"money fail"

I don’t know what happened. Last year around this time, I had my credit card completely paid off. Zero balance – go me! But now, just one year later, I’ve managed to rack up a little over 6K in credit card debt. How did this happen? How am I failing so badly at maintaining zero balance on my credit card?

Racking up the Credit Card Debt

A lot has happened this past year, and some of it was expensive. Some of the credit card debt was due to repairs and unforeseen circumstances, while most of it was just me failing to say no to wants (yes, personal finance bloggers have weaknesses too!)

Unforeseen circumstances

House repairs

A good portion of my credit card debt came from issues with the house. We had a blockage in an air conditioning tube that led to a huge leak in the ceiling, a few plumbing issues, and a landscaping disaster. These unforeseen expenses cost about $1500.

Car Issues

I also had a few car issues this year that cost me. I needed new tires and had a problem with my electrical system. These repairs in total cost about $700.

I know, I know, this is exactly what an emergency fund is for! I should take the money I have in my short- term emergency fund and pay for these unforeseen events. This is where I fail at personal finance. I know the math adds up. I know it’s better to pay off the debt. But I just can’t bring myself to do it. I like having money in my emergency fund. I like knowing it’s there if I need it. I want the fund to be fully funded before I start taking from it. I know that’s a whole basket full of insane, but psychologically that’s where I’m at.

Related: Destroying my Credit 

Travel

Although I’d love to blame the majority of my credit card debt on unforeseen circumstances and minor emergencies, that just isn’t the case. The majority of this debt came from travel and adventure. I paid $500 for my PADI certification this year, $500 each on trips to Vancouver and Los Angeles, over $1000 on two trips to Orlando (once for Universal, and again for Disney), and a little over $3000 on my trip to Germany. I just can’t seem to say no to experiencing new things. And, although I have a separate account set aside for my traveling expenses, there wasn’t nearly enough in there to cover this year’s adventures.

To be fair (or as an excuse), I only went to Germany because my friend was getting married. I definitely would have put off having an international trip this year if it wasn’t for this once in a lifetime event. I know I shouldn’t be spending money I don’t have on traveling, but my mantra has always been that you only live once, and you have to enjoy the time you have. You have to make exceptions for the important things in life, because if you don’t, what are you living for? Obviously going into debt for this isn’t ideal, but it happens. Saying no to stuff like this isn’t easy.

I feel more comfortable about having the debt knowing that I could pay it off tomorrow if I really wanted to, but like I said above, I feel better having debt and money in savings (I know how wrong that is!!!).

 

Money Goal – Pay it Off!

So now my number one money goal is to pay off my 6k in credit card debt. I’m hoping that I’ll be able to do it in about 6 months without resorting to using my savings accounts. I’m also going to hide my card so I can’t use it. I’ll keep you all updated on how I’m doing!

What is your biggest money fail? We all have money weaknesses, what’s yours? Let’s help each other get through it.

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"Destroying my credit"

I’ve been nostalgic lately, thinking about my past, my upbringing, and some of the wonderful financial decisions I made when I was a teenager. I’ve written about my middle class upbringing and about my stellar education on taxes. But there was one more area of my financial life that I really messed up in when I was young, and it took me a very long time to dig my way out.

Destroying My Credit

My parents never really taught us about the dangers of credit card debt. When I turned 18 and started getting offers for free money, I took them. I don’t know why it was so easy to get credit as an eighteen-year old with no credit history, but man, it was.

I had three regular credit cards and three store cards before I turned 19. Why wouldn’t I get an Express credit card? I even signed up for an Abercrombie card despite never ever shopping in an Abercrombie in my life!  Free money is free money, right?

Not All Impulsive

Yes, I was a stupid teenager buying all the things with fake money. But I did actually make one legitimate purchase that I couldn’t afford!  My dog, Shadow (I miss him!) had a problem with his nose. It always looked like the skin was peeling off. Since he seemed healthy outside of that, my parents didn’t take him to the vet. Well, I wasn’t going to let my lack of money prevent me from taking care of my pup, so I took him myself and charged it. I think it cost around 500 bucks if I remember correctly (this was a long long time ago). Either way, I didn’t have the money to pay. That was future Melanie’s problem.

Related: Managing Your Money All-In-One For Dummies – Get it on Amazon! 

But Mostly Bad Purchases

The rest of my purchases were stupid. The hottest trends in clothing, stupid toys, long distance phone calls, things I can’t remember. I had a lot of fun destroying my credit!  Unfortunately, I was thousands of dollars in debt by the time I turned 20. And I had no money to pay it. I did manage to make the minimum payments for the first few years, but that barely covered interest, and before long all the cards were maxed out. Even the minimum payments became overwhelming for a poor college student. Most of the debt went to collections, and I effectively destroyed my credit.

