Penny, One Dime Ago

This is me participating in the Money Blog Network project in which we look back 10 years.

June 1998. I was 21. I think I still dyed my hair dark red (Outrageous Cherry or Redken Shades in Cinnamon). I I fooled around with a few too many pretty boys (and don’t regret it, not for a minute). I probably drank a bit too much (but not too much compared to most of my classmates). I was a wicked better programmer than I am now (I wrote a Valentine’s Day perl script for my boyfriend that year). I never skipped school (I genuinely love going, always will, and hey, I was paying for it). My job sent me to California on my first business trip, and it was the first and only year I went to Burning Man.

I was VERY HAPPY and…

Poor
Oh and I mean it when I use that word. In 1998 my adjusted gross income (AGI) was $16,600, according to my tax return from that year. I lived paycheck to paycheck, by my wits, by the skin of my teeth. I did not have financial help from my parents during college, as they could not afford it.

Working
In April 1998 I started a contract programming job at a dotcom start-up in Michigan. I made $12 an hour but only until school started, when the dotcom went bankrupt and I took a work study job on campus. My how I’ve though about how my life might be different if I’d just headed out to California for Dotcom Boom #1 instead…

Living Alone
In 1998 I learned that I LOVED living alone, truly loved it (still do), free of crazy roommates and truly on my own (and, well, you know… boys could come over).

• Rent = $515/month
• Car insurance = $70/month
• Car payment = $120/month.

Oh right. I had a car then, and would until 2004 (until it was stolen and happily relieved me of car ownership duties forevermore).

My total basic expenses were $705/month.

With expenses that were too high…
My expenses were lower than they are now (housing cost less, for instance), but as a proportion of my income they were much higher than they are today. In 1998 my most basic monthly expenses ($705/month) were 50% of my total income ($8,460 out of $16,600 for the year). And before you say it… The dorms cost the same as my apartment. That 50% of my total income on the basics did not include food, textbooks, utilities, gas, and so on, so it’s easy to see where the remaining $8,000 went.

Well into student loan debt
By 1998 I had $12,000 of what would become a total $20,000 in undergraduate student loan debt ($4,000/year for five years and there you have it). Frankly, I don’t know how I got out with so little since tuition cost $16,400/year and my parents weren’t paying for any of it. I recall some merit-based scholarships, grants, and work study so that must have covered it.  I will look but that paperwork is in storage.

And racking up credit card debt.
At 21 I had $5,000 in credit card debt. It’s too bad that I’m not a pack rat and shredded most of those statements years ago, because I would love to peruse them now.

I know I charged a $500 car repair (I *think* that was the first time I used my credit card) and $1,000 on work clothes (I literally had nothing appropriate for an office environment).  Some was new tires, but the rest was shopping and eating out and paying off the minimums as I went.

My friends used credit cards constantly, buying whatever they wanted at J. Crew, buying a few rounds of drinks, picking up expensive architecture books and Magic cards, anything they wanted.  What I didn’t know until later (and cannot believe I didn’t realize, so naive was I) was that their parents were paying off the balance every month. I only thought that there must be something wrong with me if I couldn’t make more than the minimum payment.  Clearly they had some math skills I didn’t!  Wrong.  They just had wealthy parents.

Without Savings
Not a penny, not a stitch.

Don’t Look Back
I usually subscribe to this but looking back has been a great exercise.

Ten years later, my hair is not red (it’s striped).  I sleep with only one pretty boy (and don’t want any others).  I’m not poor and I’m working (still in tech but for a lot more money).  I still have student loan debt to pay off, which I’ll start on when my Ph.D. is done.  I have no credit card debt and am a homeowner. And I’ve done it completely on my own the whole time. I like that.

Not having financial help from my parents was a very good thing in some ways, though there is no doubt you come out ahead financially if you have no student loan debt to deal with. I went into credit card debt partially because I charged some things I needed, but I then had to figure out how to get out of it without help.  This was a worthwhile exercise.  When I had credit card debt again in 2006 I got out of it aggressively, and that aggression came from past experience (three years to pay off $5,000?  Uh uh, no way, not again).

My $5,000 credit card debt hung over me for years. I missed a few payments and finally went to Myvesta.org for debt consolidation, which was absolutely the right decision.  I highly recommend them.

I know I was still making payments to Myvesta when I lived in Chicago, because I know I went to a Western Union on Belmont once (and I only ever used Western Union for Myvesta). My total monthly payment was $130/month. I paid off my $5,000 debt in early 2002 and stayed out until 2006, when I left my ex and bought my own condo and, well, started the whole story that started this blog.

It took me three years to pay off $5,000 in credit card debt, from 1999-2002. I have yet to evaluate the impact of my early credit card debt on my FICO score, but it can’t have been too bad in the long term – I never had high interest rates or was denied credit.

I also paid off $5,000 of student loan debt during the two years between undergrad and grad school (2000-2002), though I have not paid these loans down much more while in grad school. This is because I’ve instead paid for most of grad school in cash (not easy in the years when I was bringing home $37,000 before taxes).  I learned from undergrad loans that I didn’t want MORE student loan debt. I knew I had to find a different way to go to graduate school, and I did – part-time but almost entirely in cash (and still $20,000/year).

