Really confused over CCdebt

[peterj]

Okay so i am only 22 so i dont have a lot of experience with morgages etc but i went through the who is in debt thread and saw a lot of people with CC debt 20,30 even 80 grand in debt... How? i have a credit card and i get scared when i use around 300 of my 2100 limit? i am not really a good saver and i waste my money but how do people get into that situation?

[elessar78]

Not all debt is credit card. Some are composed of auto loans and student loans and mortgages. Which could easily get into the tens of thousands.

[disneysteve]

Some of the really high debt came from catastrophic stuff, like a medical crisis. Others come as a result of a divorce or death of a partner leaving the other person with no immediate means of support, so they turned to CCs to pay the bills.

And a great many people with sky high debt simply lived way beyond their means, only made minimum payments, maybe missed some payments or were late a couple of times so fees started being tacked on and interest rates got jacked up.

I'm with you. Aside from the catastrophic cases, I don't understand how anyone can walk into a store and buy something with a CC knowing that there isn't enough money ready and waiting in their bank account to pay that bill in full when it arrives, whether it is $10, $100 or $1,000. I would simply never buy something that I didn't have the money for, no matter how I was planning to pay.

[disneysteve]

Not all debt is credit card. Some are composed of auto loans and student loans and mortgages. Which could easily get into the tens of thousands.

That's true, too. I finished med school with over $100,000 worth of student loans. Add in the mortgage and car and we were about $250,000 in debt at one point.

[illinigamer]

Not all debt is credit card. Some are composed of auto loans and student loans and mortgages. Which could easily get into the tens of thousands.

I think peterj is referring to those who have tens of thousands in credit cards alone, but I think it is all related. People buy houses and cars they cannot afford and this results in them putting things on credit they may otherwise have money for. Based on my experience, it is usually a case of people wanting to portray an image of success (our society likes to tell us money=success).

Now, I don't want to get off on a rant here, but I do not agree with the terminology "living above ones means" to descibe the cause of consumer debt. In my mind, this phrase suggests that something of value was gained by the additional spending, but I think most of it is just waste. For example, if you show me two individuals identical in every way except that one has a $50,000 car and the other has a $20,000 car, I will say they have the same "lifestyle." I think a lot of debt spending is similar to the $30,000 in this example in that it does nothing to improve the life of the individual, it only serves to portray a certain image. But that's just my opinion, I could be wrong.

[Tree0164]

Alot of people get into those situations because they are living beyond their means. They want the new tv, latest toys and gadget and simply charge. My famly did pay off close to 20k 4 years ago-majority of it was from an adoption. I haven't had an outstanding credit card balance since-

If you have a good budget and have some extra money each month-pay yourself first do an automatic transfer.

Good luck!

[ceejay74]

It's kind of a blur how I got in so much credit card debt, and my mindset has changed so much over the past two years, but here goes:

When I moved out on my own, I had only student loan debt (about $15,000). My first debt was to finance a treadmill, about $1000. Not really getting what it meant, I only paid the minimum. My next one was when I took my girlfriend to Victoria's Secret to buy her some things. The lady at the counter said she could get me a card and I'd save 10%. I'd never had a card and it sounded kind of exciting. I was qualified right there, and so instead of paying for the clothes, which I had money for, I put it on the credit card--and began paying the minimum.

My girlfriend moved in with me and money was tight. We were living on rice and spaghetti most of the time. I got a credit card offer in the mail and thought it would be great to buy stuff again, so I applied. As soon as we got the card in the mail, we went out and bought a computer.

Over the next year or so I maxed that card out and also got another store card.

The next year, my girlfriend's financial aid for college fell through because her parents wouldn't file their taxes anymore. I was paranoid that if you quit college you never go back, so I took out an unsecured loan to pay for her tuition. Her parents promised to pay $4000 of it but only ever sent me $200.

Maintaining payments on everything was hard, so occasionally I would consolidate some of my debts on a low-rate card. Inevitably I would cave and continue to use the cards I'd transferred off of, and my low introductory rates would expire. It was frustrating and depressing, but I wasn't sure what to do; at that point I could barely cover my bills and living expenses. We didn't live an insanely rich lifestyle or anything, but splurges here and there and bad budgeting really added up over the years.

