Reader Survey: How Did You Get Into Debt?

I started out in the young and stupid category when I went nuts with my first credit card in college. A few years down the road that transitioned into the second, struggling to make ends meet category. It’s self-perpetuating. You spend unthinkingly, and then when you’ve learned your lesson and understand the consequences, said consequences make it hard just to get by from paycheck to paycheck. We’ve gotten rid of most of it, though, and we’re close to paying off our last credit card, just in time to take on a mortgage.

I basically married into debt. Don’t get me wrong, I used credit cards heavily, but always paid them off in full or took advantage of no interest offers. I never had anything that took more than a few months to pay off (no house, car, etc.).

My husband on the other hand had a whole other situation. A few years before we started dating he had purchased a home, which he shared with a roommate. About a year later, the roommate moved out to buy his own home shortly before my husband was laid off from work. It was during this time that we started dating (had known each other for many years prior). So here he was making less money and having all the bills. He worked odd jobs and began working with a friend of his in an IT consultancy startup. He was making just enough money to cover household bills, but relied on the credit card for all other expenses (gas, groceries, etc.). He eventually got another roommate to help out, but it was too little too late.

For two years he worked in the startup on an hourly wage, but often wouldn’t work more than 20 chargeable hours. He was vastly under-employed, but believed in the company and liked having a somewhat flexible schedule so he kept with it. Around the time that I moved in, the company was doing well enough that he was put on a weekly salary, which helped greatly.

Unfortunately the damage was already done though. His credit card company jacked the interest rate (with no reason) and he moved it to a HELOC. That plus another credit card landed him with $30,000 of debt at the time of our marriage (not including the wedding – which was paid off by us and our parents just months after the wedding).

After the wedding, I convinced my husband to let me take over all the finances. I found that he never really even paid attention to what he was charging and never paid off a balance. By the end of the year, we should have the debt trimmed down to about $23k (it would be more, but he had a few emergencies that made the payments smaller).

So, yes, I married into it. I love my DH and I accepted this baggage along with him. Together we’ll get through it.

I was Y&S and on top of that invested in a business I shouldn’t have. Then after I had accumulated about $18,000 in credit card debt I had a complete mental break down and ended up having to be saved (for real) by my parents and the wonderful man I married. I’m much better now, out of credit card debt, living as a cash family. The husband and own our house (we paid in cash) but have a small car loan that I hope to pay off by the middle of ’09. However, we have no emergency fund so I am starting to build that now and of course in order to do so we live very frugerly.

It’s fine, I’ve learned my lesson and am getting treatment for both early menopause (one of the reason for the breakdown) and the psycological issues.

We are now doing much, much better but I worry about all the others who are in the same position in the US.

Warren’s first scenario sounds a lot like my parents, actually. They lived a very frugal lifestyle and just couldn’t make it on their salaries. I believe it’s more common than we think.

Seriously; this describes my best friend to a T. She has what would be considered a good job in the corporate world, but her company is on the small side, so she only makes around $32K a year and after paying for insurance and transportation her take home pay is even lower. She has a small apartment, which is not too crazily priced considering our city, and she has a roomate. She cooks her meals at home; she rarely eats out. She doesn’t have expensive hobbies. She almost never buys anything for herself.

Yet between student loans (which are relatively small because she chose to go to a local school), the cost of living, and her medical expenses, she struggles to make ends meet, and saving anything? That’s pretty much a joke.

There are a lot of people spending themselves into the hole for sure, but there are just as many, if not more, people who would be in the hole regardless.

Series of reasons, decisions and stupidity put me in debt. When I was young I would spend money to show off friends and impress younger cousins, all of course on credit cards. When I got married, I payed for wedding with most of my savings and my credit card. Two weeks after my wedding I lost my job in the middle of a recession, used credit cards again to pay for expenses. It took me a few months to get a decent job. Three years later, still in CC debts we bought a house with 10% down payment. Then wen went on a spending spree on bedroom furniture, living room furniture, dining room furniture, guest room furniture and whole lot of other things, all off course on credit cards. Part of the reason was overconfidence in our own ability to pay for all of this. Then one day when i was doing the finances to my horror found out that for the last several months we were spending more than we earned. All the consumer credit & CC payments became a significant portion of our expenses. Soon we buckled up, cut out spendings, stopped using credit cards, prayed hard and during the course of next 3 years we payed of credit cards, consumer credit, student loans,car loans and personal loans. Today we are debt free with the exception of mortgage and we have just started to take baby steps towards investing towards future.