Finally, a plea to parents and educators: Please teach kids and teens about money management, debt, student loans, interest rates.  Tell them that many kids have parents who pay their credit card debt off every month, so they know, and know they don’t have to imitate it.  Teach kids NOT to sign up for those credit cards slips in the middle of cellophane-sealed text books.  Help them to budget.  Work out future scenarios with them so they have some insight to what is “beyond the now,” which was so hard for me to fathom at that age.

Get Out and Stay Out

I started this blog to keep myself honest and on track with paying down $10,000+ of credit card debt. I was in a position (single, no kids, high income) that enabled me to tackle it aggressively and pay it off quickly, in about a year.

The side effect of paying off debt is that I’m left with potentially less interesting things to write about. Documenting the struggle to get out of debt can be helpful and, yes, fascinating to others who are trying to do the same (at least, it has been to me – don’t know what I’d do without inspiration from Tricia at BloggingAwayDebt or StopBuyingCrap).

What do we get-out-and-stay-out (of debt) bloggers write about once we’re out?

We can write about how we did it. I’ll start with that, in one cohesive post.

In my case, it was pretty simple, if not easy. I rent my condo for just under $1,400/month. I decided to live within-or-below my means, using only my paychecks to cover my expenses. I threw every rent check at my debt until it was gone (about 12 rent checks, since I also owed my ex some money – feel free to scan my About section for details).

I admit to using a few hundred dollars from rent checks to pay for things like homeowners insurance ($400/year) and plane tickets home to visit my family (two tickets at about $400 each over the course of a year). I thought then, and still do, that occasionally using part of a rent check was OK since it prevented me from charging it and adding to my balance. This is how I paid off my credit card debt in about one year.

After I reached Balance Zero I started putting rent checks into savings to start an emergency savings account. Between rent checks and a tax refund for 2007, I now have $12,000 ($3,000 in a new Roth IRA, $2,300 in one savings account, and $6,700 in another) in savings that I didn’t have one year ago. I call this my $22,000 improvement – $10,000 that paid off credit card debt, $12,000 in savings.

It sounds great now, but it wasn’t always easy or fun. I’d always thought of myself as frugal, but upon examination (via Mint.com and cash tracking) I found a lot of room for improvement. I promise, it was worth it, all of this did add up, but it was extremely uncomfortable at first. This included:

• Using the library instead of Amazon.com (a recent improvement but one that will save me a few hundred dollars every year) – and never returning them late, because it’s $1/day per book.
• Canceling Netflix (I honestly wasn’t using it much, and the library, friends, or coworkers usually have anything I want).
• Going to local beauty schools for hair color and cuts, and general girly maintenance.
• Occasionally coloring my hair at home, and doing at home eyebrow maintenance, manicures, and pedicures.
• Doing laundry at home instead of being lazy and dropping off a big old bag at the wash-n’-fold for $20 a trip.
• Selling used clothes, books, and other household items to resale stores or on Craigslist. It can be a hassle, but it helped.
• Ditching my PDA (and the constant stream of email and distraction that came with it) and dropping the data/Internet plan it had to switch to a regular phone and cheaper plan.
• Paying attention to how many cell minutes I used every month and realizing I didn’t have to change much to switch to a cheaper plan.
• Using Skype to make more of my calls, which will hopefully make it easier for me to switch to a still cheaper cell plan (soon!). Since March 1, I have used $5 to make three hours worth of calls to Japan and England. Nice!
• Moving in with Mans, which cut down on my housing costs.
• Forgiving myself for falling off the shopping wagon by sending or taking things back, and refusing to feel embarrassed about it.
• Not buying coffee in the mornings (except on Fridays, and I stand by this Friday treat technique!) but making it at home (and allowing myself to buy slightly better coffee for doing so, which is still a lot cheaper). I also produce a lot less garbage this way: no paper cups!
• Gettin’ crazy with beans: garbanzo bean salads for lunch, split pea soup, lentil soup, black bean soup, and so on. We’re talking $3-$5 for four or five lunches here, people. It doesn’t get much cheaper than this.
• Being frugal about things that make people call me Great Depression Lady (like salvaging slightly moldy and rusty clothespins by soaking them in bleach water and drying them in the sun, and not buying new ones for a few dollars).
• Filling out expense reports IMMEDIATELY – and I mean this literally. Like immediately after a meal (as soon as I sit down at my desk), and immediately after a trip (meaning on the plane home).
• Throwing out catalogs as soon as they arrive without opening them (this still requires tremendous willpower on certain days, because hey, I have an emergency fund and no credit card debt, so why not? I’ll just order one or two lovely things… and yeah… no. Best to recycle immediately.)
• Focusing on hobbies (knitting is my new one) and doing things (like running and yoga) that have nothing to do with shopping.
• Reading personal finance blog feeds FIRST before going anywhere else online. This sets the frugal tone for the rest of my clickety clacking with the browser.

The best part of this 18-month-long experiment, however, is that I truly have no desire to spend money. If I could pay off $10,000 of credit card debt and save $22,000 in one year, how much can I save in a year when I don’t have debt to pay off? THAT is my new challenge – I just have to find ways to make it interesting for others to read about.

I am so happy to report that there is nothing I want. I don’t enjoy spending money. I don’t mind spending it on things I need, or on things for others (charitable donations, gifts, flights home to see family), but the joy comes from just not wanting much. I see a lot of pretty things I could buy, but really don’t want enough to spend the money. It took a few months, but now this is a habit, and it’s wonderful.