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Ask the Readers: How to Cope with Spending Addiction? Print
Friday, 5th September 2008 (by J.D.)This article is about Ask the Readers, Psychology, Real-Life, Shopping
Nicki wants to get out of debt, but she can’t — she has a spending addiction. She’s hoping that other Get Rich Slowly readers can give her advice. Here’s an abridged version of her story:
I am writing for advice on managing debt. I’ve been reading your website for the past month because my boyfriend recommended it after he noticed I spend a lot of money. Here’s a summary of my debt:
- Visa: $9900 at 11%
- Mastercard: $10,000 at 11%
- Car loan: $4800 at 8.5%
- Student loans: $12,500 at 11% (I think)
I earn nearly $2800 a month after taxes, and my expenses total just over $1400, leaving me about $1300 to put towards my debt. I’m nearly 26. My goal is to be debt-free by the time I’m 30 years old. I want to start a family then, but cannot do so with so much debt. At this rate, I won’t even be able to get a mortgage.
My original plan was to pay off the Mastercard and to use the Visa only for emergencies. Unfortunately I spent money on clothes, shoes, etc. At the same time, I was moving and buying new furniture, and before I knew it I had two credit cards with $6000 debt. The closer I got to my credit limits, the higher they would be raised. Sadly, I kept spending. I truly believe I have a problem with spending and saving, similar to a drug addict.
I know what I am doing is harming my finances, but I just do not know to control myself. I lack discipline, and I do not know how to gain it. I’m not averse to working hard, and I always intend to follow my debt reduction plan — I just need help in maintaining focus and staying on track.
Do you have any advice for dealing with spending addiction? How can I attain the principles of frugality? I am desperate!
Nicki’s e-mail hit home for me. What she describes is exactly the same relationship I used to have with money. Last year, when I wrote about my own experiences with compulsive spending, I shared six tips that eventually helped me to overcome my problem. These may also be useful for her:
- Cut up your credit cards. Do it now, and don’t make excuses. If you’re a compulsive spender, getting rid of your credit cards trumps all other considerations. (Don’t cancel the accounts — just cut up the cards.)
- Only carry cash. Don’t carry a checkbook or a debit card. Your goal should be to make spending as inconvenient as possible.
- Track every penny you spend. Use Wesabe or Mint or Quicken or Microsoft Money. Use a notebook if you have to. Just write down where your money is going. You must learn to see the spending.
- Play mind games. Use the 30-day rule to control impulse shopping. Tax yourself. Develop tricks to circumvent your urge to splurge.
- Avoid temptation. Stay out of the mall. If you spend too much on knitting, keep away from the yarn store. Don’t set yourself up for failure.
- Ask for help. Seek support from your friends and family. Listen to them when they earn you about your behavior.
(For more detail on these techniques, read my six steps to curb compulsive spending.)
Overcoming addiction is not easy, but I believe Nicki can do it. Admitting she has a problem and asking for help are great first steps. As she gets her spending under control, I think Nicki will find it easier to get out of debt. In fact, she may be surprised at how addicting saving money can be.
Do you have any advice for Nicki? How can she cope with her spending addiction? What’s the best way for her to tackle her debts? How can she learn to be frugal?
September 5th, 2008 at 5:15 am
The balance and interest rate is a bit frightening, but that’s entirely doable if one buckles down to get it paid off.
But that’s not the problem. The problem is the spending habit to begin with, which I am glad that it is being addressed. As the author states, to realize that one has a problem is the first step towards recovery.
However, addictions of any kind may also indicate a root cause that has nothing to do with the addictive behavior in the first place. (In this case, spending.) Perhaps some kind of psychological insecurity? Perhaps one was a victim of abuse? Or is it something more abstract, like bi-polar disorder? Finding out the root cause of the addiction is the most important thing, because you can’t cure something if you don’t know exactly what’s causing it.
The second thing is to look around and consider some kind of support group or counseling. Addiction of any kind isn’t something you have to or should tackle alone, and depending on the root cause, it may also require professional counseling.
The third thing is to realize that having addictive spending doesn’t mean that you are broken somehow. It just means there’s an issue that needs to be worked out, but you are not a lesser person. (In fact, being made feel less will probably only worsen your addictive behavior.)
The simple fact is, nobody is perfect. And it’s OK if we are not perfect. The question isn’t whether we have flaws or not. The question is what do we do in light of it. Adversity can breed greatness, and I hope that you will come out of this better than ever.
September 5th, 2008 at 5:22 am
JD had a good list to start with. (Ah, this is so much like struggling with weight — compulsive behavior is compulsive behavior . . . )
I would add that Nicki should become part of a community of people who wrestle with the same issues. I’m not sure it matters whether she interacts with the people over the internet or in real life; each has its strengths. She needs the daily support and a place to openly discuss the feelings that drive her to spend, to ask for new strategies to try when she runs out of ideas, and to have a place to celebrate the victories that are only understood by others struggling with the same issue.
If she’s not quite ready to start, I would suggest she read at least the first few chapters of Your Money or Your Life, which I found invaluable in getting a handle on where I was financially, how to get out of debt, and how to set a path in the right direction.
I wish her the best in finding her way.
September 5th, 2008 at 5:31 am
I concur both with JD’s practical tips, and the idea that she might want to explore why she feels the need to spend.
From what I’ve seen many people who buy a lot of things do so to fill a gap. Maybe they’re doing a job that they don’t really enjoy and buying nice things makes up for that. Anyway if you address the underlying issue it might help.
Sometimes there isn’t a reason, but if the urge to spend is compulsive, there often is.
Aside from cutting up cards, I’ve found that the best idea is the 30 day rule, it’s one that I use a lot.
September 5th, 2008 at 5:32 am
I found myself in the same situation as Nicki did about a year ago. Although the numbers weren’t has high, I was overspending. From experience, I can tell you that the best advice offered by GRS is NOT to set yourself up for failure.
In my case I had an internet shopping problem. Anytime I found myself tempted to click “Purchase” I would stop, take a few seconds/minutes to regain control of myself, and close the web browser. I even went one step further and started applying the same amount of money as my potential purchase to my debt. (Most of the time these expenses were books, DVDs, and electronics ranging from $10-$150.) As an example…
One day I caught myself looking to purchase an MP3 player that cost $125. Before clicking “Purchase” I stopped myself, thought it out, went to my bank online bank account, and applied $125 towards my credit card debt. After a few times of doing this I noticed my account balances shrinking, but also my credit card debt shrinking. Not only did this help me start to pay off the debt, but it eliminated my online shopping habits because I realized I didn’t have the money to even pay off the debt, let alone buy the “stuff” online that just added to my debt.
September 5th, 2008 at 5:47 am
Put mail-order catalogs in the recycling bin the moment you bring them in from the mailbox; ditto for the advertising supplements in the paper if you get the paper. Don’t read magazines. Keep a gratitude journal. Find out whether you can get free counseling through an employee assistance program at work.
September 5th, 2008 at 5:48 am
I find one of the hardest things is to stay motivated. Spending is a right now thing while earning is usually a monthly type thing. You have to set goals and see the progress you are making toward becoming debt free (charts, excel spreadsheets). Like everyone mentioned, the buddy system helps tremendously to keep you in check. Someone who will hold you accountable for your actions other than yourself because you can usually talk yourself into spending. Visiting the library for all the top money management books is also a big help. I enjoy reading stories of people who have been in the same situation and accomplished their goals.
Good luck and stick with it.
September 5th, 2008 at 5:54 am
Congratulations to Nicki for taking the first step. The advice from JD and readers (so far) is excellent.
Nicki, you have been sent an angel in the form of your boyfriend. Do not lose sight of this. Enlist his help at every opportunity. Perhaps ask him to take over your finances temporarily and provide you with weekly spending money. Yes, there will be times when you resent his help. But do not refuse it, disregard it or diminish it. An angel can leave your life just as easily as he walked into into it.
This I know.
September 5th, 2008 at 6:14 am
I’m a fan of the boards at fool.com. They are great at tough love. There have been some pretty miraculous stories where people show up with 6 figures of debt and within 1-2 years are debt free and are the go to guys for advice.
http://boards.fool.com/Messages.asp?bid=100145
Unfortunately, it costs a bit of money to post.
September 5th, 2008 at 6:15 am
There are some things you may be able to do to help, on top of the advice already mentioned.
Can you further reduce your spending? When your lease is up, can you move to a smaller apartment or share a place? Before I bought a place, I was living in a house with 2 other people. The monthly expenses were $600 including utilities. On top of this, it was a blast.
Of course, you’ll want to stop eating out for awhile and start shopping at discount grocery stores. This has an added benefit of learning to cook yourself, which is cheap and fun.
Can you sell some of your stuff? Can you replace some of it with cheaper stuff? If you can sell your sofa for $1k and get a smaller or older used one on craigslist for $200, your car debt is then down to $4000.
