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When I was a junior in high school, I got my very first credit card. Yes, I was a junior in high school. Older than most of the kids in my grade, I was 17 years old, and I was eligible to sign up without a co-signer, and my parents hailed the idea as great, considering I had a trip to New York City with the choir coming up and I needed what I like to call insurance, just in case, just in case I got mugged or robbed or found something really awesome to buy. So the card arrived with a $500 credit limit. I had never had so much money in one place in my entire life. The problem? No one ever told me about credit, credit cards, limits, late fees, etc. I thought I had the money, when, in reality, I didn't. Talk about a tough lesson in life.
I couldn't pay my rent, my bills, nothing. My senior year of college I actually sold books, DVDs and CDs for extra rent cash. By the time I graduated college, I had four major credit cards and lots of store-based cards (JCPenny's, Lane Bryant, Avenue, and the list goes on) with a ton of debt on them. I was in such bad shape I had to borrow money from a friend to make the drive to my internship in Washington D.C. and to make some of my credit card payments. This was a financial low for me. When I got to D.C., I was living alone, not dating, and I was focused entirely on my work at The Washington Post. I devoted all my time to work, sleeping, and blogging. The result? I suddenly had an excess of cash sitting around. I went through the tough task of researching on the web what was better -- holding onto the cash or paying off my credit card debt. Security blanket or debt freedom? After some careful Googling and watching those helpful snippets on the Today Show and other morning shows about financial smarts, I chose to start paying off the debt.
I moved to Chicago in 2007, and with my new job, I had even more money to continue paying off the debt. I cut back on eating out, going to bars (where money just disappears), and threw money left and right at my debt. By August 2008, when I schlepped off to Connecticut for graduate school, I'd almost paid down some nearly $10,000 in debt. It was insane, and I was surprised with myself, but it felt good. Finally, in February 2009, I hailed my debt conquest here on the blog. Do you remember it?
When I thought back on how I accumulated that debt, I remembered what really killed me -- I was withdrawing cash from my credit cards to pay for rent and other things I knew I couldn't afford but just had to have. That folks, is red flag for serious financial stupidity.
Luckily, I've been blessed with a husband who happens to be an accountant, a very secure and financially brilliant husband who knows about investing and spending wisely, putting money where it needs to go. I thank his family for raising him with financial smarts that I didn't seem to acquire growing up. Although he handles most of the finances, I still have to step back and think before spending a single penny, because I know what the downward spiral looks like -- but this time, there's someone attached to it and that person is my husband.
So what's my advice to you on the best way to stay smart when it comes to spending?
- If you see something in a store that you want and just have to have, put it in your cart. Walk around, do the rest of the shopping. And when you get to the register, if you still feel unsure about it, if it's just a want and not a need, think about what buying that item means in the long run. Will it keep you from buying something you and your family need? If so, hand it to the cashier and proudly say, "I've changed my mind." (I do this all the time.)
- Or, if you don't have that much will power, put it back on the rack or shelf, go home. Give it a day or two. If it's still on your mind and bugging you, then go back and buy it. But remember to think about the repercussions of buying that single item.
- There are a million websites for keeping tabs on your spending. And, to be honest, they're kind of addictive once you get tracking and planning.
- If you have to have a credit card, make sure it's one with a great rewards program. I have a few, but my favorite is my Sears Mastercard :)
- Never fear calling your credit card company and tooting your own horn to ask for a lower APR.
- Marry an accountant. No, seriously. They know all of the tricks and tips for tax write-offs, which can come in really handy when it comes down to tax time.
And, most importantly, keep it simple. Don't drown yourself in 10 credit cards. If you have them, you'll use them. I learned that the hard way. It took me eight years to dig out of my hole, and those should have been carefree years without financial frustration.
Think, spend wisely, and, of course, marry an accountant if you know what's good for you!