

S. Katherine Davis said...

How did things work out? How are you now? Did you get the debt all paid off. I'm rooting for you.