If you live in a place that has public transit, consider selling your car. The bus isn’t for losers.
You’re going to need to make some lifestyle changes until your debt is paid off. You’re going to need to accept this.
September 5th, 2008 at 6:15 am
It is important to remember that this does not happen overnight and you WILL have setbacks! Don’t be too hard on yourself! I like JD’s comment “In fact, she may be surprised at how addicting saving money can be.” Its almost as if you have to take the rush you get from spending and refocus it toward being creative about saving and paying bills! The rush you are going to get from sending that last CC payment is going to be terrific! This will be a daily challenge that you can celebrate at the end of every month when you tally the numbers! It’s a challenge, one that is not out of your reach!
September 5th, 2008 at 6:15 am
I’m going to add one more tip that has helped me immensely. Limit your exposure to marketing. Get rid of cable and limit your exposure to TV in general (We use Netflix only now). Don’t buy magazines.
I find that if I don’t know about products, I don’t want them!
September 5th, 2008 at 6:16 am
I can’t remember the book that gave me this advice, but I started treating using credit as if I were an alcoholic: I took it one day at a time. I believe the phrase the book had was something like: Just for today, I will not debt. (Grammatically incorrect, but you get the point.) It was extremely helpful to me when I was spending more than I earned, and now it has become a habit.
September 5th, 2008 at 6:20 am
What do you do to help someone that you know has a spending addiction, but either will not admit to it or does not see it?
September 5th, 2008 at 6:21 am
If it’s an addiction, JD is right, you need to cut those cards–NO excuses. Remove the temptation entirely.
Secondly, you have to figure out why you feel the need to spend. What is it you’re buying? Why do you want it? Is it filling a void or giving you a high?
I used to spend money to feel good about myself, until one day I realized that my life is great, I had a wonderful family, and buying a dress I thought I had to have wasn’t going to dramatically improve my life, but putting the money in savings could dramatically improve my life if, say, I lost my job or my husband lost his. Now saving gives me a sort of high.
Another thing you might try is to use a website like Wishlisting to “save” anything you think you want. I find that if I “save” something there for a couple of weeks, I can look back at it later, and I don’t want it so much. Find ways to curb impulse spending, and you’ll learn to step back and use logic before you buy.
September 5th, 2008 at 6:46 am
In one of my posts I described how I deal with unnecessary shopping. Feel free to check it: http://www.kacperwrzesniewski.com/how-to-restrain-from-unnecessary-shopping/
September 5th, 2008 at 6:48 am
For every credit card I have/had, (I carry 4, all of them paid off every month), I called up the issuing bank and explicitly ask them not to bump up my credit limit. In addition, I never remember the PIN (so no cash advance at ATM), and I shred all the cash advance cheques they so “kindly” send me every month or two (if I haven’t explicitly told them not to send them to me any more).
Granted, I don’t have a spending addiction as bad as Nicki’s, but I do then to go on a spending spree and spurge once in a while.
Having a frugal partner helps curbing the temptation. You are very fortunately to have a boyfriend who really cared about you. For me the thought of “he wouldn’t like it if he knew” was generally a great deterrent for (further) spending, but that sometimes make me feel bad after an impulse buy.
I suggest Nicki to build a very strong vision of her future — her dream home, comfortable retirement, tour around the world, etc. — and keep a visual reminder of it in her wallet. The next time she pull out the plastic/cash for that pair of designer shoes, that goal will stare back and her and scream, “you want WHAT instead of me?”
September 5th, 2008 at 6:51 am
Nicki,
The first step is to recognize the problem and you have done so.
Second, if you have a mental health problem with money (addiction as you call it) you need professional help. If you can’t afford prof. help seek out a 12 step program like http://www.debtorsanonymous.org/
Third, follow JD’s advice. No credit cards ever, only use cash. Track your spending. Set up a budget, etc.
September 5th, 2008 at 6:52 am
Spending is a hard habit to get rid of. I think JD has a great list.
Savings can become a great habit that is also addictive. As she starts paying off her debt she should also set up a savings plan.
As she sees her debt load going down she will also see her assets going up.
September 5th, 2008 at 6:53 am
I agree with the comments here. Sometimes the shopping addiction is all about just trying to be somebody you are not and trying to make up for simple issues at home, like too much clutter. Often our home is overwhelming, so we don’t want to be in it and we think buying the “right” things will make all okay. It can, but doesn’t have to be a serious underlying problem that’s driving one to shop, but obviously the impact to one’s finances is serious. The good news is that Nicki wants to change. It takes a lot of courage to face those finances. First thing she should do is find out exactly how much she owes on that student loan. Specifics are needed when facing one’s finances. Then with her income after expenses she should start tackling the debt. (Personally, I still think the snowball plan is the best. Seeing more immediate results makes sense for someone with a shopping addiction; i.e., someone used to instant gratification.) Instead of shopping, she can focus on her home and purging items through return (chances are she has stuff she’s never even used, perhaps with tags still on–find the receipts or credit card bill and take them back!), resale (if possible), or charity (holding onto stuff because you paid so much for it, but don’t want it, only hurts you through guilt, being overwhelmed by the stuff, and so on). With her shopping addiction, she probably has so much stuff in her home that she never ever uses. She should take baby steps for the decluttering, so it doesn’t become overwhelming, but focusing on those actions will be very satisfying (even addictive like J.D. says) and keep her focused and away from shopping.
September 5th, 2008 at 7:04 am
I struggle with this as well, but I congratulate myself on getting much, much more responsible within the past 6 months. What has worked for me is a combination of things:
1. Don’t go even go near malls, shops, catalogs, shopping sites, etc. I go to the grocery store with a list and now do the same when I go to buy clothes. I have to really NEED something and then I will research where I can get it for a good deal.
2. I read several personal finance blogs, including this one, daily. Reading about other people who have succeeded is so encouraging. Also, you can learn some great tips along the way.
3. I created a realistic budget that included some “play money”. I allow myself $20 a week to go out with friends or shopping, etc. It’s not much, but with planning I haven’t felt at all deprived.
4. I faithfully update my budget with my spending. I also have committed to sending a set amount towards debt each money and by saving elsewhere in my budget it has started to feel very rewarding when I can send even more than I planned towards credit cards.
Good habits take a little bit of time to take hold. I still trip up, but I have committed to larger goals (like buying a house and having a wedding) that are much more exciting than a new pair of jeans.
September 5th, 2008 at 7:09 am
The first step is recognizing the problem and asking for help- and Nicki should feel good that she has done that. I second the suggestion that she tie into a group(s) that deals with the various aspects of this- debt, frugality,credit. I think internet is better than human- since humans tend to meet infrequently in person(1X a week or 1x a month)- and it is easier to “confess” when you don’t actually do it in person. Plus there is a much wider range of experience/suggestions available.
Good luck, Nicki-I believe you can do this - and be able to have a home and a family by 30.
September 5th, 2008 at 7:14 am
One habit I suggest, which must be accompanied by cutting up the credit cards, is to pay your bills on payday. If you write the checks and mail them on the same day you get the money then you won’t have the oppportunity to spend the funds anywhere else.
I also recommend starting a Life Happens savings account at the same time you’re paying down the debt. Start it at a bank you don’t already use, one that’s inconvenient to get to, and don’t get an ATM card. Make depositing to the account just one of the bills you pay every payday so that you get in the habit of saving. The goal would be to get the account to about $1,000 so that if you have unexpected car repairs or doctor bills or the like you don’t have to go back to your credit cards.
FWIW - I agree that you shouldn’t be too hard on yourself if you slip a little, but also, I think you shouldn’t be too easy on yourself. If you spend your grocery money on shoes, forgive yourself but then also survive on ramen noodles, rice, baked potatoes, and vegetables until you get your next budgeted money for groceries.
September 5th, 2008 at 7:17 am
Congratulations Nicki. You’ve realised that you have a problem and you’re willing to tackle it. That’s the first step towards financial freedom.
J.D’s advice is excellent so I won’t repeat it. I will suggest that you get some support in your quest to pay down your debt. An excellent support is the Women in Red group at MSN Money. They are a wonderful, supportive group of women, each with their own story, who are cheering each other on as they face their finances.
http://articles.moneycentral.msn.com/SavingandDebt/Advice/MeetTheWomenInRed.aspx
Good luck!
September 5th, 2008 at 7:19 am
Some excellent advice provided by both J.D. and his readers above. They have all given great tips on the mechanics of getting out of debt, controlling your spending, etc. However, you have to have a real philosophical shift to finally beat back spending too much money.
I recommend reading the book Your Money or Your Life for some thoughts on frugal living. Surround yourself with positive examples of how to handle money–blogs, magazines, library books, etc. Give away some of your possessions to those who need it. Volunteer your time for those less fortunate. Examine how much money your earn per hour after factoring commute time, lunches out, work clothes, etc. (your real wage, not what your paycheck tells you it is) and when you want to buy something think about how many hours you have to work to pay for that item. You might just find that it isn’t worth the exchange of life energy.