Every couple years I would get fed up, and try to set up spending systems and cut our lifestyle back severely. I would cut back too severely, with no pressure valve, and eventually I would crack and go back to the old ways. I really couldn't see a way out, and I didn't know how to organize my finances beyond paying bils and doing credit card transfers.

We started a transcontinental romance which cost thousands in phone bills, trips back and forth, and gifts. When I'm newly in love I tend to throw caution out the window. When our third moved in, he brought a load of debt of his own. He couldn't work because he was a recent immigrant awaiting authorization, so we were now buying for three on two average incomes.

At some point I looked at our checking account, and it was bad. Our overdraft was maxed out. Most of our credit cards were nearly so. I finally sat down and totalled our income and bills, and we had barely any money left over. For the first time, I set a strict budget and made us all stick to it. When my third started work, I put most of that money toward paying down debt. Ever so gradually, things started evening out. We haven't increased our debt in over two years, but we have a long way to go paying it off. Nonetheless, I feel like I've hit a point where I would never, never go into more debt if there was something I could sell, cut from our budget, extra income to bring in, something. I have come to fully understand the far-reaching repercussions of credit card debt in a way that just never quite occurred to me.

I guess in the end, I can't really explain my obliviousness, or why some people have this mental block. I'm an educated, fairly intelligent person. But somehow I was unable to fully understand how paying the minimums while taking out more credit card debt was going to hurt me for so many years to come.

Phew. I don't know if that was enlightening, but it's the best way I know how to describe it.

[elessar78]

Starts with something so innocent, huh?

I remember getting my first paycheck after graduating from college and paying off my balance from college. AFTER my first paycheck I was at zero! But I didn't budget at all. Ate lunch out all the time and was at the bar basically every night the first year out of school. It was an unhealthy lifestyle in many ways.

But I got into trouble when my first card was maxed and decided I needed a winter coat. Not any just to get by, I needed a high-performance North Face one. I figured $350, I'll have that paid off in no time. That was the "want" that got it all started. Boy was I wrong. Lost my job briefly after that, but didn't really cut back on spending.

Then came my mom's 60th birthday, somehow my step dad guilted me into going on a family vacation to Italy. Then several years later, being a big soccer fan, had to go to Germany for the World Cup. Then decided to start a business and put the initial investment on the CC. Then decided to get married bought a ring, also on the CC.

So basically, I only had money for the day to day living. It was the "special occasions" that I never planned for and ultimately got me to pull out the plastic.

But I finally got that under control and in the process of undoing it. As I pointed out in another thread, I should have the damage undone in 12 months (actually less because "the damage" is only about 1/3 of my debt, the other 2/3 is a car payment and student loans that were not attributable to stupid living).

So plan ahead and save for the unexpected, because it's always a-coming.

[disneysteve]

ceejay74 and elessar78, thanks for sharing your stories. Please don't take offense at what I'm about to say, because it absolutely isn't meant as such, but even after reading your stories, I still can't comprehend WHY someone would do that. Maybe it is genetic. Maybe it has to do with how my parents handled money and taught me about money. I don't know. But even as a child or teen, and certainly as an adult, I would never ever consider buying something if I didn't have the money to do so. Whether I was paying with cash, check or credit card, I would only make a purchase if I already had the money on hand to pay for it. It would have never crossed my mind to finance a piece of exercise equipment or a luxury coat. My brain just doesn't work that way.

I think education may be part of this but I also think there is some innate financial ability. Just like some people are good at math and others aren't, while some people are quick to learn a foreign language while others struggle, I think some people are just born with a different natural capability to do financial stuff. It isn't right or wrong or good or bad, it just is, like blond hair or brown eyes.

