How I got into $45k of debt

I hit a big milestone today (more on that later), but I thought I’d give you a quick recap of how I got in this boat in the first place…

I graduated undergrad in December 2004 with a maxed out credit card (balance: $1k). I moved home that month, but it took until May before I found full-time employment at a bank, making $30k a year to start. When I started working, I knew the smart thing would be to pay off that debt and then start saving before my student loans became due. Instead, I did what most people my age do: I bought a new car ($20k, financed at 8.55% over 72 months). I got a new credit card from my bank and proceeded to rack up charges on bar tabs, clothes and a family vacation to Florida. At this point, I had $20k of student loans, $20k owed on a car and a couple of grand on my credit card.

Over the next few years, I added another credit card (I sure FELT like a big boy when I got my first American Express card) and a personal line of credit. I took a trip to DC, a trip to Los Angeles by myself to look at graduate schools, spent well beyond my means without any sense of a budget. I managed to save around $2k into an account, but spent it all immediately. At the peak, I owed $25k on credit cards/lines of credit. Ouch. I knew it was wrong, I just didn’t do anything to stop it or fix the situation.

It was around 2008/2009, when I was thinking about going to graduate school to get my MBA, that I started thinking about getting out of debt and having a financial plan for the future. I had no savings, no retirement funds, a car (only two more years left of payments at the time I went to grad school), and about over $22k in personal debt – not even counting the $18k or so in student loans from undergrad. If I was going to survive, I had to budget and dig myself out of this hole. How would I ever afford tuition, let alone living expenses?

Thankfully, my GMAT score and a few other factors led to me getting a full scholarship that also covered an international trip. I managed to escape from grad school with only $22k in student loans. Not bad, considering it was Wake Forest Schools of Business and the annual cost of attendance was north of $60k a year. I consider that a huge break. I was able to find very cheap housing, paying $400/month in rent for a bedroom in a house. I was very careful with entertainment and other expenses. No Caribbean beach vacations for me; I took service trips that were partially subsidized by the program. My scholarship even paid for a two week trip to China and Hong Kong. It was awesome.

Upon graduating, I had an offer to move to Memphis making about double my salary when I left the bank. I was careful in getting a reasonably-priced apartment and didn’t spend too much on furniture or anything else. In July 2011, I paid off my car (and still drive it today). In 2012, I paid off my bank credit card; by 2013 I had paid off my AmEx Blue card. All that was left was my personal line of credit, which had been around $9k at it’s worst.

Today, I paid off the last of that line of credit. I have no credit card debt, no car loans. All that’s left is my student loans and some serious saving. It’s taken a long time, but I am very, very proud of the progress I’ve made.

If 32 year old me could go back and tell 22 year old me to quit being an idiot, save my money and don’t spend it on stupid crap, I would. Some things were frivolous at the time and I wouldn’t take them back (the trips come to mind). I would, however, have figured out a way to pay for them in cash instead of instant gratification on the cards. But plenty of the other stuff was just dumb and pointless. Did I gain much by going to the bar six straight nights and spending a bunch of money to feel bad the next day? Probably not.

I’ve learned alot over the past 10 years and I’ve dug myself out of a grand total of $45k in debt. And while I still have $37k in student loans to go, I’m on a solid plan with decent savings that helps keep me OUT of further debt.

3 thoughts on “How I got into $45k of debt

  1. I was lucky enough to have graduated without debt. Had a full scholarship, otherwise I’d be neck deep on debt. Living in the US is so easy to get in debt, it’s a way of living. I started to work after college and even though I was making decent money I managed to owe 6K on credit cards. After a year I decided to pay it off and never again get a credit card. I was planning to move and travel a bit without having to worry about paying back any money. It was hard, credit card companies don’t wanna let you go hahaha.
    In Spain however, credit cards are a bigger scam than they are in the US, making it easy to live debt free, poor but debt free lol.

    • Credit cards certainly serve a purpose, you just need discipline to not get caught in a bad position. Don’t use it as an advance, use it for protection (i.e. shopping online, renting a car, etc.) It’s really our spending behavior that’s the problem…that, and a lack of understanding the consequences. It took me many years to dig myself out of that hole!

  2. Pingback: In Today’s “Obviously!” Files… | This Guys Life

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