Best wishes on your journey to debt freedom. You can do it, one dollar at a time!
September 5th, 2008 at 7:26 am
I had a similar problem (between car, student loans and credit cards, was up to about $60K), but am now debt free!
A couple of things that helped me (in addition to some tips already offered–definitely use those!):
-Create a spreadsheet or some type of document where you track your debt reduction. Every time I would make a payment on something, I would enter the balances of ALL of my debts and then calculate the amount and percentage my total debt went down. I became OBSESSED with that number going down and when it didn’t go down from month to month, I would get pissed. Eventually, when I would go to make a purchase, I would think about how it was going to impact my spreadsheet. If it was going to mess up my progress, I didn’t buy it! Seeing that big number go down was a big motivator for me. Even if it only went down a little bit each month, I was that much closer to the big 0!
-When you go to buy something, just tell yourself NO. You have been living without it, you can keep on living without it. You can buy it when you actually have money (you do NOT have money if you have that much debt). Your life is not going to improve by having a brand new couch instead of your hand-me-down couch in that new apartment. You will regret this purchase later… Learning this sort of self-talk was key for me. You’re the only person in charge of your spending choices, choose wisely! Develop a Sybil-style alter ego if you have to! Make sure SOMEONE in your head is telling you not to buy things that are only going to worsen your financial situation. There will be plenty of time when you’re out of debt and have a positive cashflow to buy things that you’d like to have in a smart way.
Good luck! It’s not always going to beeasy, but you CAN do it!
September 5th, 2008 at 7:27 am
Tracking your spending is good, but planning your spending is better. Use an envelope budgeting system. Develop a plan for every dollar you bring in. You already know how many dollars to earmark for living expenses. Now make sure dollars are getting earmarked for debt payoff. You’ve already calculated your debt and set a date goal for having it paid off. That’s how much per month? That’s how much per paycheck? Now you know how to earmark those dollars. Don’t let any dollar come in or sit in an account unless it has a specific purpose assigned to it. Then, don’t spend unless you have the necessary dollars for the particular purpose. PLAN! Manage your money rather than let you money manage you.
September 5th, 2008 at 7:29 am
This is all great advice. I would add two things for Nicki not mentioned:
First, a slight spin on removing tempation. You will have it, so every time you do, do something else. For example, every time you want to spend, go to the gym or go for a run. This type of outlet can be a great way to have a different “release” mechanism. Of course, you can always try the rubber band on the wrist too!
Second, my guess is you actually have decent credit if you paying your bills. Look into a debt consolidation loan to reduce the percentage rates and potentially even get some of the amounts reduces (interest removal).
Good luck!
September 5th, 2008 at 7:34 am
When you get paid, immediately pay your bills and then make a payment to your credit card or move money to a savings account. Again, this makes it harder to access your money unless you really need it. And, you won’t want to withdraw money from the savings very often, since you are only allowed a few withdrawals per month.
(I get paid twice/month and make a payment to my credit card each time I get paid, so I make lower payments frequently instead of trying to come up with a large payment once/month).
September 5th, 2008 at 7:38 am
I would like to mention that closing credit cards IS important. Cutting up my credit cards made no difference. I had all the account numbers memorized. Also, department stores are more then happy to look up your credit card number with their store and run it for you. I know this to be true from experience. Just my two cents… having ended up in collections for YEARS and eventually SETTLING the debts, it would have been far better for my credit score to have simply closed these accounts years ago.
September 5th, 2008 at 7:38 am
Such good advice you’re getting from everyone! I just had to add two thoughts:
You can load up on THINGS there that will give you some satisfaction - books with shiny covers, even cds and dvds - usually free [my library charges $1 or something for dvds but most don't] and you’ll have the feeling of a successful shopping trip without the expense. If you really must shop try a thrift store or a few garage sales - you may be surprised at what you find and either way you’ll spend MUCH less - and spend cash!
1. sometimes you shop because you’re not busy enough or have nothing occupying your mind - so occupy your mind tracking your money, calculating payoff dates, reading the books everyone’s recommending and the blogs as well
2. when you REALLY feel like you want to shop start at the library
September 5th, 2008 at 7:43 am
I disagree on the “only carry cash” advice.
If the goal is to make spending as inconvenient as possible, cash is the wrong answer. Everywhere takes cash. I only carry my debit card around. Even though the number of places that take credit/debit cards is on the rise, it’s still more inconvenient for me than having cash.
I have far too many entries in Quicken with a payee of “cash pixies”; when I have cash on me it just evaporates.
What works for some doesn’t work for others, of course. The best advice is to read all the advice and then tailor it to yourself.
Good luck!
September 5th, 2008 at 7:47 am
good luck to Nicki! I truly believe that wanting to change and recognizing the problem are most of the battle. the rest is just learning some financial discipline and knuckling down for the “long haul”. If I were Nicki I would shop around for lower interest rates and think about picking up another job to ramp up her pay off schedule. And, if you are working you can’t go shopping! I would also set aside some savings. this is because I think that seeing savings grow is one of the best ways to learn how to save and live more frugally. If there is a way to work in a field that assists with student loan payoffs, I would really consider it too. Nicki is doing a very smart thing and I wish her all the best.
September 5th, 2008 at 7:52 am
Debtor’s Anonymous, Debtor’s Anonymous, Debtor’s Anonymous. We use compulsive behaviors to make us feel comfortable when we aren’t - in order to overcome these compulsive behaviors, we have to learn to live comfortably without them. Depending on the extent of your problem, this is probably not something that you can teach yourself. Ask for and obtain the support of people who have experience with your problem and have overcome it.
September 5th, 2008 at 7:55 am
Just a quick thought, consolidate and refinance your student loans. This process is not credit dependent, and mine are currently at 4.25%. You can save a nice chunk of money, and be able to get the credit card/vehicle debt out of the way faster.
September 5th, 2008 at 7:56 am
Here’s an old-fashioned idea that can help you adjust to using cash on a budget. Put money in monthly envelopes for spending on different things (food, gas, clothing, fun, etc.) You’ll see the affect to your budget every time you take money out.
And you should have a “fun” category each month, although it should be modest — depriving yourself completely can backfire if you’re not careful. There are plenty of ways to stretch a $30 or 40 monthly fun budget. And then if you really want to go to a concert or another large expense, you can save that budget up for two or three months.
September 5th, 2008 at 7:56 am
Hi. Some sort of counseling, group or individual would definitely be helpful. I’m not sure that replacing an addiction to spending with an addiction to savings is really the best long-term solution; balance is the key, and I think couselling can help with that.
and I want to strongly support something cherie at 25 said — find other things to do! Distraction via something physical is one idea, if you schedule exercise and cooking and cleaning for non-work hours there is less time to shop or even to think about shopping. Or a slowish hobby, like knitting or quilting, where you can see progress from the time you put in but you also won’t finish immediately — and you can make presents instead of buying them!
Also, make it difficult to shop in as many ways as possible; and make sure to ask on-line retailers to stop sending you email. Maybe give up your car keys, too, and carpool to work so that you’re not stopping off after work to shop, and do other shopping with that supportive boyfriend…
September 5th, 2008 at 7:59 am
I found myself with $15k in credit card debt a few years after graduating college.
What saved me was my FEAR. One day, I was looking at my CC bills, and made a realization that it will take me a LONG time to pay it all off, even though I was paying 2 times the minimum required payments. It truly, honestly, SCARED me. It was a HUGE wakeup call.
My “bold” strategy was to buy a house, get some roommates (who will pay for most of the mortgage payments), and use what I can save towards paying off my debt. I also started selling off expensive hobby equip (for me, that was computers I used for video editing). In addition, every 5-11 months, I would look for a 0% balance transfer (intro rate) credit card to transfer my balances as I paid it off.
It took me 2.5 years to pay off that $15k of debt. My rent at an apartment was costing me about $800 a month. When I bought a house, my mortgage was $1200 a month (incl PMI), but the 2 roommates I had paid for about $1000 of that (I even rented out the master bedroom of *my own house* to get a higher rent - friends thought I was crazy).
But even after paying the debt off, and learning to pay off my CCs every month in FULL, it took me a few years to get my mindset into SAVING mode.
Now, I’m insanely frugal. People make fun of me. But honestly, I do it for myself, not for them. I try to think of the future, and not now - probably more than necessary. Currently, I’m 35, and 22% of my salary goes into retirement. It’s overkill, and I plan on bringing that down to between 15-20% - but I need to make sure. I also want to retire (maybe go teach high school) between 50 and 55 and live financially happily.
September 5th, 2008 at 8:02 am
I second, third, and fourth Debtors Anonymous. Do not pass go. Do not spend two hundred dollars.
