Today is a historical day; at least in terms of my life story. For the first time in my life, since opening my very first credit card account, I am credit card debt free. Can we get a woo-hoo!
My credit history began sometime during the year of 1997. I had recently turned 18. I was a freshman at Baruch College, a city university located in the heart of Manhattan. Like most city universities located in Manhattan, there wasn’t much in terms of campus life. There were no dorms. Not much in terms of outdoor areas as school buildings are located on city streets. Most students still lived at home with their parents and commuted to work from home. Many students also juggled school with work, including myself.
As a working student, living at home, with minimum expenses, and lots of expendable income, I was prime prey for credit card companies, as were many of my fellow commuting and working students. They, the credit card companies, would have their people out on the street right outside of my school, with pens and credit card applications ready! One day as I stepped outside after class, I decided naively to sign up for my very first credit card. And that’s the story of how I first got suckered into the whole system of credit card debt. What a sad moment in my life.
At the time, I had looked forward to that moment. My boyfriend had a ton of credit cards and I was envious of his ability to buy clothes and “man toys” with the simple swipe of a credit card. He had a closet full of designer clothes and I wanted to follow suit. After the credit card, came store credit cards with designer brands like J.Crew, Banana Republic and others. Soon enough, I also had the big closet with designer clothes from J.Crew, Banana Republic and others, accompanied by the thousand of dollars in credit card debt.
My parents had always been in debt themselves and had very little financial knowledge. I was never told by them why credit card debt was bad. If anything, they encouraged use through example. In school, I studied accounting and finance, so I understood how compounded interest worked, so I knew money was going every month to pay off interest. I didn’t see it as a waste of money however, and saw credit card debt as a way of life.
Since the very first credit card swipe, I have carried credit card debt. That’s 20 years the credit card companies have been earning interest from my debt. It’s also 20 years of money that I have basically been throwing away. I can’t, or rather don’t want to imagine how much money that add’s up to (including interest I could have accrued if I had saved rather than spent).
I’m so glad I smartened up in 2015. I was in more debt than I had ever been in my life. After discovering the reddit.com subforum on the topic of financial independence, I decided I needed to change my life. Sure I was behind, very behind in fact, compared to the countless other followers who had already reached FIRE in their 20’s, 30’s and 40’s. I was very late to the game of reaching financial independence, but I decided better late than never.
15 months later, I have paid off $25k in credit card debt and am now officially credit card debt free. I’ve made lots of sacrifices in that time but strangely enough, I feel lighter. All this unloading has made my life simpler and easier.
For the remainder of the year, I plan to save 50% of my take home pay from my employer and save an additional $10k from my business. Part of my savings will go towards an emergency fund, the remainder to an IRA account. It should bring my total net savings (includes savings, 403b, 401k, IRA) to $38k. In terms of my net worth, I am still working on paying off a school loan in the amount of $40k so I still have a ways to go but I feel like I’m finally on the right path. Next year, I should reach a positive net worth, another huge FIRE milestone.
For the first time in a long time I feel empowered about my life and am looking forward to the future. Having debt really does create limits to one’s life. This year I came close to quitting my job because of a terribly abusive boss but I had to stick thing’s out to reach my goal of paying off my remaining credit cards. If my finances had already been in order, I could have left the job, or threatened to leave the job, with little to no worries. Definite lesson learned. As my finances improve, I wonder what other kind of opportunities money will create in my life.