I started carrying credit card debt when my husband and I started dating. We are both independent and didn’t rely on our parents for money when we were in college. I had ZERO credit card debt. My husband had so many credit cards that he couldn’t even count them on both of his hands. He used credit cards to fund everything while he was away in college- books, food, school supplies, gas…everything! We got married and had our son early in the marriage. We paid for our wedding by credit cards but we just had a very small wedding. My mother helped us consolidate our cc debt into one loan and we paid it off. Then emergencies came up, we moved states, and we racked up more cc debt. Right now, our debt is manageable. We are strictly cash only and do not touch our ccs as we pay them off. My husband had over 10 ccs and now we’re down to three but never use any of them. It’s been a long road and we’ve come really far but we have a ways to go.

I personally carry only about $3,000 of credit car debt, which is due to car repairs and electronics (which is important to us). This debt will actually be paid off during the next year and we really only have it because at the moment we’re living on one income while my husband is in school. However, I would like to say that growing up, if we didn’t go into debt, we went without. Circumstances may be of your own making sometimes, but sometimes you just can’t get a job that makes enough to provide. It took us a long time to get to a good financial place.

College. All of my debt is from student loans. I foolishly thought that if you have a degree, you’ll get a decent job.

There are definitely people who aren’t wasting their money. They just can’t make it on $40K. One of the most aggravating things about reading PF blogs is this sort of post, which completely ignores class realities in modern American society.

I’m a big fan of Elizabeth Warren.

I think that so many of the postings above are indicative of why Americans are in debt — we consume too much, define “wants” as “needs” and feel entitled to things that aren’t entitlements. People above defined “necessary” or “emergency” purchases to include tickets to Norway due to a parent’s illness, tickets to funerals, tickets and other costs for “mandatory” weddings, cable, cell phones, etc. We need to fundamentally come to the conclusion that if you don’t have the money, you can’t have it — with the exception of serious “needs” like healthcare. I know that funerals and weddings are important, but if you don’t have the money, you can’t go. Period. Just a few decades ago, almost no one other than the extremely rich flew around the world and the US for such things. And though cable, cell phones, etc have become expected conveniences, they still are not entitlements. Lots of Americans do just fine without them, and not having them is better than debt.

There is tremendous continual pressure on the American consumer to go into debt at a very early age and to stay in debt for the remainder of their lives or at least as long as possible. This is a message delivered to all aspects of our lifestyles from college loans to mortgage burdens to cars to buying on credit to extending loans based on assets (equity or 2nd mortgage).

It is a perceived net of security to ward off other advancing pressures such as inflation, insurance, wage freezes, tax increases and unforseen calamaties. Yet in fact it quickly becomes the trap itself since it (credit) is manipulated so carefully by the banks in the form of credit scores, interest rates and other fees.

With all of this corralling applied to generation after generation in our country, I’m not so sure debt woes are the result of bad choices people have made. Instead it appears they are the result of poor education, awareness and lack of available comprehensive tools in matters of personal finance and economics.

What middle school or high school emphasizes these issues to children enrolled prior to them embarking on phase 1 of the debt cycle upon graduation? If schools are not teaching this to one generation, how will those students be prepared to teach it to their children? It is a beautiful scenario for the banks…

I didn’t even have a credit card in college (during the late 80s). It wasn’t until after graduation, when I entered the corporate world, that I began to have credit card debt, although it was relatively small. When I left my ex-husband, I discovered $2,400 in hidden credit card debt and because he was irresponsible, I got saddled with it. It took me two years to clean that up. Then I went another 11 years without any cc debt.

However, my new hubby and I recently purchased a real fixer upper on several acres. We didn’t feel comfortable bottoming out our savings, so we decided to put the appliances and some of the necessary supplies for improvements on the cc. We figured it wouldn’t be too much and we could pay it off in a year or so. BOY WE’RE WE WRONG!!! The rehab costs have been much higher than expected, and now our cc debt is too! I’ve got most on 2 different 0% cards, but the rest is on a 8.9% card.

I *HATE* credit card debt!! But we don’t feel comfortable bottoming out our cash to pay it off just yet. It will take approx 3-4 years to clean up the mess, but we just have to live with it until then.