September 5th, 2008 at 8:09 am
I’m a 22-year-old with $9000 in debt. I’m paying it down slowly, but I’ve made a lot of sacrifices in my life to be able to do it (like moving back in with my parents. It’s hard living in their house again, but I’m saving $500/month by paying my parents a much smaller monthly payment). I haven’t cut up my credit cards, but I put them each in a sealed envelope with the balance and APR written on it. That seems to be enough for me to keep away from them.
Also, I downloaded a Debt Reduction spreadsheet (found http://www.vertex42.com/Calculators/debt-reduction-calculator.html) to give me a good visual of how long it’ll take me to pay off all the balances. Knowing a time frame for when each card will be paid off definitely helps with my motivation. And although $9000 in debt is overwhelming for a 22-year-old with a decent-but-not-great salary, I was pleased to see that even with a low starting snowball amount (about $50) all of them will be paid of by March of 2011. It’s also pretty motivating to see how much interest I will have paid on each card (thousands of dollars, wasted!).
I think visuals are important. With abstract thoughts, it’s easy to start feeling hopeless and be pulled into a mindset of it-doesn’t-matter-I’m-too-far-gone. You need to make small, realistic, achievable goals that will give you the confidence and knowledge to know that you can overcome this. Good luck!
[And thanks, JD, for a great site. I've been reading for months and this has helped me change my life.]
September 5th, 2008 at 8:31 am
I millionth Debtors Anonymous. For a good, solid, and cheap intro to the DA principles, find a copy of How to Get Out of Debt, Stay Out of Debt, and Live Prosperously by Jerrold Mundis. Sometimes the hardest thing about breaking the cycle is believing it can be broken. Mundis’ book is a classic.
September 5th, 2008 at 8:46 am
Try finding an addiction support group. There are support groups for every addiction. And for the loved ones of those addictions. And a twelve step program for every addiction. I believe I saw something for spenders annonymous or something like that in the back of a Melanie Beatie book, on of them in the Codependent No More series. I would also seek help from a therapist. There are a lot of steps to addressing an addiction, if addiction truely is your problem. Taking steps to eliminate temptation, like cutting up credit cards and staying out of shopping centers, is one step. Treatment is another.
Good luck!
September 5th, 2008 at 8:46 am
Here are some things that helped me, even though once in a while I will have a relapse!
I throw away all junk mail, including catalogs and sale store ads, don’t look just throw, there is always a good deal somewhere.
Sometimes the people we hang around with influence us to spend, this one is hard but try doing things that either cost nothing, or maybe even find some one else to hang out with. This one is poisonous.
Since I am trying to get out of debt I really question why I am buying something.
I grab books related to personal finance and read them to stay on track. Such as: Are you being suduced in to debt, by John cummuta.
It is a journey if you fall off don’t beat yourself up to hard, just get back on and go again.
September 5th, 2008 at 8:52 am
I recommend to use an Accountability Partner to help on your journey to becoming debt free. Whether it is a close relative, spouse or close friend, have someone that you can share your plan with and make weekly checkups to review your current financial state.
Also, formulate a plan and set up automatic accounting to apply the funds to where they need to go prior to you being able to spend them. If you do not have the access to the credit cards (by following JD’s recommendations to cut them up), then you cannot spend money that is not in your bank account.
More than anything, believe in yourself and know that you can beat the “addiction” in spending. It seems like a desire is there but the decision has to be made to take control of this portion of her life. Once that decision has been made, you will be able to beat this issue! I wish you the best of luck!
Stay Disciplined!
September 5th, 2008 at 9:13 am
Ahh been there done that. She can do the Ice Glass method, which I will have a post coming on 9/7/08 in my blog. Put all credit cards in a glass full of water, and hide it in the freezer. Seemed like a good method to stop impulse shopping.
September 5th, 2008 at 9:14 am
One possible solution to her credit limits however is to pay a card down and then call the company to lower (yes lower) the limit to a more acceptable range (say $500-1000) and restrict their (the companies) ability to automatically up the limit. Yes you can do this with most CC companies.
Now she has less of a limit and can max them out all she wants it will no longer be an issue.
Spending addicts will always have max limits so restrict the limit and restrict the damage.
September 5th, 2008 at 9:21 am
I used to be the exact same way. A few things that worked for me were not shopping. Window shopping is dangerous!
Also being a female I felt it was important to always have a credit card with me for emergencies (flat tire, car breakdown, etc). I went to the motley fool site and found this little envelope you print out and cut out then put your credit card in it. Then to use it you have to break the seal. It makes one more barrier and makes you really think about what you are doing. It worked for me and my husband!
We are now out of debt (not just by doing this) but it did help significantly!
September 5th, 2008 at 9:22 am
cut up the credit cards, get a 2nd job
September 5th, 2008 at 9:24 am
Try doing The Work when you feel the urge. It’s a way to examine your beliefs, which in turn fuel your emotions and compulsions. It’s helped me immensely. You can also call their toll-free number for a trained facilitator and find a group in your area. Good luck!
http://www.thework.com
http://www.byronkatie.com
September 5th, 2008 at 9:39 am
I am trying this one, withdraw 1/3 the normal amount each time you go to the ATM (provided your bank refunds your atm fees or use your own bank branch) in addition to leaving the CCs home. It makes spending a bit more inconvenient when you have less cash on hand.
September 5th, 2008 at 9:45 am
Nikki, congratulations for seeing that you need help and seeking it. That’s a brave thing to do!
Something we’ve done for my SIL, who has problems saving money, is to act as her personal bankers. Basically, we set up a savings account in our names, but for her money. Each month she’d send us a check for an agreed-upon amount and we’d deposit it in the account for her. Because it wasn’t in her name and she didn’t know the number of the account, she couldn’t access it. When she needed the money for a savings goal, we’d withdraw it and send it to her.
Obviously, this is only a good idea if you have someone you trust implicitly with your money. But if there is someone you can trust this way, it’s a way to take the money out of your immediate control. There might be a way you can adapt this concept to help you pay off your debt as well. Good luck!
September 5th, 2008 at 9:55 am
First off, congratulations on coming to the conclusion that you have an issue that you need to deal with. Don’t be too hard on yourself though; don’t see this as a personal failing but rather simply a tough situation you need to work on to get out of.
Second, Cutting up your credit cards is probably the best immediate advice to stop the hemorrhaging.
Third, I would suggest you consider either negotiating with the credit card companies to reduce your interest rate. I would start out by telling them that you have an offer for a balance transfer of 0% (bluff) and see if they will match just to keep you as a – apparently – good customer; just don’t tell them you cut up your cards. Alternately, consider looking for a good introductory rate, preferably 0%, on balance transfers; open the account, transfer the balances, cut the card they send you, set up automatic payments several days in advance of the due date, and forget it!
Fourth, start negotiation with your car loan company to get that interest rate down. I would look for a credit union that may be willing to offer a car loan refinance, or even just a personal loan with a better interest rate than what you are paying, which seems quite high.
Regarding the student loan, it kind of depends on whether the loans have been consolidated or not, whether you can refinance for a better interest rate. I see an option if you are correct about your interest rate, but it comes with a caveat. If you can’t refinance because you consolidated the loans, consider a personal loan from a credit union or bank if it offers a significantly lower interest rate. The caveat is that you will lose the possibility to write off the interest as a student loan interest deduction on your taxes, thus why the interest rate needs to make up for that.
Regarding your spending, the only thing that will work is discipline. I know some are suggesting that you use cash, but that comes with a whole other set of problems that will also lead to not having enough money. Using cash will lead to less oversight of what you are doing with your money, not more. I would suggest that you get rid of your credit cards, but keep your debit card and open an account with a money management site like mint.com that will help you categorize where your money goes and help you set up a budget. Ultimately, it comes down to a single thing and nothing else; discipline. Discipline to live an affordable lifestyle or make more money. Discipline to keep your spending in check. Discipline to not spend money on frivolous things. Discipline to not desire to live like a queen on a pauper’s salary. Discipline to delay gratification and save money.
I think it would help if you visualized for yourself what it is costing you to have bought all the things you did on credit. Think of it this way, if you bought furniture for $10,000.00 on the MasterCard a year ago, at your interest rate, that furniture, right now, actually cost you $11,156.30 ($10,000.00 + $1,156.30 monthly compounded interest, or almost $100.00 dollars a month just in interest, for which you received absolutely nothing). If you let it roll another year without paying anything (which of course is unlikely) the furniture would have cost you $12,446.31, $2,446.31 of which you received absolutely nothing material for.
Now, this all sounds discouraging if you consider that on that credit card alone you would have to pay almost $100.00 just to keep the balance at $10,000.00, but that is why you have to work on renegotiating and decreasing your interest on these loans.
