CREDIT.COM
When my 20-year-old daughter asked me to watch "Confessions of a Shopaholic" with her, I told her to pick the time and I'd be there. I hadn't read the book, but the movie sounded like an amusing way for us to spend some time together.
If you haven't seen it, the movie's heroine, Becky Bloomwood, is a shopaholic in serious credit card debt. She's hounded by threatening phone calls from debt collectors, one smarmy guy in particular. Becky's afraid to open her mail because of all the credit card bills. Oh, and she's also a finance journalist, of all things. The idea that she was supposed to know about finances made it even more entertaining.
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During the movie, I find myself laughing at Becky's debt dilemma, thinking it's all wildly funny. But about 20 minutes into the movie, I stop, my brain suddenly flooded with bad memories. It hits me like a lightning bolt: A few decades ago, I was Becky Bloomwood.
I hadn't thought about it in many years. It's as if I'd completely blocked out an entire decade of spending, the likes of which Atlanta probably hasn't seen since.
It all started innocently enough . . .
After I graduated from college, I landed a good-paying job as an accountant for a petroleum company. I worked my way through college and felt proud to have gotten this job.
Every night I'd go home and check my mailbox. And there, waiting for me, were letters telling me how special I was and how I'd been "pre-selected" for all these credit cards. And they all promised me high spending limits (and instant happiness, too).
At the time, I had only a Rich's Department Store credit card, because that was my favorite store (it later merged with Macy's) and the card had been easy to get while I was in college. But I started thinking about how convenient it would be to have a card I could use everywhere. So I applied for a Citi card, wooed by the bank's especially flattering letter -- "You deserve this card!" was plastered all over the envelope -- and I got approved in no time.
When it came in the mail, it was such a rush to hold this shiny card with my name embossed on it. So I decided to apply for another. And another. I got approved for every card I applied for. At this point, I had seven cards. When I reached my limits, the issuers kindly raised them.
Honestly, I never even read the fine print on any of those cards. I confess that I had no idea there even was fine print because I didn't look for it. The only things I focused on were the offer letters and how much the issuers wanted me as a cardholder.
One spending binge leads to another
My job paid pretty well, but not well enough. My credit cards paid for my power suits, which I thought I needed to be taken seriously. But that meant I also needed power handbags, power shoes, power jewelry, power makeup, power lunches, power cocktails. You get the idea.
It didn't take long before my minimum payments exceeded my income. In one month, I bounced 12 checks. Yep, I said 12. Adding in the non-sufficient funds fees for each check, I found myself deep in the hole that month. I stopped making credit card payments for a few months, convincing myself that my cash flow would have a chance to catch up with my monthly expenses.
You know what happens when you stop paying your credit card bills? You start getting mean phone calls from credit card companies. This was before Caller ID, so my only option was to let the calls go to my answering machine. I got very adept at listening to a message just long enough to figure out if it was about my credit card debt before deleting it. Hey, at the time I was young and single, so I wanted to be sure I didn't miss calls from anyone I deemed important.
The credit card bills had become overwhelming. I took the only course of action that made sense to me. I stopped going to my mailbox.
Ambushed by the mailman
I lived in an apartment at the time, and it was easy to avoid that area of the building. But one day I'd gone home during lunch and ran into my mailman in the parking lot. He said he'd thought I'd moved because he could no longer stuff any more mail into my box.
I shamelessly told him that I'd lost my mailbox key. (It's a little-known fact that being in debt can turn you into an extraordinary liar.) I even started to embellish my story with how I'd also been out of the country for an extended period of time, but he interrupted me to hand me my mail. He then suggested I walk with him to the mailbox so he could unlock it for me and give me all the mail currently stuffed in my box. Unable to make myself invisible, I had to take possession of my mail.
That night, I poured a glass of chardonnay for courage and spread the envelopes out on my dining room table. I paid the utilities and other necessities. When I started looking at the credit card statements, I looked only at the minimum payments and started writing checks for half the amount. Amazingly, I still didn't stop using my credit cards.
Instead, I decided I had to make more money. So I studied for and passed the CPA exam with the goal of getting a higher-paying job. Only now do I see the "Becky Bloomwood" irony in all this. I had a head for numbers, but I was clueless when it came to my own financial affairs. My solution was to make more money to maintain my spending habits instead of focusing on paying off my debt.
The day I hit rock bottom
I went to work for BellSouth Mobility at a higher salary. I got the job in the nick of time -- to my horror, I could no longer get approved for a credit card. I could no longer get credit limits raised. The banks no longer loved me.
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Then one day I tried to make a purchase, and my Rich's Department Store card was declined. Rich's had canceled my credit card account. Refusing to give up my card without a fight, I called the Rich's credit office and asked to have my card reinstated. A service rep was quite rude to me and told me my last check had bounced. And even when I did pay with a check that didn't bounce, it was always late.
Do you know how big a mess your credit life has to be to lose a retail credit card? A really, really big mess. This was the turning point for me. My credit ride had come to a merciful end.
My wacky approach to debt reduction
I didn't know exactly how much debt I had, and I didn't want to know. I wasn't in denial; this was my strategy (and not one I'd recommend). It's like trying to work your way out of the eye of a hurricane when you don't know where the edge of the storm is.
Today, I'd face the total amount head-on and make a plan of attack. But back then, I was young and inexperienced, and, honestly, I think I was worried I'd pass out from shock if I saw the actual number. So for each card, I looked at the minimum payment due and avoided the rest of the statement. I told myself that in one year, I'd see how much debt was left.
How I found 'extra' money in my budget
I started reading personal finance books, and I learned how to budget and track my spending. Then I designed a strict budget for myself.
I had no car payment, which helped a lot. I lived close to my office, so I went home for lunch. (I was no longer afraid to run into the mailman, and that was surprisingly liberating.) I learned how to love PB&J sandwiches. I went out at night with friends only when I could get 2-for-1 drinks and a free appetizer buffet.
I also canceled my fancy health club membership and signed up with a cheaper alternative. I considered giving up the club altogether, but decided the workouts helped me cope with the stress of the debt. When you're in debt, there's a constant feeling of anxiety, whether you consciously acknowledge it or not.
I allowed myself only $10 a week for mad money. Looking back, it's hard to believe I stuck with that. But when you start getting out of debt -- even just a little bit -- you experience a psychological lift that feels great. Positive emotional momentum takes place as you're inching toward financial freedom. It's kind of like a runner's high, so you want to keep going. After a while, I was able to double my minimum payments, then triple them.
My year of living frugally
When I tallied my debt a year later, I still owed $11,000. To this day, I don't know the exact total of my debt. I kept track of the payments I made that year, so I know it was around $20,000 when I started working on it. Even though I had a big chunk left after that first year, I felt empowered and proud of myself.
While I was getting out of debt, my whole life changed. I left the corporate world to become a finance writer. I ended up specializing in credit cards because I wanted to help others avoid the huge mistakes I'd made.
A happy ending
After "Confessions of a Shopaholic" was over, I told my daughter everything about my credit card past. I wanted to make sure Ashley understood the perils of credit.
If any of you have kids, be sure to teach them how to use credit responsibly. Listen, I know there's controversy about this, but think about my story. One day your kid will graduate from college. Do you want him or her to get those enticing offers in the mail when you're not there to explain how to use credit responsibly? And believe me, they'll get those letters.
Credit isn't a bad thing. It's the lack of knowledge about how it works that's dangerous. Empower yourself -- and your children -- with knowledge and you'll be able to use credit cards to your advantage.
You don't have to go all the way and become a credit card diva like me. But I want you to know that you can hit the depths of credit card hell and come back from it strong and financially fit.
