David and I drew up a list of my current expenses, and I was astonished by the starkness of my bottom line. I didn't make enough. Like, not nearly enough. Sure, I could cut out $3.50 cappuccinos, but my problem was much bigger than that. I always thought I spent reasonably because I shop at H&M and Target, don't own designer shoes or an iPod. Looking at my expenses, I saw that I had been living outside my means for so long that I clearly didn't have any sense what my means were.
-- "My Big, Fat, Unpaid Credit Card Bill," Salon, Jan 30, 08
Reading this piece reminded me of a particularly stupid period I went through in my post-collegiate twenties. The gap between my perception of what I made and my perception of how I could live was deep and wide. It took me three years to close that gap, pay off my credit cards, and learn to live within my means. And I was deeply, perpetually embarrassed by the problem I had created for myself.
One of the pleasant things about knowing where your cash goes is having one less thing to be embarrassed about. Given that I have so many other things about which to be self-conscious -- bad hair, terminal clumsiness, the cat hairs that inevitably end up decorating anything I wear, no matter how I lint-roll -- it's nice to have one fewer thing prompting me to wish the Earth would just open up and swallow me already.
Oh wow, this is me. And your last paragraph is frighteningly like me, right down to the cat hair that appears everywhere!
What's the step after cataloguing where the money goes, but not yet calling some debt relief non-profit? That's where I think I am, but I don't know how to lessen my debt (credit & student loans) any better, I'm already at low-budget living.
Posted by: lizb | 2008.01.30 at 12:51
I really liked that article, because I, too, identified with the author. I had that experience of seeing on paper that the income and outgo just didn't match, and it took professional help (free monthly budget meetings with a counselor at my credit union) to set things straight.
I know it's not news, but I'm glad the author mentioned the taboo of mentioning credit card debt. The most difficult part of being on a tight budget in my 20s was social. There was not one single social occasion in my life that didn't require spending money, even if it was just $1.50 for indie coffee, and that caused a lot of shame. I lied about not being hungry or already having eaten to avoid ordering food I couldn't afford, and I suggested hanging out at home instead of going out, but I never said why.
Posted by: Jecca | 2008.01.30 at 12:52
What's the step after cataloguing where the money goes, but not yet calling some debt relief non-profit? That's where I think I am, but I don't know how to lessen my debt (credit & student loans) any better, I'm already at low-budget living.
This is a really good question. Lizb, here are the steps I used when my back was against the wall:
A. Sell everything and anything you can. My CD collection? Gone. My books? Pared down to the ones I knew I could re-read for entertainment on all those weekends I was no longer going out. Clothes? Basically, if I could get any cash for it, I did.
B. Get a second job. And yes, it sucked. I spent two years in my twenties just working seven days a week, with any money going straight to my bills.
It can be really demoralizing, because you're putting in all this time and effort and you feel like you have "nothing" to show for it, mostly because "nothing" = a smaller debt, and it's not like you're going to go gloating to friends, "Guess what? I paid off the second of four credit cards this month!" I think this is why some people like to spreadsheet debt reduction. At least then, you can see the numbers going down.
I had never considered negotiating a payment schedule or minimum payment rate with my credit cards or student loans, but I have read where you can call and be like, "Either you get X dollars every month for Y months, or you get no dollars -- how can we make this happen?" But I don't know if anyone's actually done that or if that's a financial urban myth.
Posted by: Lisa S. | 2008.01.30 at 13:24
Some of the best things in life aren't really free after all. I totally can relate to. Acting on plain, unreasonable impulse to buy stuff that I don't really need at that moment forced me to live back with my folks for six months until i got my act back together. Now I have set boundaries.
Posted by: Caterina Lenards | 2008.01.30 at 22:07
Oh that makes me a little sad for Sarah. I'm glad she's getting things worked out. That "cutting out the cappuccino" advice drives me crazy. When we were trying to both reduce our debt and live really frugally (so we wouldn't add debt or starve) it certainly wasn't lattes that were the problem. We are currently out of credit card debt which is just so amazing. It took a number of years of diligence and this last year we were really aggressive with the payments after transferring to a 0% card. We now have a mortgage, car payments, student loan payments and we owe some money to Thom's father but even with all that, not having credit card debt feels like total freedom. Of course, having a house, the temptation is so strong to start working that plastic. We're really struggling with how much to do and how soon on the house and how we want to pay for it (cash, of course!).
Posted by: Amanda | 2008.01.31 at 11:15
Yeah, it is a shame--and the unfortunate thing is, it's not like $11K is that much debt, it's just that she wasn't managing it well (30% APR?--ouch, ouch, ouch, ouch). At times, I've had about that on my credit cards (ah, grad school)--but I planned it that way, the debt was chugging away at 3-4% APR, the payments were manageable, and the cards were used for absolutely nothing else.
That "cutting out the cappuccino" advice drives me crazy.
Word--unless the person is truly an insane spender, usually the problem is something much bigger and more systemic, like the apartment.
it's not like you're going to go gloating to friends, "Guess what? I paid off the second of four credit cards this month!"
I think a lot of the time that's the problem--money's this taboo, people feel like they can't talk about it, and if you can't talk about something, you're so much less likely to think about it in any kind of rational or analytic manner. I do have a friend who I feel I can talk about my financial situation with (and she talks to me about hers--and we have had a few "Whoo-hoo! I paid this off!" conversations), and I think that's really helpful.
Posted by: Polly | 2008.01.31 at 13:35
lizb - IMO, your next step might be to come up with a plan. Since you know where your money does go, you now need to decide where you want it to go instead.
I'm particularly fond of the snowball method of debt repayment. The basic premise being that you pay the minimums on all debt except for one. I like the idea that your debt paydown crosshairs aim at the debt source with the highest interest rate. *That* debt you hit with the minimum payment plus anything extra that you can afford to pay on it. Once that is paid off you target your second highest interest rate debt source. Then third, and so on. Along each step you roll what you were paying on the just-paid-off debt into the new debt that you are focussing on. So the amount that you are paying off grows like a snowball rolling downhill (thus the name).
Some people like to aim at a relatively small debt first (regardless of interest rate) for the mental / emotional boost from paying one thing off entirely. That's another option. You'll know what works for you.
Posted by: Stephanie | 2008.02.01 at 09:35