Below is a link to an excellent excel debt reduction calculator that will help you visualize and chart your debt and show the effects of upping payments. It should help you motivate yourself when you see the real effects of reducing your debt.
http://www.vertex42.com/Calculators/debt-reduction-calculator.html
I hope you are going to be able to adjust your lifestyle to make the changes you need to make in order to pay off your debts.
Ciao
Marc
September 5th, 2008 at 10:01 am
Loads of great advice. I’d second going to the library. Walking away from temptations, finding a life not based around spending. In hopelessly broke states my salvations have been journaling nearly free, making stuff from scratch ie bread !, become a great at baking invite people over for coffee and cake. Selling stuff like books online at amazon is great too.
September 5th, 2008 at 10:03 am
First, cut up your credit cards. Carry only cash and use the envelope system. Sell unused stuff around the house.
Since you lack budgeting/saving discipline, claim 0 exemptions on your W-4 and let Uncle Sam have an interest-free loan.
When you get your tax return, put at least 75% of it toward your debt. Treat yourself to something nice with the other 25% so you don’t lose hope.
Set up an excel spreadsheet so you can track your progress.
September 5th, 2008 at 10:14 am
Cutting up your cards is a start, but as a person with sometimes compulsive internet spending issues here are my tips:
- Stop reading blogs/sites that show great new products or great deals on products whether they be fashion or decor, if you don’t see them you won’t know you want them… I know this is hard because I also have a bit of an Internet obsession
- Stop visiting online shopping sites, no browsing at all, it is too tempting
- If you have your credit card info saved on any shopping sites you need to delete that info, it is way to easy to buy when all you have to do is click
- If you have your credit card number memorized you need to purge that from your mind somehow or ask your bank to change the number on the account, it was amazing just how fast I could type my card number when I was impulse buying
Good Luck! I totally understand that buzz that shopping can give you, but really if you are able to give it up and get past the craving being frugal can feel almost as good… not that I don’t have a relaps on occasion, but shopping doesn’t produce the same feeling as it used to and the regret gets me right back on track.
September 5th, 2008 at 10:37 am
There’s a lot of good advice here. I’ve been through this too, like so many here. I’m afraid I don’t have any great words of advice because when I finally stopped spending I pretty much just stopped.
There were a few things I did to ease the temptation. For one I cancelled subscriptions to all fashion magazines and stopped buying them at the store. For me buying a fantasy designer life was a huge cause of my spending problem. You know what I found out? It doesn’t really matter if I don’t know what the new hot item is because I can’t afford it anyway.
I also budgeted myself a small amount (like $200) a month to buy whatever I want. I can spend it on lunches out, or I can get a new outfit or whatever I want, but that’s it, $200, no borrowing from next month, nothing.
Good luck Nicki, I know you can make it
September 5th, 2008 at 10:45 am
There are a lot of fantastic answers here, Nicki. I encourage you to read them all. I also encourage you to look at my old post about compulsive spending. When I was writing about your question last night, I basically wanted to copy-and-paste that entire article. It took restraint to limit it to what you see here.
Some of my favorite suggestions so far:
* Attend a meeting of Debtors Anonymous. This might sound intimidating, but I think it’s an excellent choice.
* Read the book Your Money or Your Life. It’s what gave me a wake-up call about my own spending. (I followed it with The Total Money Makeover.)
* Reduce your exposure to advertising. This, couple with staying away from stores that tempt you, can have a huge impact on your spending.
Please feel free to respond here or, if you’re not comfortable doing so, e-mail me again…
September 5th, 2008 at 10:55 am
Nicki, I think we’ve all been there to some degree. As you can tell from the comments above, many of us have lived the same experience. Here are my tips for frugal practices.
- first - determine from the suggestions what you can reasonable tackle.
- if you can’t get yourself to cut up your card, put it in the freezer in an inch of water.
- Make your new compulsive behavior be reducing debt.
- If you make regular payments on your credit cards and on time, contact them to see if they can reduce their interest rates.
- your student loan amount is over $10k, so research programs that offer a consolidation amount that has a lower interest rate or again, call the student loan bank to see if you can negotiate the interest rate down.
Good luck.
September 5th, 2008 at 11:21 am
JD, can you do a full post about debtors anonymous? Several readers seem to love it and i would love to hear about their experiences. Have read Mundis’ book and loved it.
September 5th, 2008 at 11:33 am
A few years ago I did a dream map of some things I wanted to accomplish including moving to a tropical location. I put the poster beside my bedroom door, insuring to look at it every day. Doing this kept me focused and taking the steps to make it happen. I am now living in an even more amazing location than I had initially envisioned, exceeding my goal. While not the same, maybe a dream map would help you to keep sight of your goals as well.
Short story about two of my good friends…
Ann’s boyfriend John had a similar issue with debt. John asked her for help and allowed Ann access to all of his information. John had received some applications for new credit cards with 0% financing. She transfered the balances she could to these, then again as the time for the percentages to increase came near. For the amounts that they couldn’t transfer he requested a reduced interest rate on the remainder. He was able to get a small reduction because he paid on time. He cut his spending and focused on some goals.
John was able to get out of debt with Ann’s help. His goals, similar to yours were to get married, have a family, home, and a boat. John has said to me that having these goals really kept him on track.
A lot of banks will now allow you to schedule payments for a set date and amount. You do NOTHING. Setting it up would take only a few minutes and pretty soon you wouldn’t even notice the difference coming out of your check.
It sounds like you have the desire, now it is just baby steps to success!
September 5th, 2008 at 11:51 am
I understand the temptation to try to set up your life in your twenties with credit cards and student loans in anticipation that you’ll pay it off later with your fabulous job (made possible by college). I am in my thirties and am still paying off student loans and credit card debt.
I feel for Nikki, credit cards seemed to make it so easy to buy some needed clothes (for job interviews!) and furniture (to create a sanctuary after a hard day at work!). I was really good at convincing myself that these things were emergencies.
My advice–it’s okay to not have a full lifestyle set-up, it’s okay to be a bit scrappy. There’s always something more to buy, something to “complete the set”, but the set is never complete. I still struggle with this every day, but I’ve been able to pay down my debt a bit and I’m still working on it. Someday you’ll be debt free, and you have to focus on how good it will feel.
Focus on your future goals every day instead of the present. Check out “The Time Paradox” by Zimbardo and Boyd–it’s about how we operate in our personal time zones (it sounds flaky but it isn’t) and suggests strategies to focus on the the future if you are present-oriented.
Cut up your credit cards.
Don’t apply for any new credit cards, no matter the deal offered (go to optoutprescreen.com to stop those offers from flooding your mail box).
You probably have enough furniture. No more house stuff-you’ll survive.
Only shop for new clothes in August and January for the sales, and focus on finding one well-made, classic piece that you can take care of and wear for at least 10 years–and use saved cash to buy it.
Never use credit cards to buy food or drinks–carry cash for these occasions.
Never use credit cards at all, not for gifts, or bridesmaids outfits, nothing.
Read sites like Get Rich Slowly–check in every day to stay focused on your goals.
And if you marry this guy, have a tiny, cash-only wedding
It’s tough, it will be hard to change your lifestyle, but someday you’ll be able to save up for a house, retirement, and the occasional cute pair of jeans.
Good luck! You’re not the only one going through this!
September 5th, 2008 at 1:03 pm
You can do this, Nicki. If I can — and everyone else who has given you support here can — you can do it too. My first steps of advice:
1. You put the call in for help — so you are now truly ready to stop getting into more debt, and your starting line STARTS TODAY, RIGHT NOW.
2. The only way to truly begin (or get off the debt treadmill)is to CUT UP YOUR CARDS. There is NO OTHER ALTERNATIVE.
3. Hold tight for 6 months no matter what and ride the waves, as there are sure to be many that come up (ie. sick dog; girls’ night out; wedding gift)– Murphy’s Law; as soon as you decide to make a major change, you’ll get tested. BUT YOU WILL FIND A NEW WAY TO SPEND & LIVE. I PROMISE.
Getting out of debt won’t happen overnight, but what you do (and don’t do) each and every day from here on out will get you closer to your goal. The process will be hard as you break old habits and develop new ones, but you’ll end up with something better at the final moment of your last debt payment: A person who not just understands money is a concept that reflects your core values and beliefs, but honestly LIVES by these values and beliefs.
