Now and Then: How My Current Financial Situation Compares with a Decade Ago

I spent the 1990s addicted to credit cards. I was mired in debt.

Recently while cleaning the garage, I unearthed a box full of old receipts and bank statements. I spent a couple hours sifting through them, aghast at my former spending habits. It was like peering into the life of a stranger.

Addicted to debt
The oldest documents I have are from April 1994, less than three years after I graduated from college. Already I had $9,550.13 in credit card debt. (I also owed more than $5,000 on my 1992 Geo Storm.) Fifteen months later, in July of 1995, my credit card debt topped out at $19,965.74.

During this time, on a take-home pay of about $1,400/month (after taxes), I was deficit spending by nearly $700/month! I spent 50% more than I earned. I bought books and comic books and VHS tapes and videogames. I did not invest. I did not save.

[I spent a lot of money on books an comics]

How much of that stuff do I still have today? On a quick stroll the house, I found a handful of science fiction books I bought in those years. That's it. Basically, I spent $25/day on nothing. I was an idiot.

From 1995 to 1998, my spending fluctuated. I'd dig myself a couple thousand dollars out of debt, and then fall back into the hole. It was as if I was compelled to use all of the available credit on my accounts. I can remember calling the banks' toll-free numbers to find out which card had enough room for me to buy new comics. As I said, I was an idiot.

[$11.32 in credit available]

I also used every possible penny in my checking account. (I didn't have a savings account.) A lot of times, I used more than every penny:

[I bounced checks all the time]

Running to stand still
During the time I was addicted to credit, I knew that I had a problem. I'm a smart guy. I understood the math. But my deficit spending wasn't a math issue — it was a product of subtle emotional and psychological problems that I had to work through before I could get my spending under control.

One day, out of desperation, I cut up my credit cards. A local bank was promoting home equity loans, so I took one out and used the proceeds to pay off all my credit card balances. From the middle of 1998 to the middle of 2007, I did not use a personal credit card.

But getting rid of credit cards only provided temporary stabilization. I still lived paycheck-to-paycheck, spending every penny I earned. And I still had $20,000 in debt — only now it was in the form of a home loan. Eventually I discovered other ways to take on consumer debt. I financed a new car. I took out a loan for a computer. I borrowed from family. By 2004, my debts totaled over $35,000. Then, at last, I began to turn things around.

Addicted to saving
It took more than three years of focused intensity to become debt-free, but eventually I did take control of my finances. Since then, the financial inertia has helped me to save more.

During my quest to eliminate debt, I developed a positive cash flow of over $1,000/month. That continues to this day, which means I've managed to save $5,000 in my emergency fund, $1,000 in my Mini Cooper account, and an extra $500 designated for a future vacation. Plus, I've begun to save for retirement.

All of this feels great, of course, but sometimes I worry that I'm in danger of developing a different sort of unhealthy relationship with money. I'm addicted to saving. I feel like I'm perilously close to becoming a miser. It might be time to actually budget for fun.

Taking the first steps
How can you dig out of debt and begin to build wealth? First, recognize that it will take time. You won't change your habits overnight. At first you'll need to take baby steps, and even then you'll fall on your face at times. Get back up and keep trying. Eventually you'll move beyond baby steps; you'll find that you can confidently make huge financial strides. Here's some advice based on my own experience:

  • Set goals. The road to wealth is paved with goals. I spent like a fool when I was younger because I didn't know what I was doing with my life. Find a purpose.
  • Stop using credit. You may not be able to do this immediately, but make it a priority. The longer you continue to add debt, the longer it will take to get rid of it.
  • Establish an emergency fund. Set aside some cash in savings as cheap insurance against life's nasty surprises.
  • Practice frugality. Look for ways to curb your spending. Shop smart. Focus on quality and value.
  • Reduce recurring monthly expenses. Monthly subscriptions — to magazines, to web sites, to cable television — are like a cancer. Cut as much as you can.
  • Get out of debt. Find an approach that works for you, and begin to chip away at the deficit. Use the debt snowflake principle to make gradual progress.
  • Increase your income. Ask for a raise, or make money from your hobbies. Consider selling things you no longer want or need.
  • Try not to get frustrated. Don't let your situation get you down. Don't focus on the big picture. Do keep your eyes on your goal, but concentrate on taking small steps. Do the best you can at this moment. If you know you have problems in certain areas, work to improve them. Don't expect to become perfect overnight.