Digging Out

I finished college and realized that if I ever wanted to have a decent job and a decent life, I needed to fix my credit issues. I was able to settle with a few of the collections agency for less than owed, and I payed off other balances in full. It took a lot of saving, budgeting, and negotiating to dig my way out, but I made it.

Having numerous charged off credit accounts had lots of negative repercussions for many years though. It takes about seen years for those things to fall off your credit report, and life was hard for those years. It was hard to rent a nice place with such a poor credit history. I had to pay higher interest rates on any loans I tried to take out.  I couldn’t even consider buying a home.

 

Helping Future Melanie

I’m glad that I finally dug my way out and that all those negative statements are off of my report.  I currently have a healthy credit report, and a much healthier relationship with future Melanie. Instead of thinking “well that’s future Melanie’s problem”, I think “How can I help future Melanie?” and life has been much better.

Have you had problems with credit in the past? I’d love to hear your stories!

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Evil Credit Cards

We all know credit cards are evil. They entice us with their ability to buy us things when we don’t have the cash, then proceed to suck us dry with ever rising interest rates. Jerk-faces. But it doesn’t have to be that way. Credit cards can be our friends if we use them right. We just have to learn to play the game. We can leverage credit card rewards points to get great deals!

I went to Best Buy recently and bought a very nice Canon WIFI camera (priced at $279.99), a 64 GB memory card ($89.99), a gaming control ($24.99), and a Bluetooth wireless speaker (39.99). That is nearly $400 worth of merchandise!! Do you want to know how much money I spent? $5.31. That’s right, I scored nearly $400 worth of goodies from Best Buy and I only paid five dollars and thirty-one cents!

Impossible!

But its really not. You can leverage rewards points to trick the system and score big! There are two main rules for leveraging rewards points. The first is that you should never buy stuff you don’t need to gain points, and the second is to always pay off your credit card balance in full.

Rule 1 – Credit Card rewards

I followed the first rule to beat the BestBuy credit card at it’s own game. I actually needed a new laptop. My partner J needed a computer as well. These weren’t wants, they were needs. My old laptop was running out of memory, and didn’t have the power to process the pictures I needed for my blog. J didn’t even have a computer. I budgeted for this. I had 3K put aside for computer shopping in my “next big purchase” account.

Pro tip: You should never make a huge purchase like this without budgeting for it!

I went into Best Buy armed with my cash and an excellent idea of what I wanted. As I was browsing laptops and comparing specs, I noticed a sign for the Best Buy Rewards credit card. They were offering 10% back in Best Buy rewards when you purchased items with a new account. Usually, a deal like this wouldn’t entice me, but the laptops I was looking at were between one and two grand, so 10% back is a pretty nice chunk of change. And don’t forget, I  needed a bunch of accessories! I also knew that I’d need a new camera at some point. The wheels in my head started turning…could I get the card and use the reward points to buy my new camera?

I picked out the perfect laptop and J picked out the perfect desktop. The total price for both computers plus all the accessories we needed came to about $2800. I applied for the Best Buy rewards card, and chose the Best Buy rewards option. They also have a one year no interest option, but since I had the cash, I knew I would be paying it all off right away.

Pro Tip: Pay off your credit cards right away!

Make sure paying off the card is in your budget!

Rule 2 – Credit Card Rewards

This brings us to rule number two: Pay off the credit card right away so that you don’t have to pay interest. That’s how they get you. They give you $250 in rewards, but they know that most people won’t pay the credit card off right away. Guess what, if you don’t you will be paying three times that in interest!

I did have to wait two weeks for my rewards to come in, but as it turns out, that was extremely advantageous. My rewards came just in time for Black Friday! I had $280 of free Best Buy money to spend on the biggest sale weekend of the season! The camera was on sale for $230,  so I had an extra $50 to spend on whatever else I might need! I chose a gaming controller for $14.99 and got J a wireless speaker for $9.99. Also, I bundled the memory card with the camera for even more savings. The $89.99 memory card was only $14.99 when bundled with a new camera. And of course, I paid off the credit card so no interest was incurred. Remember, that’s how they get you!

The Moral?

The moral of this story is that credit cards don’t have to be evil. When used correctly, they can actually be very advantageous. You can use the credit card rewards points to save a ton of money! The best part is that there are only two key things to remember:

1. Don’t buy things you don’t need just to get points.
2. Pay off the credit card right away so you don’t have to pay interest.

If you do this, you can beat the credit cards at their own game and come out a winner.

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