September 5th, 2008 at 3:07 pm
Just wanted to add that I agree with everone’s suggestion about reading Your Money or Your Life, but in general I think reading good financial publications keeps you focused and allows you to see money-saving methods that you might not normally think of. I subscribed to the Tightwad Gazette newsletter years ago and have the books that are compilations of those newsletters. I still periodically go back and read those because they keep me on track and often I discover a tip or method I had forgotten about or wasn’t applicable at the time, but now is. I also reference them if looking for a specific issue. The author, Amy Dacyczyn (sp?), does a really good job of explaining the concept of your cost per hour. (When you see that you have to work 4 hours to buy that outfit you might wear twice per year, suddenly it’s just not worth it; the desire is GONE.) Plus, the stories are incredibly inspiring (much like reading reader’s stories and comments here). When you see what others are doing and have done, you know you can do it, too. Checking such publications out from the library or reading them at the library could be another way to use time that might otherwise be spent shopping as well. Discipline is not an instant thing. Like others said, it comes one day at a time until it become a habit. One day in the not too distant future, you’ll be amazed you ever lived like this. You’ll be so happy with your new life and the feeling of not having this debt eating at you. Like others have said, kudos to you, Nicki, for reading GRS and coming to this major lifestyle decision!
September 5th, 2008 at 3:10 pm
All that stuff like cutting up your credit cards is like going on a diet unless you figure out how to permanently change yourself.
Buying stuff–coffee treats and clothes and all that–is a substitute for being genuinely fulfilled. It’s empty existential calories.
I am able to live within my (very limited) means because I have good self-esteem, and while I do want to look good, I don’t worry too much about looking like everyone else and having what everyone else has. And I have a life that is full of things that I am passionate about–that make me really really fulfilled.
If I was a spendaholic and wanted to change, I would:
1. Start some kind of meditation practice. Christian, Kabballah, buddhist, taoist, yoga, TM, it doesn’t matter. Just *do something* to stop the chatter inside your mind that makes you feel insecure. People who meditate have more self-control, more self-awareness, are less impulsive, deal with stress better and are more hopeful.
2. Volunteer regularly for a cause you really, really care about. People are happier when they are a part of something larger than themselves, and when they are doing good.
3. Use these experiences to figure out what makes you feel bad or empty. Do you spend money because your job is meaningless to you? Are you in a lot of friendships that sap your integrity and strength? Do you feel empty because you only think about yourself?
Having some self-awareness and a couple of regular practices that compete with your regular spending life will help a lot.
(as will cutting up the cards…)
September 5th, 2008 at 4:53 pm
You said you bring in 2800, have 1400 in expenses, so you should be able to put 1300 to debt….maybe you should decide to put less to debt, create a plan that is a little less rigid so you`ll stick to it. Then after a couple of months, you should see if you could increase your debt payment. One mistake I`ve made over and over is trying to pay down debt so fast that you feel like you have no life. Then I`ve just ended up in more debt because I felt so crappy for not following my budget. If you make it too hard, you won`t stick with it. Find a plan that`s acceptable to you right now, and stick with it. Then start working towards increasing the amounts. Give yourself some success, and whatever you do, don`t start falling back on credit.
You should also read Dave Ramsey`s book, and find things to do to motivate you to keep on your debt reduction track (like reading this blog!).
Good Luck, you CAN do this!
September 5th, 2008 at 4:55 pm
Have you had enough yet? Enough pain? I think it’s got to hurt before we spenders make changes. I was sick and tired of being without money because of debt, and sick and tired of wasting money on interest. It feels good to be on the other side of 0, and have people paying me for my money rather than me paying others for the use of theirs.
September 5th, 2008 at 5:02 pm
I STRONGLY suggest CLOSING the accounts or the temptation remains: the account number is already memorized and it is all too easy to call the CC company and request another card (I have seen this numerous times working in the mortgage industry).
If you are into the Dave Ramsey philosophy there is no need to keep a cc open for “emergencies” - you would already have the emergency fund to cover the cost at which time you can use your DEBIT card as your emergency card.
I hope all this helps. Good luck Nicki!
September 5th, 2008 at 5:14 pm
Hi JD,
Only one point is good [one regarding tracking the money]. I don’t think rest of five suggestions will be of any use in her situation. I will recommend that she should read the book “richest man in babylon”.
September 5th, 2008 at 5:37 pm
You need a hobby. Something that will channel your desire to spend into a desire to accomplish something. Your position isn’t a bad one unless you continue to spend. If you have an outside interest that you can use to divert your cravings for “things”. In the process of having a hobby you will be absorbed in learning the things that a person needs to know about the hobby that you won’t think about spending money on things that you don’t need. The hobby will also be a topic of conversation between you and yur friends that will also divert you attention from your undesirable spending habits.
September 5th, 2008 at 5:55 pm
A few people have mentioned the book “Your money or your life”. Who wrote that? There are quite a few books on Amazon with that title, e.g. one by Alvin Hall and another by Russell Corben and Brian Smith.
September 5th, 2008 at 6:14 pm
John, Your Money or Your Life was written by Joe Dominguez and Vicki Robin. it’s one of the classics of personal finance. It’s not a perfect book — it can get new age-y in spots, and its investment philosophy no longer makes sense — but it is a fantastic motivator and an excellent starting point.
September 5th, 2008 at 7:09 pm
I am SO in this gal’s situation - I have $11K on an American Express, $25K on Visa, $9K in student loans, and $10K in lines of credit and I’m 30. Now I traveled quite a bit, went to school, and had no income for three years, thus the big amounts. HOWEVER, last year I was doing really well at paying things off and then I, in all honesty, got frustrated and bored and I GAVE UP. I started spending again. I was so pissed that it was going to take so long to get myself in the black again, and that even then I wouldn’t be able to have the same “lifestyle” that I had, I just went back to old habits. It isn’t an addiction - it is a whiny four year old saying, “I WANT” and the 30 year old in me just gives up and gives into that four year old. All the time.
So recently I did what JD said and I cut up my credit cards. However, what I have now is a pay as you go credit card so if I need to use a card for something (securing a rental vehicle, buying something online) I have one - but I have to have the forethought to load it with cash at least a week in advance, so that is that built in time for reflection. That for me is my ’spending’ money budget - I think I will load it with about $50 a month and then once I get enough, that’s where I’ll use for entertainment, clothes, etc.
Essentially, what I need to do is tell that whiny four year old in me to shut the hell up and to, as my sister in law would say, “suck it up buttercup”. Spending more won’t get me out of debt, and yup, my lifestyle will suck ass until I pay things off. But if I make that a main goal and just do it (to be cliche) it will be better in the long run.
September 5th, 2008 at 7:46 pm
I did not have much time to read every comment above me, but I read the whole post and understood the problem. Here’s my share.
First of all, I think you can easily solve your problem since you accepted that what you have bee doing is wrong.
Secondly, you need someone who can motivate you and I think the best person who can do that is you. No matter how many professionals and commentators here, it is still who will make a decision.
Lastly, start saving some and be very strict otherwise you will not succeed. My money saving tip - Keep at least 10% of your earning and do not touch it no matter what happens. Consider it as part of your taxes. You will be surprise how much you can save in 4 months, a year maybe…
Just my 2 cents!
September 5th, 2008 at 8:22 pm
Take responsibility for yourself.
I got into debt in part because I grew up in a family that did not have very much money and I grew tired of not having enough money always being the excuse for why we couldn’t do things. Might be good to attack the root of the problem from that angle, but it doesn’t need to define you any more.
What helped me was being accountable to other people. Might help you, too, since you posted here. I suggest joining the Women in Red forum on msn.com. People post their initial debts, like you have here, and then post their progress each month. It’s a nice way to get some support while you struggle to change your habits. You’ll also see lots of people in similar situations or in much worse shape then you (both of which can be empowering). Check it out.
Otherwise, track your spending, make a plan (a budget and find a debt consolidation calculator), and buckle down. You can do it!
September 6th, 2008 at 1:56 am
YOU CAN START A FAMILY EVEN WITH DEBT!
Why wait till you are 30? Heck I am getting married at 20 and I will be having kids in a couple of years and I won’t be rich. Your family will bring you a million times more satisfaction than getting out of debt (which you should still try to do). Don’t let finances stop you because you will regret it down the track.
Have kids now before you are too old and will need to spend $10,000 on an IVF program
September 6th, 2008 at 5:17 am
I believe the easiest way to break an addiction is to substitute another one. I have now picked up the habit of compulsive shopping for free items. I read all the blogs for CVS, Rite-Aid and Walgreens and plot and plan how to get the items for free using coupons, sales and store rebates. I already have over $125.00 in rebates for this month. I have a designated an area where all the items are stored neatly so as to not cause stress by having things all over in bags. I look at the items proudly like a hunter who has bagged a trophy. I also hate clutter so I will donate 90% of these items to the homeless at Christmas. I will begin to fine tune my “hunting” to only items that I can make money on from coupon “overage” since I buy so many items that I will not use (but they are free). This has certainly tamed my spending and I also was able to pick-up gifts for others.
September 6th, 2008 at 8:33 am
I agree with your suggestions. However, if it truly is an addiction, I recommend getting some help to understand the reason for your impulsiveness and to have some accountability. One place that can help is Debtors Anonymous. http://www.debtorsanonymous.org/ They are totally confidential and amazing.
