Saturday, March 10, 2012

Recovering from early credit card debt

This post is a part of Women's Money Week 2012. For more posts about overcoming consumer debt, see Debt Roundup.

This is a guest post by my sweetie; she graciously agreed to provide an alternate viewpoint for the topic of Debt.

When Remy and I first started talking about money matters, I was surprised at how incensed she felt about the credit culture here in the States. It made me realize that here was someone who, without experiencing credit card debt first hand, knew how I felt and what I hated about it, too. That was refreshing. But, in talking to her about the differences -- culturally, philosophically, personally -- we have in our views about money, it was clear that my past experiences color the rest of my interaction with money. They also have affected our relationship as we’ve started living together and making plans to get married in the fall. Today I’m sharing a bit about my financial history and what I’ve learned from struggling with debt early in my life.

My understanding of money clashes with what it seems that society expects (high credit card balances, loans for the things you can’t afford, trust you have steady employment to do all this). I grew up in a family that believed that if you didn’t have the cash on hand to pay for something, you’d just keep waiting until you did. My family is living in the same apartment we got 24 years ago. I’ve never lived in a home owned by my parents, but for a while I lived in a home with extended family. For us, luxury was getting to go out and eat at a fast food restaurant after church services. And even then, it wasn’t going to be a big meal: value combo for the adults, basic kids menu, nothing fancier than that. My relationship with money was that it was for others to use and flash around -- we needed it for the “important” things. And g*ds forbid we should ask for splurge items. My parents would get us something for holidays and birthdays, though. With three children, that was a noticeable expense.

When I graduated from high school, I considered attending college. Neither of my parents were college-educated, but their struggles with money were enough to paint the picture of how hard paying for college would be. For them, the concerns of housing, books, food, clothing, transportation, and all other associated school costs were insurmountable. To them, the idea of being able to pay all this, right off the bat?  What kind of gift was I hoping for? Remember, to them, if the money wasn’t in hand, you’d just keep waiting til you had it. But an education doesn’t wait, not that way.

My dream was to attend Brandeis University and study English, to get a degree I could translate into a teaching credential or into some other creative avenue, but I REALLY wanted to teach. To some eyes, it seemed like I had excellent prospects. Great grades, awesome recommendations; some of the best schools wanted me. I was offered scholarships all over the place, but not enough to cover the gap between tuition and living expenses and the money I had available. Student loan time, right? No. Because that is exactly what my parents had instilled in me NOT to do. Despite all the financial counseling that I was given at school about how easy it was to take care of student loans and how they were designed to HELP me and not HINDER me, there was no way I would ask my parents to co-sign or that they would let me get one. It was too big a hassle, trying to get them to break their opinions on loans and their reservations about what that would mean for any future savings I might have or what I would do with them... It was a contentious time in my household, but it didn’t help that deep down, I agreed with them. So the arguments were really just ways for me to deal with the disappointment of not getting to go away to college, like I’d dreamed of.

I downgraded my education from Brandeis to the nearest junior college (a move I don’t regret, too much), got a part time job, and went to school without a student loan hanging over my head. I did that to cut costs; I was concerned about spending money I didn’t have. Sadly, I was not prepared for a student’s credit card that arrived for me about two weeks into my first college semester.

I had an opening credit limit of $300: a nice tidy sum and about two weeks of wages for me (if I included tips and didn’t do anything else with the money). I thought that telling myself that this money was ONLY for school needs would be a great way to handle it. And it was, for a while. I did right by the card - paying it off each month in full, (look, see! I was being responsible!) -- and saw my limit increase steadily to 500, 700, 1300. The problem was that as the limit increased, so did my expenses. My commute was about an hour, but a lot of idling and spending time at traffic lights. My parents were sharing my car with me, and I would contribute maybe $10 every couple of weeks because they would fill up the tank for me when they took my car somewhere. That changed as the gas prices climbed. So now I was putting full tanks of gas into my car. I asked for more hours at work and got them, but that meant I no longer had time to go and get my lunch or dinner at home, and so I started hitting the drive-through after classes (this is how I ended up gaining the Freshman 25). All that went on the card. My limit went up to $1500 and I was so glad for that, but I was still barely making $300 every two weeks or so. My minimum payments went up to just a little over that amount -- I owed more money than I was bringing in with the part time job. My parents weren’t very helpful in this situation. They didn’t know about negotiating with the credit card company to get a lower, more reasonable minimum payment, and they couldn’t help me out because their money was starting to get stretched thin, too.

