My Debt Story, Our Debt Story

The Story Begins….

I got my first credit card right around when I turned 18. Yup,  the got the banks teeth into me at a young age. It was a secured card with a low limit of $200.  I didn’t  use it much but I remember feeling coolbecause I was the first in my group of friends to have a credit card. It made me feel like an adult.

Looking back on it, I can see how that card started the attitude of “I will have the money later to pay for that”. I remember going on a spring break  trip and using that credit card to make some purchases that I didn’t have in my trip budget.  My attitude at the time was not worry about then, I could pay later. I was living in the here and now.

I kept that card until I switched from my local credit union to a larger regional bank that had locations in my hometown and soon to be college town.  The bank employee sold me on the fact that the credit card was an easy way to have overdraft protection on my new checking account. As a college student without much money I thought it was the prudent thing to do, so I did it.  I remember feeling proudthat I had done something right with my previous card that they were willing to give me double the credit limit, and it was not secured.

The College Years

During college I got another new credit card that I don’t even remember signing up for it. I probably signed up for to get a free  t-shirt sporting the logo of my college, why not show school spirit?   When the card showed up in the mail I wasn’t even sure if I wanted it, but I ended activating the card anyways.

I ended up using that as my primary credit card and racked up a few thousand in debt over the next few years of college. I used that card to purchase school supplies, buy shots at the bar, and even the occasional cash advance.  My attitude towards debt was probably at its lowest point.  Things were going to be better in the future, no need to worry, I could get what I wanted.

One of the craziest things about that card was that my credit limit was consistently going up while the balance was also going up. I wasn’t making much more than the minimum payment and they were giving me credit increases on an almost monthly basis.  As an accounting major, I never did quite see how that added up. In reality it is obvious what they were doing, they were trying to hook me intobecoming dependent on that card.

Working Life Begins

Before  I graduated I already had my first job lined up, with a fancy offer letter and all. I used that offer letter to buy a house. The bank never even verified my future employment. Adding to my credit worthiness was my complete lack of a down payment,  $45,00o in student loans, and no savings.

Also with my fancy new job I needed a new car.  I didn’t get a new car but I did a new loan.  Because I was in the process of buying a house, and had my fair share of student loans my interest rate on that car was almost 10% when everyone else was paying around no more than 5%.

It was also about this time that I started to get an addiction to zero percent interest offers. Over the years I/we have used zero percent financing to buy 2 TVs, 2 computers, 2 beds, 2 house doors, and a washer and dry set, and that is just what  I remember.

With this debt I thee wed

Two years ago I got engaged to my wife Nicole.  Along with all the great things she brings to my life, she also had her fair of debt. We first attacked all of her consumer debt and have all of that paid off. My wife also used student loans to pay for the vast majority of her college related expenses. Other than our house, student loans are our single biggest source of debt.

Where we are now.

What we currently owe:

  • Home Mortgage – $103,000  (probably underwater by at least $10,000 if not $25,000)
  • Student Loans – $80,000
  • Autos – $17,500
  • Consumer Credit – $2,000

Our first priority is to eliminate the consumer debt in the next few months. After that is paid off we are going to attack a private student loan that I incurred. I want to attack it because it is a variable interest loan and that rate is currently the lowest it has ever been.

After that, we are uncertain of our next step. Our first thought is attacking our mortgage next. My wife and I would like to move into a more family friendly house and increase the size of our family.  If we put everything into that loan we could probably pay it off in 5 years. Allowing us to move to a new house, and  potentially keeping our current house as a rental property.  We have about a year to figure out the next step.

Some of the lessons I have learned about debt

  • Debt leads to more debt
  • Easy access to credit leads to over spending
  • Paying down debt is much harder than accumulating debt
  • I don’t particularly care for debt
  • Having a plan helps when paying down debt