[elessar78]

ceejay74 and elessar78, thanks for sharing your stories. Please don't take offense at what I'm about to say, because it absolutely isn't meant as such, but even after reading your stories, I still can't comprehend WHY someone would do that. Maybe it is genetic. Maybe it has to do with how my parents handled money and taught me about money. I don't know. But even as a child or teen, and certainly as an adult, I would never ever consider buying something if I didn't have the money to do so. Whether I was paying with cash, check or credit card, I would only make a purchase if I already had the money on hand to pay for it. It would have never crossed my mind to finance a piece of exercise equipment or a luxury coat. My brain just doesn't work that way.

I think education may be part of this but I also think there is some innate financial ability. Just like some people are good at math and others aren't, while some people are quick to learn a foreign language while others struggle, I think some people are just born with a different natural capability to do financial stuff. It isn't right or wrong or good or bad, it just is, like blond hair or brown eyes.

None taken! I think there's value in being able to share stuff like this. Maybe even therapeutic for me and maybe helps me stay on the right path to recall what I did back then.

As a teenager we didn't have a lot of money and I always wanted the nice stuff my friends had. So as soon as I had some of my own money, it was spend spend spend. I could always find a way to rationalize any purchase. My mom (who raised me exclusively) used her credit card regularly and now I realize that my mom gives me some pretty questionable financial advice. The most recent being was to use my entire emergency fund as a down payment for a house. Another one being she talked me out of buying a low-mileage Toyota Camry for a brand new car that was double the price.

So, I can't say it's innate, but more of a learned thing. I've had to unlearn old beliefs and adapt new ones to become more financially responsible. I rarely get the urge to buy stuff and when I do, I go cheap. And I can't say that I'm constantly trying to stifle the part of me that just wants to buy buy buy. I don't even think that's around anymore!

[disneysteve]

Interesting. So maybe it is more of a "nurture" thing than a "nature" thing. Makes sense.

[Seeker]

Wow.... very interesting thread.

I know serveral people who fall into these habits of spending forward debt, who never really listen or learn and continue to pay the minimums... until they cannot. At which point the problems compound.

I know that I was not "taught" per se on how to handle money... but I somehow did not like "owing" money to other people.

I took on debt, but have always managed to pay it off in full before too much interest accrued even with the very beginning stuff (like furniture) long long ago.

illingamer: I'm curious about your definition of lifestyle in this context?

For example, if you show me two individuals identical in every way except that one has a $50,000 car and the other has a $20,000 car, I will say they have the same "lifestyle."

[ceejay74]

No offense taken either.

I have a couple of thoughts as to what allowed me to start that behavior. Although my dad is a very frugal and practical man, I never got any hands-on lessons and was more or less sheltered from all responsibility as a kid. (Nor was I a natural at taking on responsibility for myself.) Thus I entered the world a bit more naive and helpless than many people probably did. I was 23 but mentally, much younger.

I was also a bit daydreamy and artsy compared to the rest of the family; those sorts of traits start to get commented on and you get "typecast" in your own family, in a way. I took that on as my identity. Life in the real world was hard and complicated. One of the easiest aspects, though, especially in the 90s and early 00s I'd guess, was getting credit. I always planned to pay it off; my thoughts were that I would gradually make more money and be able to pay everything off when I was more financially stable, but that I was young and wanted to enjoy my surroundings somewhat. I cut corners in tons of places, but never enough to make ends meet.

Also, disorganization played a big part. I hated taking on debt, but I couldn't see another way to keep my girl in college, put food on the table, etc. A vast percentage of my consumer debt, I'd wager, was eating and drinking out. I would buy groceries but disorganization and laziness led to the food going to waste, and an unpredictable life led to many impromptu dinners out.

I sort of stayed in that freewheeling state for awhile; I buckled down for months on end but would always cave and make things much worse.

The things that finally got me on track: necessity, a stable relationship and more predictable schedule, and a man who considered it a top priority to put home-cooked meals on the table every night. Once I tried out the cooking, scheduling, budgeting and saving, I took to it like a fish to water. It's as if my dad had instilled some of his traits after all; they just didn't show up right away.

