This is the next installment of our series explaining to you exactly how we got into debt. Last week I wrote to you about our car loan, and the circumstances that led us to have to borrow money in order to acquire a vehicle. Today I want to talk to you about our most hated category of debt: credit cards.
Before my wife and I met, I had a couple of things happen that caused me to have to rely on credit cards. I’ll tell you about all of these cases in detail in the future, but what I can say now is that I had a mix-up with my auto insurance company right before having an accident in my car. On top of that, I had a few run-ins with the police that caused me to put out well over $10,000 in order to straighten everything out. 😳
Credit Card Debt While Young
These factors, combined with a hefty rental car fee (I’ll explain more in the “insurance/accident” article), caused me to have to rely on credit cards for some basic living expenses – I was extremely young at the time and if I was to find myself in a similar situation today I would definitely make better choices. Also, because of my lack of education or training in any trade, my income was pretty low even though I was working two jobs.
At this time, I racked up about $25,000 worth of debt, and a good amount of that was sitting on several credit cards. I worked as hard as I could, put myself on a budget, and cut every unnecessary expense in order to gain control of my finances. Unfortunately, every time I felt that I was close to paying off all of my debt, something would happen that was out of my control.
Credit Card Debt While Going Back To School
Once I decided to go back to school, my credit card debt increased once again. I had to pay rent, bills, my normal living expenses, and even some of the school expenses that were not covered by my student loans. Because of this I was forced to pay some of my expenses on credit cards, even though I was still working two jobs as I went to school.
While I was in school, my wife (who was just my girlfriend at the time) decided to stop working and go back to school as well. Unfortunately, she was not able to save up enough money while she was working in order to cover her to tuition, living expenses, and school fees while in school full time. Also, as she came near the end of her time at work she began to experience chronic migraines. Because of this she used up all of her paid time off and even had to take a number of days without pay to make up for the absences.
So when she went back to school much of her living expenses were paid through either student loans or credit cards. We got married right before her last semester (I was done with school by this point) and we had two other large purchases that were ultimately funded by credit cards…
Our Foolish Decision
While we were on our honeymoon, we made what we feel to be the most foolish and uninformed financial decision that we have ever made as a couple. We decided to purchase a timeshare in Mexico (I know, I know). After making payments on this timeshare at a high interest rate, we decided it made more sense to pay off the balance using a low interest credit card.
A Good Deal?
The 2nd large expense was when we purchase our car and obtained a car loan, we use a 0% cash advance offer to put a down payment on the car. Those two purchases alone added over $10,000 to our credit card debt. At our worst point we had over $40,000 in credit card debt, and now we stand at just under 36,000.
Where We Stand Now
We hoped to make a larger dent in our credit card debt, but various things came up during the year (especially the $2300 that we spent not fixing our car) that slowed down our credit card repayment.
So as you can see, a combination of misfortune, bad decisions, and sacrifices has led to our enormous credit card debt. We will write about the details, including the balances owed and interest rates on each account as well as our plan to pay it all off.
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