Credit Card Confessions: Part 1

This is painful for me. I am writing to admit (rather confess) that I’m in a bit of a financial pickle, sitting at the bottom of the jar looking up at the longest climb out I’ve personally ever faced. For the first time in my credit-card wielding life (eight years if you count high school), I can’t pay it off. I am carrying a balance and paying for it at 12% APR. As in, for the last two months I’ve lit two twenties on fire because I couldn’t pay off my credit card bill. I have debt in the way of a mortgage and student loans, but somehow credit card debt seems so much worse because of the outrageous interest rates and the fact that I could have prevented it. On one hand, the actual numbers are not that drastic, and yet it is the first time in my life that I really feel like I have let myself down financially.

I alternate between feeling confused and ashamed, and for weeks I’ve been in a bit of denial. It took me a while to even consider writing about this on my blog because I felt like a total hypocrite – giving you tips for managing money and making it grow while at the same time eschewing my own advice. But alas, I’m writing to you as a public confession in the hopes that you and I both can learn from how I got here and can avoid the perils of credit card debt in the future!

How I Got into Credit Card Debt:

  1. Failed to adjust to higher monthly expenses: When I bought my condo, my rent more than doubled. I should have cut my spending in half, and I didn’t. It caught up to me. I finally get the phrase “house poor” – I’m proud of myself for buying the condo, but not proud of my lack of attention to my spending habits since.
  2. Went into denial instead of reacting and adjusting: I didn’t have to look at my bank statements to know I was spending more than I was earning. But in a state of denial I just kept going, assuming I am resourceful and will figure something out. But there’s no such thing as being resourceful and in denial at the same time – I essentially procrastinated figuring out how to pay my bills until I had gone way overboard.
  3. Spent the same $400 about five times: I had a chunk of “shopping money” budgeted this month – and I spent it about five times. I just kept saying, “Oh – this will come out of my shopping money” over and over and over again, without actually keeping track of how much I had left.
  4. I didn’t properly stock my Emergency/Car funds: My 14-year-old car needed about $1,000 of work this month. I have a savings account for car-related expenses, but it only had $300 in it. I should have accounted and planned for the fact that every year I spend at least $1K-$2K on car-related bills (registration, repairs, insurance) and budgeted for it. And to make matters worse? My car needs a new transmission that costs twice what the car is actually worth. Given my current financial state, the LAST thing I want to do is buy a new car and get saddled with more debt and monthly expenses.
  5. Counted my chickens before they hatched: I planned on selling some of my Google stock this month (no, I’m not one of those early employees who is a gazillionairre). I figured that what I planned on selling would be worth about $2K. The day our trading window opened (in layman’s terms the first day in three months that I’ve been allowed to sell) it dropped about 40 points, making a sale worth almost nothing given my strike price.
  6. Some miscellaneous reasons: Ate WAY too many expensive meals with friends; spent money on gas and travel that while I couldn’t really avoid, I also didn’t compensate for; and spent small amounts of money that seemed harmless at the time on a really frequent basis (David Bach calls this "the latte factor," I call it "the safeway factor").

Curious about how I’m going to get out of debt? So am I. Check back for ‘Credit Card Confessions: Part 2,’ where I’ll tell you my plan for climbing back out of the pickle jar.