Another place you might look into is Money Management International. This is a nonprofit organization, some of their local offices have the name “Consumer Credit Counseling.” They can help you negotiate lower interest rates with your creditors.
Lastly, your work might offer an Employee Assistant Program, where you could get some free confidential counseling, to help you understand and deal with the issues that cause you to overspend.
The good news is you want help. The better news is that it’s out there. Good luck!!
September 6th, 2008 at 9:43 am
Calling spending too much and impulsive purchases an addiction is an insult to our intelligence.
It is not an addiction; calling it one is simply coming up with an excuse for the behavior, a behavior that may be entirely appropriate for some people.
If you really want to get out of debt and get your finances under control, you have to start with a goal. “I want to be debt free by my 30th birthday” is a start. I would break that down into smaller, more manageable goals that are Specific, Measurable, Attainable, Realistic, and Time-bound. (SMART)
Then, everything you do with respect to your finanaces must be guided by the goal. If it really IS your goal, then your behavior will change.
September 6th, 2008 at 10:18 am
With all due respect, Paul, you’re wrong. Your advice is good, but I think it’s unfair to dismiss Nicki’s problem as not being addictive.
Behaviors can (and often are) addictive. There are sex addicts, there are food addicts, and there are spending addicts. There are people addicted to videogames. Many (if not most) addictions are psychological and not physical. Spending addiction is one of these. For more info:
* How to manage compulsive shopping and spending addiction
* When shopping and spending go too far
* What is spending addiction, and how do I know if I have it?
September 6th, 2008 at 10:46 am
We’ll have to agree to disagree - semantics is like that.
I think it’s an excuse for behavior, contrary to what Oprah might say. If addiction = behavior you don’t really want to stop, then yes, it’s an addiction. By your definition, someone who doesn’t like to workout and would rather sit at home would be “addicted” to sitting on the couch. When they are 350 pounds, they can claim the “addiction” as the reason, instead of taking responsibility.
Edit:
I’ll use myself as an example. Up until not that long ago, I smoked cigarettes. There was a time, many years ago, I was certainly addicted to nicotine. I broke that addiction, and for several months did not smoke at all.
Then, I started making poor choices. I would smoke, but not every day, or even every week.. I just LOVE to smoke. I know it’s stupid, but can’t seem to stop myself.
It wasn’t until I realized that my behavior wasn’t due to an addiction (I could go a week with no desire for a cigarette, then have some behavioral trigger - for me a long drive - and in two days smoke a pack), but my choice to value my love of smoking over the short and long term health effects. Once I realized I actually value my health more than I like smoking, I stopped making the decision to smoke.
That’s very different from the person smoking a pack a day who can’t go 12 hours without feeling bad - THAT’s an addiction for sure, and is very hard to break.
When Nikki decides she values financial independence and building wealth more than she values getting new shoes every week, she’ll change her behavior.
September 6th, 2008 at 11:00 am
I’m not sure it’s a case of semantics, but perhaps you’d be more comfortable with the term psychological dependency. Still, I believe addiction is the correct term, and I think most psychologists would agree. Not all behaviors are addictive. I’ve never heard of anyone being addicted to “couch-sitting”, to use your example. However, there’s a small subset that are addictive for some people: gambling, shopping, etc. These are well-documented and there’s a body of research on them.
As somebody who has an addictive personality, I guarantee you that I don’t look upon addiction as an excuse. Nor, I suspect, does any other addict. Being addicted to something is very, very scary, and until a person is ready to take control of his situation (as Nicki seems to be by asking this question), it can seem impossible to find the power or the motivation to lead a normal life. Again: not an excuse, but a reality.
Edit to respond to Paul’s edit:
I would argue that your smoking was an addiction, just as my spending used to be for me. But you and I have both demonstrated that addictions can be overcome.
But I agree with your final paragraph 100%. Overcoming addiction requires a change in values.
(Also, I think that you might believe that addictions are physical and not mental, which gets back to my opening remark in this comment.)
Again, Paul, I think your suggestions are awesome, but I think you’re defining addiction too narrowly. So, as you say, maybe it is semantics.
September 6th, 2008 at 11:50 am
Read Secrets of the Millionaire Mind by T. Harv Eckert.
There is a chapter devoted to divvying up your finances. Keep repeating the process until it is a habit.
It sounds like your priority is spending and not managing your finances. Once you have a core set of money values you will be less likely to want to be a compulsive shopper.
Sometimes we impulse shop because we don’t know what do with our money. My suggestion is to read that book over and over until some of the ’secrets’ become practice in your life.
Hope this helps. Take care.
September 6th, 2008 at 2:54 pm
@Paul - Man, this is by no means supposed to be derisive, but Paul, the problem with your intelligence being insulted is that your intelligence does not quite envelope the knowledge about addiction.
Outside of physiological addictions like the addiction to nicotine and opioids, most everything that is called addictive is actually describing a compulsion. As with the addiction to shopping, excessive spending, compulsive spending, or spending at an unsustainable rate; we must address a compulsion to act upon a behavior that is outside of the conscious control of the affected. Spending too much money during a shipping trip is not a problem, it is a problem when the action becomes, without will, autonomous and the results cause a net negative impact on one’s life that can spread to the lives of those around you. A habit on the other hand is an action one has become accustomed to and can perform autonomous at will without a net negative impact. Essentially a habit is most commonly merely a nuisance in itself, a compulsion is in itself most commonly destructive, whether it is immediately apparent or not.
Your story about your addiction is quite flawed from a physiological standpoint. You were not deciding to smoke; your physiological addiction reflex was triggering a memory pattern that was making the decision for you just like you don’t decide to eat. Something allowed you to come to a point where you were able to break the physiological addiction, compulsions, and habits that all team up in a cigarette addiction, but you still were not simply choosing to smoke before and then rationally came to the conclusion that that point you stopped to smoke was the reasonable time to end smoking. Your body is a complex system of interlocking signals. You don’t decide, now is a good time to eat relative to another time, your body cues your hunger reflex when nourishment is deemed required (whether the requirement is correct or not), which triggers your memory pattern to seek out food. Of course this process can be willingly interrupted, by saying “screw that Marc guy, I am going to decide to eat something right now and I am not even hungry”, but that would, again, be a reflex response, but this time based in a psychological make-up that is contrarian and defiant. A hunger reflex is of course no shopping compulsion, but the process that makes an action autonomous is hijacked in these modern compulsions.
The reason I point these things out is that the multiple variations of spending disorders that prevail in the USA are reaping havoc on our economy, society, and future generations’ prospects. One of the best ways to tackle a compulsive behavior, as most “addictions” are, is to understand the mechanics and the triggers of the process. Once you have mapped out the problem, it is all that easier to devise an action plan to devise a solution or a path to recovery that avoids the triggers you know of and that can interrupt the compulsion process if it has been initiated. Calling the problematic behaviors choices and decisions is counterproductive because it will lead to insecurity and shame because the person that believes that they are choices will wonder why they can’t choose to spend less even though it is destroying their livelihoods and relationships.
September 6th, 2008 at 3:25 pm
Nikki, you’re not alone. If you’re ready, join debtors anonymous. they will be in the phone book. you don’t have to say anything if you don’t want to. just go. listen to suggestions.
i’ve been there - big time. a book you might want to look at is HOW TO GET OUT OF DEBT, STAY OUT OF DEBT, AND LIVE PROSPEROUSLY by Jerrold Mundis.
I wish you all the best.
September 6th, 2008 at 4:45 pm
September 7th, 2008 at 7:48 am
It’s semantics. Y’all are calling what I would call a ‘compulsion’ an ‘addiction’.
Doesn’t matter if our friend Nicki realises what she needs to do and does it.
One of the keys, IMO, is understanding microeconomics and how it applies to our decision making. Every choice you make is one of valuing something more than something else.
I’m not judgemental at all that someone, for example, pays interest on a car loan to get that awesome new BMW. If you wanted that car more than you wanted to build wealth, good for you! Go get the car. That doesn’t fit with my goals, but who am I to impose my goals and values on you? If you want to learn how to build wealth so you can get the car and not need a loan, let me know.
Everyone needs to understand those concepts, then adjust their values based on appropriate goal setting.
After that, it’s all about making the right call for the goal. The tips and tricks help for sure, but don’t matter if the goal isn’t in place and real.
Sorry for cluttering up the comments with a discussion - this would be more appropriate on the forum, but I haven’t joined.
September 7th, 2008 at 8:49 am
Two things that really helped me.
1. No Spending Days, hard at first but can really transform you spending
2. Read the Tightwad Gazzete. the real genius lies not in her money saving tips but in how she views money. I’m only part way throught but it’s already transformed my thinking about money
for more on no spend days check out
http://notesfromthefrugaltrenches.com/
note not my blog
September 7th, 2008 at 8:01 pm
Cut UP the credit cards.. I HAD to do this. If you no longer have the cards you can’t go crazy with them. (think consumer cocaine, thats all a credit card is.)