The key is to get started. Looking back, I wish I had found the courage to begin digging out of debt in 1994. Instead, it took me ten years and tens of thousands of dollars to find the guts.

[I was paying interest rates as high as 18%]

This article is part of the MBN Group Writing Project for May. Here are stories from other participants:

What about you? How do your finances compare with a decade ago? Has your situation improved? What was your turning point? What was the most valuable strategy you found along the way?

More about...Debt

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Sam
Sam
12 years ago

I find it funny that I was just looking at my financial status when I was 30 (6 years ago). I wrote about the topic this morning in the context of Gen-X retirement saving rate. http://adventures-of-sam.blogspot.com/2008/05/gen-x-retirement-blues.html My biggest mistake was (similar to JD) taking out a home equity loan to pay of credit card debt. But even worse I went back to using my credit card (UGH!). My best move was buying a house even though I had student loan, car and credit card debt. 30 was when I made my first spending plan which was a good move because… Read more »

B Smith @ Wealth and Wisdom
B Smith @ Wealth and Wisdom
12 years ago

JD-Great story. It’s amazing to look back and see how far we’ve come.

One thing I would like to add to your steps is desire. You have to have a burning desire to become debt free and live within your means. Without a driving “why” it is impossible to stick to it.

Angie
Angie
12 years ago

Well 10 years ago I was debt free, although only because I was 13. Now at just under 100k in debt. My goal however is to have all of that debt gone within 5 years. And only have a mortgage to pay for. Hopefully 5 years from now I can look back with such positive results just like you have. I am also hoping all those student loans end up being an investment and not just a burden.

Andrew
Andrew
12 years ago

Good article. I have always paid off my credit card debt on or before the due date so never had to accrue interest. However, I can understand the phychological need to acquire things that seem important at that time. I love electronics and home automation but would never buy retail and never purchase more than I can afford to pay off every month. I look for the item at regular stores online and then use google shopping or check ebay to see the lowest price. Then I think it over a few days before making the committment to purchase the… Read more »

Michael
Michael
12 years ago

I think I went through the same swing you did, going from an extreme spender to an extreme saver. There was a time when I entered my extreme saver phase that I felt like any purchase above basic living expenses was a waste of money. I found myself still feeling broke because although a large chunk of my money wasn’t going to credit card bills it was going directly to savings, leaving me very little “play money” and left me feeling like I wasn’t enjoying my money the way I should have. Two things helped me with this. One was… Read more »

Frugal Dad
Frugal Dad
12 years ago

Funny, I wrote on my blog today the story of my wife and I trying to keep up with friends who were much better off than we were. We were newlyweds (ten years ago), and I was out to prove I was fiscally worthy as a provider, etc. We had older friends who lived on two incomes and had no kids. They had all the toys, and we wanted them, too! So, we charged them. It took nearly ten years to recognize we were just running on a hampster wheel. I like how you put it – “Running to stand… Read more »

Finally Frugal
Finally Frugal
12 years ago

I did something similar when I sold a house two years ago: paid off all of my credit card debt, my car loan, everything except my student loans. Six month later, I was in debt again, and was spending more than I earned.

I’m at the beginning of my own journey to correct my mistakes, but I can already feel that satisfaction of watching my savings account grow while my debt decreases. Instead of gaining a temporary ‘high’ from shopping and acquiring, I’m finding satisfaction in just the opposite. . . .

Tamara
Tamara
12 years ago

Thanks for posting! I didn’t know you weren’t always so good about money. It’s inspiring to see that you were at one time financially unhealthy but you have been able to turn it around.