That probably doesn't make it any more clear, to someone who has never gotten in over their head or been confused by finances. Whether nature or nurture, you're probably right that the seed for this being able to happen to someone or not is probably planted very early on in life, so it seems innate and the other side inexplicable.

None taken! I think there's value in being able to share stuff like this. Maybe even therapeutic for me and maybe helps me stay on the right path to recall what I did back then.

As a teenager we didn't have a lot of money and I always wanted the nice stuff my friends had. So as soon as I had some of my own money, it was spend spend spend. I could always find a way to rationalize any purchase. My mom (who raised me exclusively) used her credit card regularly and now I realize that my mom gives me some pretty questionable financial advice. The most recent being was to use my entire emergency fund as a down payment for a house. Another one being she talked me out of buying a low-mileage Toyota Camry for a brand new car that was double the price.

So, I can't say it's innate, but more of a learned thing. I've had to unlearn old beliefs and adapt new ones to become more financially responsible. I rarely get the urge to buy stuff and when I do, I go cheap. And I can't say that I'm constantly trying to stifle the part of me that just wants to buy buy buy. I don't even think that's around anymore!

[elessar78]

No offense taken either.

I have a couple of thoughts as to what allowed me to start that behavior. Although my dad is a very frugal and practical man, I never got any hands-on lessons and was more or less sheltered from all responsibility as a kid. (Nor was I a natural at taking on responsibility for myself.) Thus I entered the world a bit more naive and helpless than many people probably did. I was 23 but mentally, much younger.

I was also a bit daydreamy and artsy compared to the rest of the family; those sorts of traits start to get commented on and you get "typecast" in your own family, in a way. I took that on as my identity. Life in the real world was hard and complicated. One of the easiest aspects, though, especially in the 90s and early 00s I'd guess, was getting credit. I always planned to pay it off; my thoughts were that I would gradually make more money and be able to pay everything off when I was more financially stable, but that I was young and wanted to enjoy my surroundings somewhat. I cut corners in tons of places, but never enough to make ends meet.

Also, disorganization played a big part. I hated taking on debt, but I couldn't see another way to keep my girl in college, put food on the table, etc. A vast percentage of my consumer debt, I'd wager, was eating and drinking out. I would buy groceries but disorganization and laziness led to the food going to waste, and an unpredictable life led to many impromptu dinners out.

I sort of stayed in that freewheeling state for awhile; I buckled down for months on end but would always cave and make things much worse.

The things that finally got me on track: necessity, a stable relationship and more predictable schedule, and a man who considered it a top priority to put home-cooked meals on the table every night. Once I tried out the cooking, scheduling, budgeting and saving, I took to it like a fish to water. It's as if my dad had instilled some of his traits after all; they just didn't show up right away.

That probably doesn't make it any more clear, to someone who has never gotten in over their head or been confused by finances. Whether nature or nurture, you're probably right that the seed for this being able to happen to someone or not is probably planted very early on in life, so it seems innate and the other side inexplicable.

HOLY CRUD! It's like reading a biography of myself.

-Also, was sheltered from much responsibility. (Mom paid by CC bills and bar tabs in college, for example).
-Never got much direct money lessons (although my father-in-law tried to teach my wife money lessons they never took with her, but it did with her sister.)
-More artistic type as well
-Credit was easy when I was in my 20s
-I was disorganized, letting stuff lapse or go late.
-ate out and went to bars a lot
-Getting married got me focused, because now I was responsible for the family finances.
-Wife loves to make dinner at home


So it may be part nature and part nurture, like DS pointed out. A natural inclination to be artsy can also predispose someone to be more spontaneous, flighty and the lack of a disciplined upbringing can be the seeds for money problems.

But it can be undone by learning to become more disciplined and to plan ahead.

Also, as an aside, my father was NEVER good with money so there was a definite absence of good financial education growing up. Actually, it probably wasn't until I got into my late 20s where I had good financial role models in my life (step dad, father-in-law, brother-in-law) that I got a clue.

[ceejay74]

LOL, that is freaky! But it's good to see a kindred spirit who also pulled themselves out of a similar morass.