Finally, after having to give up school to get a full-time job, I had to call the credit card company and get them to lower the interest rate and the minimum payment. I wasn’t in a good negotiating position. It was too late: I’d fallen behind in payments, and there was very little they would do for me. I had a good job, but I had this monster of debt dragging me down. Paying that credit card debt back cost me the paychecks of one of the highest paying jobs I’ve ever held. It took the entire time I was employed (it was a school semester job, January to June) to pay off the card. I never got to see one cent of those paychecks, because it ALL went to paying off debt, while I lived with my family.

When I was finally free of that card, I realized that even though I wasn’t yet 25, I was already part of the countless Americans struggling with credit card debt and its aftereffects. I’m 28 now, and my credit score is still reflecting the negative comments on it (they're falling off, slowly) and it stands at a level that’s just barely passable for most jobs that still check these things. It’s made it hard to rent an apartment (my fiancee’s higher score came in handy to balance it out, but it would have been tough to get the same place on my own). When I want to buy a house or maybe buy a car, my rates will be higher than someone without bad credit history -- if I get approved at all.

So that brings us to my present-day relationship with Remy and how we have handled money as a couple. When we first considered marriage, finances were one of the things we had to discuss in detail. I had a lot of baggage due to the mindsets I’d been raised with and what I had experienced; I felt as if the things that my parents were so afraid of were true because I’d had them happen to me. She was concerned about my consumer debt and wanted to know that there was a plan for paying it off. Sometimes we argued about that. I felt like I was coming out of a fog and despite all the steps I’d taken to correct my earlier mistakes, there was still so much that I feared would rear its head -- especially some of the notes on my credit report. Supposedly, bad comments can stay for years!  I’ve slowly seen some of my earlier mistakes disappear, but it’s not enough, or fast enough, for me to be happy with where I’m at.

We have a specific plan for most of my debt: I want to marry her “beholden to no one and no thing”. (To this day, that line from To Kill a Mockingbird sticks in my head.)  I’ve worked two jobs for months. Since my last Monday-Friday position ended, I have been looking for an office job to replace it while I work on the weekends and take on extra small jobs to boost my income. Every month, I pay a certain amount to my credit card company, more to the bank that holds my loan, and some to repay my personal debt, and I pay my share of the living expenses as well. Like that first full-time job after quitting college, I don’t have much left over from my paycheck. But the results are much more satisfying. Over the past year, I have entirely paid off a loan I took out from my bank (to try and see if I could handle the idea of even HAVING a loan) and I’m maintaining a reasonable balance on a credit card I opened to have some positive stuff start to be reported again to the credit bureaus. And the amount I owe from last year’s back rent has gotten smaller and smaller... in a few more months, it should be gone! Just in time for the wedding.

As I look at my decisions and how I have grown in my relationship with money and debt, I realize that the goals I’d had when I was younger -- school, credential, good teaching gig -- are still important to me. I have a better handle on the panic of having a loan (thanks to my credit union and their easy terms for my trial loans) and I feel like this time around, going back to school to finish up my credential means that if I decide on taking out a loan, I am in a better headspace for it. If I were to take out a student loan now, I wouldn’t stress about it too much or for too long, because now, I’ve worked through a lot of my own issues and my enculturated ideas behind a loan. I know more about how to avoid getting in over my head, and I have the experience and confidence now to know that I can pay it back. I think that’s progress.

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