This episode has taught me an important lesson about myself – emotionally I don’t do well with cc debt. Once our cards are paid off (we owe $17k still), we will *NEVER* carry cc debt again! We’ve agreed that moving forward, if we can’t pay cash, we can’t afford it.

Mostly it was after moving cross-country and having to live off my cards when I couldn’t seem to find a job in the new location for a few months. My industry was undergoing a sea change at the time (dotcom bust, post-9/11 instability, to name a few things) and I wasn’t prepared for the new job-finding paradigm.

Thanks in part to balance transfer shuffling, I’m on my way to paying off that debt now.

I did a number of things right:
I paid a percentage of my college costs as I went, and owed my parents 10k when I finished. Didn’t have a car for years and then bought used for cash.

Aside from the school debt, which I paid off in 5 or 7 years, my debt was never bad, but I carried about 3k on credit cards for YEARS – even if I had the same amount in the bank!

I paid it off in 2000 (right before getting laid off) and was okay for a few years, but then I went to grad school (hello 17k in debt), bought a late-model used car (6k in loans) and got a little loose with my credit card when I relocated for work (6k). Wow, that’s 29k in debt, though because they were acquired at staggered times, my highest total debt load was probably “only” 22k, in 2004 or so, and I’ve been paying it down steadily.

geez, I’ve never spelled it out like that before.

I always maintained an emergency fund, and am down to owing $7392.11, with full payoff by next August on my radar screen.

so how did it happen? grad school + car being totaled in an accident + moving to a new place and furnishing an apartment + some frivolous spending. Just living life, in other words, without paying close attention to the details.

We’re in our mid-40s with two kids, ages 7 and 4 and never carried credit card debt. Two bouts of unemployment for DH, back to back–out of work for 7 months, then held the next job for 20 months, then out of work a full year–sent us into debt. Thanks, corporate America. We used up unemployment, our savings, etc. In the midst of bout #2, my Dad died and he lived on the opposite coast–lots of expensive last minute travel, etc. Add in a bunch of dental work and a car emergency and that’s how you make ends meet.

@42 DanL:
“I first wrote off my debt to being “young & stupid”. However, I soon realized that I DID realize what I was doing, so that wouldn’t necessarily qualify as “stupid”, but I chose not to address it right away.”

There is a difference between ignorance and stupidity. Doing something that you are fully aware is a bad idea is the latter.

In my case, the foundation of my debt was Y&S spending. I’d bought things I didn’t really need, took trips I really couldn’t afford, etc. etc. But even with that mindset, the debt was always at a manageable level–usually around $7000, which I could have paid off at the time if I’d put my mind to it.

Then, in 2001, I was unemployed for 4 months. When I got a new job, it involved a major move, plus it paid much less than I’d previously been earning. Did I mention that I’d also had a baby that year? All I can say is that for about 3 years, I was living in a sort of financial fog. My debt mushroomed and I just couldn’t get a handle on why I was spending so much money.

In some ways, I’d almost say that the debt was a sort of depression that I was going through. I’ve made huge progress over the past few years, and I’m in a much better place now, both emotionally and financially.

The most credit card debt my husband and I ever had was following grad school. We used them to “get by” and “fill the gaps” where student loans were lacking. In retrospect, we did more consuming during that time than now and probably could have avoided the credit card debt as well as reduced our student loans if we had lived a bit tighter. After eliminating the credit card debt, my husband and I use them for necessary on-line purchases only i.e. savings on dog meds or other items. In my experience, whether or not you use your CC debt to fill the gaps depends greatly on where you fall on the economic ladder combined with how influenced you are by consumerism and keeping up with the Jones’. I felt more inclined to portray an image of wealth and comfort while I was in grad school than I do now. Maybe it has something to do with maturity, regardless; I get more furrowed brows now than I ever did when people realize this landscape architect and attorney live in a lower middle class neighborhood and drive 8 and 11 year old vehicles. We need to be aware of the expectations we unwittingly force on others.

I finished my gradschool, brought a used car and took upon a $37K job in 2004 while carrying $26K in debt. This included some of my tuition fees. All my 2 years in gradschool and probably 2 years after I started working, I had no idea where the money was going. Young and Dumb – spent lot of money on bars, clubs, eat outs, travel etc. My boss found out that I was living paycheck to paycheck and he sat me down and explained the consolidation. I started consolidating CC debt and started paying lowest balance first.