Use cash only and implement the envelope system. Also never carry cash on you just to have cash. I only carry cash on me if i need to go buy something, and then I only carry the amount the item(s) are going to cost. That way once I buy the necessity, the cash is gone and I’m not tempted to impulse spend. For instance, I know I will spend 50 dollars on food for the week, I take 50 dollars cash out of my food envelope and buy my food (im usually within 1 or 2 dollars). Therefore, if i am tempted to impulse spend, I have to make a decision, buy the food I need to survive, or buy this other thing I dont need. When you carry just enough cash to cover a planned purchase, it makes the decision MUCH easier. As for the car, Sell it and look for a cheaper one thats in good condition. There are MANY good cheap used cars to be found with a little hunting and when you walk in with a wad of 100’s and start waving them seductively in front of the seller’s face, alot of times you can get a heck of a bargain. My car is currently 5 years old but only has 37,000 miles on it, fully paid for and its worth more to me than any overpriced “new” car is because without any payments, no one can come take it away if my job happens to go away and with it, my income. Life is MUCH more secure that way.
September 8th, 2008 at 8:32 am
@Paul -
It’s only semantics in the sense that everything is relative. The definition of addiction that you’re using is incongruous with the one other people use.
The definition you’re using is really closer to “[physical] dependence” or “tolerance”. These are side effects of heavy use of these substances, and are mostly independent of “addiction” the way we usually think of it.
(As a side note, many behaviors that engender addictions, like gambling or shopping or eating or sex, set off specialized physical chemical reactions in the body, so the line between heroin addiction and compulsive spending might not be as clear as we think).
“Addiction” necessarily includes a mental component. If the only aspect of addiction were physical tolerance, quitting our bad habits would be only mildly troublesome - we would go through some discomfort for a while while we withdrew from these substances, and then not have the problem any more. After a few months not smoking, you would never have the desire to smoke again.
Indeed, the real problem with most addictions is not stopping but staying stopped. The problem with alcoholism is not the physical dependence, but the insanity that causes a person with a dependence to start drinking again after withdrawing. The problem with heroin addiction is the thought that a few weeks clean means one more hit probably wouldn’t hurt.
You argue that addiction is an excuse for behaving badly. It disempowers people into thinking that they have no other choice. And, to a certain extent, you’re right. When I was drinking, I certainly used alcoholism as a rationale for my drinking. It made me slightly more comfortable with the shambles my life had become. But even if that excuse had not been available to me, I would have found another. Or not - I didn’t really need an excuse. I had to drink, cognitive dissonance be damned.
For some people, certain behaviors are the same way. Somewhere, they learned that spending (or gambling or screwing or eating) would make them feel good. And they pursued those behaviors in order to feel good. But like any behavior, these suffer from diminishing marginal returns, and too much of them will make you unhappy. But addiction short-circuits the usual microeconomic equations, and convinces (or forces, if you prefer) people to pursue these behaviors despite the knowledge that it will make them unhappy.
Here’s where we encounter a real argument over semantics. First, you can argue that people can’t be acting against their own self-interest, and that they must, by definition, value the result of their behaviors more highly than they dislike consequences. This assumes the truth of the rational expectation theory of microeconomics, which is not totally unreasonable. I think, overall, it’s more useful to say that microeconomics theory doesn’t adequately explain addiction than to say that it does, and addicts just have distorted value expectations. But that’s semantic. Similarly, we can argue over whether an addict is compelled by addiction, free will in this regard being suspended, or whether an addict just makes bad choices, choices they know are bad, over and over again. But I don’t think those arguments are that important.
What is important is that addictive behaviors can be stopped. There is help available for people who have trouble with all kinds of compulsive behaviors, including spenders. The more you use it, the less trouble you will have with your problems. I like how JD put it - go to a Debtor’s Anonymous meeting. You don’t have to join, or decide that you are addicted before you go. Just go, and see whether it helps.
I second the call for a DA post, JD. I’m sure there are open meetings that you could attend and write about, and I think it would be a great service to some of your readers.
September 8th, 2008 at 12:48 pm
Nicki:
I believe the advice above is good, and would like to add one more thing that I think will help.
Find a way to track your progress and make it real.
While a traditional bar chart comes to mind or a line graph, have fun with it, be creative. You’re returning to sewing, maybe create a ‘debt free patchwork quilt’. Each month add a piece of cloth equal to how much your debt went down.
Plus when you have a way of tracking, and you see how easy it is to get rolling, it’s that much easier to push on to savings, and enter a saving lifestyle.
-MBirchmeier
September 8th, 2008 at 2:20 pm
getting rid of credit cards, avoiding temptations, and tracking money are all strategies that i agree with and have been personally using.
the following are generally the three rules i try to remind myself of whenever i am confronted by an uncertain spending situation:
1. don’t use your credit card if you have one (avoid debt, save money!)
2. for each potential purchase, ask yourself, ‘do i really need this/that?’ would it really add much meaning to my life if i owned this/that?’ (save money, own less crap!)
3. if you really want/need something, ask yourself ‘isn’t there another way i can get this, say for free (through borrowing or donations) or at least for much cheaper used from someone else?’ (support reusing!)
the whole post from where i extracted the above can be found here:
http://www.financialwellnessproject.org/2006/07/29/buy-as-little-as-possible-day/
nicki might also check out using tools such as 43things to help define goals and motivate her with respect to her financial (and/or other) situation. here is an example of how i am using the site:
http://www.financialwellnessproject.org/fwps-43things/
September 8th, 2008 at 7:56 pm
Hi Nicki,
There have been tons of great advice, mostly dealing with cutting up credit cards, disciplining yourself, and finding groups of peers with whom to share your situation. My wife and I teach Dave Ramsey’s Financial Peace University, which encompasses each of these things in a 13 week course. With such a duration of the course, you get enough reinforcement of the principles to actually break the spending cycles and to go through 3 months of budgeting. You can go to http://www.daveramsey.com to find a course in your area.
I wish you luck.
September 10th, 2008 at 9:41 am
Your reader might be interested in my post, which deals with recognizing and modifying harmful spending behaviour. You can find it here:
http://www.btgnow.net/2008/09/the-i-deserve-mentality-how-to-recognize-and-modify-harmful-spending-behaviour/
As for her particular situation, I think she should head on over to Slice.ca and start watching the full episodes of a show called Til Debt Do Us Part. It details exactly how to make sure you take account of all the cash you spend during the month (because for some people carrying cash is just as bad as carrying a credit card: it’ll all be gone before you get home from the bank!).
Good luck to your reader!
September 16th, 2008 at 6:56 pm
I had a similar problem. My debt load was a little lower(20-25k). My salary a little higher(3.2k after taxes).
My solution. I replaced my expensive addiction(spending money on crap) with a cheap addiction. I got myself addicted to warcraft, joined a hardcore raiding guild, and for 2 years didn’t have time to spend money. I’m not kidding.
For 2 years, my entertainment spending dropped from several hundred a month to $15 a month. I didn’t need cable anymore. I was busy on most nights raiding so I couldn’t go out to bars anymore. I didn’t have time for all sort of other fleeting “hobbies” that cost a lot of money anymore. Since I wasn’t going out anymore other than work, I didn’t need to buy new clothes other than work clothes.
This may sound crazy, but it literally freed up a little over $1000 a month, even after accounting on increased spending for takeout food. That $1000 was set immediately on autopay to service the debts.
The day I paid off the debts I did 4 things.
1) Burned the shopping bag full of credit card bills.
2) Uninstalled warcraft
3) rerouted 70% of “extra” money to savings/retirement
4) rerouted the other 30% paying for fun things again.
Been a year now. Still debt free. True Story.
September 30th, 2008 at 8:33 pm
Nikki,
I think it would be a great idea if you have a “fun” envelope too - put $100 or so a month in it to spend on whatever you want-clothes, shoes whatever. That way you can learn to buy the *one thing* that you really want rather than 5 things you sort of like. You won’t feel so deprived just because you are in debt - it is important to learn moderation, not stinginess.
Another thought is - if your problem has a lot to do with clothing shopping, then grab some big plastic bins and put 1/2-2/3 of your clothing away (easiest way to do this is by counting the number of like items and dividing by half). put it in the garage or something. Wait 3 months or so- as you get the urge to shop like crazy, go into your bins and pull out stuff you forgot you had, and put some other stuff away. And then continue to rotate your clothing like that every few months - it’s like always having a fresh wardrobe! (if you have similarly sized friends, consider doing a clothing swap)
A lot of commenters stress never spending a penny every again or having any fun - that is like not eating until you lose all that weight - you need to learn moderation in spending, aka living within your means, not being a miser regardless of income.
Good luck!