Fast forward to 2008: Took upon a good job which pays more. I am married, my wife doesn’t work yet. I spent good deal of money in going back to my home country (India) to get married. I own 2 decent cars. I paid off all my debt ! Only debt I have right now is $10K – that also becuase I borrowed money on 0% APR to invest in off-shore real estate. I have about $4K in emergency savings and $3K for our next trip back home. All our vacation time and money are spent in taking this trip once every 2 years. I am renting an apartment now, not sure about the job, so haven’t bought a house yet. I am glad that I learned rather quickly ( I am 29 now) and looking forward for a debt-free life.

Thanks

My debt started with Y&S spending. My parents got me a credit card when I was in high school; since they co-signed & limits were based on their credit history, I had over $10k in credit available before I was 18. Went to college, spent $ freely on stuff & trips, so even though I worked (sometimes 2 jobs) throughout the 4 years I still ended up with $5-7k in CC debt by my early 20s.

When I was offered partial reimbursement of grad school tuition by my employer, I used the first check to pay off the credit cards & financed the remainder of tuition on loans. Thus, my $22k current loan balance technically includes some CC debt.

Later, I married my husband who had no CC debt but did have a student loan from undergrad. Current balance is about $11k.

We both have cars; prior to buying my new car late last year, both cars were loan-free. Current auto loan balance is $5k, will be paid off by Feb.

We do the majority of our spending on 1 credit card (for cash back rewards), which I pay off multiple times monthly & we don’t carry a balance. The student loans were obviously critical to our career paths; the auto loan still bugs me but we’re snowballing it to be gone shortly.

I was in the “young and stupid” crowd. At the university bookstore they’d throw in the Citi credit card apps. And the rest is history. I had no knowledge of credit cards or personal finance/budgeting, so I was off to a small start. Small amounts that eventually added up.

I finally/completely got rid of the debt two years ago. After almost ten years of revolving credit card debt. A portion of that was helping family out though, and I hit hard on budgeting once I had a job that paid better. eBay was also/always a helpful aide in combating the debt. Now I only have a consolidated school loan to pay off!

I got into debt just like you said: general stupidity topped with unexpected emergencies (plus student loans). I don’t really buy the whole victim role when it comes to credit card debt either. I mean, is it too easy to get a credit card? Yes. Do companies take advantage of youth and ignorance? Yes. But ultimately, getting the card and using the card is a choice. And people usually resort to it not because it’s their only option, but because it’s their most convenient option.

I work in bankruptcy, and I review a lot of petitions, the vast majority of folks going into bankruptcy are facing huge medical bills, drive old cars, and are poor enough to qualify for earn-income-credit on their taxes.

Life is hard out there. Those of you with professional careers that overspent and are tightening the belt to fund retirement are the lucky ones in many ways.

We started out simply enough. My husband and I were both in school when we got married. He quit to support me through. I didn’t have time for a job at all. He never told me “no”. Anything I wanted he gave me. He also didn’t share the financial picture with me at all. I kept my CC debt almost non-existent, but when I graduated, he had about $5k in CC debt. Then we moved and bought a “fixer-up” house. It wasn’t terrible, but it needed work. That’s when I really got into debt. I quickly ran up $7k on my own, most of it for the house but a portion of it was not making ends meet. By the time we woke up (mostly thanks to GRS and Simple Dollar), we had $15k in CC debt. We are down to $4k total, but it is slow with him in school full-time. I definitely look forward to him graduating and getting a good job so that we can knock out the rest of our debt. We have learned so much being in this position that I really hope and pray that we don’t ever let the CC get out of control again.

Combination of young & dumb & starting grad school when I was only making $6 an hour. I got a pay jump when I started school, but, I hadn’t been making enough to really save prior to that. However, my job was willing to reimburse 75% of school costs. So… paid with the credit card, tried to pay it down before the end of the semester & never quite succeeded. Slowly the credit card debt built, and, I finished school and didn’t have a job. I had to prioritize car payments and gasoline to *look* for jobs over using my cushion to pay off the debt.

Eventually I got two jobs and started paying things down. And then my fiance finished it off for me when my job prospects looked iffy again. (At that point, I was going to be paying $350 a month for health insurance.)