Joshua
Joshua
12 years ago

The definition of frugal is not to “not” have any fun, it’s budgeting for all the fun you have. Good article. I don’t even want to look back to my past…

icup
icup
12 years ago

On the bright side, it looks like bank overdraft fees have come down a bit since then. Aren’t they $35 now?

Adjusting for inflation, what cost $37 in 1997 would cost $48.44 in 2007.

wishing2Bwise
wishing2Bwise
12 years ago

I can remember the exact moment my savings turned into $0.00. It was called college. I remember calling my mom after emptying my savings to pay the college my first week on my own a state away, and her complete lack of sympathy for my expensive out-of-state tuition should have spawned a lot more concern for my own well-being, financially speaking of course. Then the credit card companies told me I could claim my scholarship money as income on credit card applications – AND get a FREE t-shirt and/or some fake Oakleys. So, here I am, 9 years later. I… Read more »

Tim
Tim
12 years ago

good bit JD. it’s a good bit not only because of your progress, but demonstrates that you are constantly re-evaluating and putting your financial and personal life in perspective. you aren’t a miser if you are saving towards goals rather than saving for the sake of amassing cash in of itself. you should have spending outlets that are of course planned for and budgeted. a financial plan is for spending as well as saving, which sometimes gets lost in the goal toward saving. there is a balance as with everything else and you have to rebalance everything from savings/spending, asset… Read more »

Ryan McLean
Ryan McLean
12 years ago

I have a question for you.
Do you think it was being the author of a financial blog that changed all these habits in you?

J.D.
J.D.
12 years ago

Ryan, writing this blog certainly helped keep me on task, but I had actually begun to make the turn around before starting Get Rich Slowly. October 2004 was the real turning point, and I didn’t start this site until eighteen months later. Once I started GRS, though, I was able to become even more focused. During the first 18 months of my quest to reduce debt, I still struggled with spending. Having a forum like this made me feel more accountable. It felt disingenuous to preach about not spending and then to go out and buy a bunch of comic… Read more »

Laurie Conroy
Laurie Conroy
12 years ago

Good article. I like your style! Makes me think. My husband and I have been through alot financially in the past 10 years. We have certainly had our ups and downs. About twelve years ago we decided that I quit my job and stay home with our, then two children. I was babysitting for others and making more than I was when I worked out. Things were good and even. We were basically debt free, except for our mortgage. Then came babies number 3 and 4. Then came the big baby — my husbands home business. We did really well… Read more »

partgypsy
partgypsy
12 years ago

I think what you are afraid of is “losing control”, fall off the wagon, that you don’t want to go back to the way you were. I think your savings habits are entrenched that is not a big worry, but again to feel better, again put your spending money in a separate bucket, one where you don’t feel it will affect your finances, and only spend up to that amount. I have to admit that my husband and fell a little off the wagon this month. The tax refund really did do a number on us; although we faithfully went… Read more »

cherie
cherie
12 years ago

Boy, I always get so much out of your blog and finally I have something to respond to you on! You’ve made great strides! But I have heard a few times now about how you’re starting to worry over feeling miser-ish. I say redo the budget and decide on an amount for fun with a mind to a) the fun you’re planning with your vacation fund and b) the fun you’ll have in your minicooper . . . so you need CURRENT fun budgeted in – because then you’ll DO it. It needn’t be a lot, but you feel now… Read more »

J.D.
J.D.
12 years ago

It occurred to me that I should make it clear that I’m not actually miserly yet. I’ve stopped buying comics almost completely, I rarely buy books or movies anymore, and it’s been ages since I bought a book that wasn’t for this site or for my monthly book group. However, Kris and I do continue to eat out often. It’s less than we used to, but still several times a month. Also, I’ve been allowing myself to spend money on fitness-related items: new running shoes, a heart-rate monitor, etc. And I’ve purchased two games for the Wii this year: Mario… Read more »

Jessica
Jessica
12 years ago

These are common sense point that, for whatever reasons, we all need reminded of sometimes. I ought to print this out and hang it up somewhere where I will see it every day.

Starving Artist
Starving Artist
12 years ago

Thanks JD–I’m tracking to be debt free at about the same rate you did. About 10K a year, to get rid of over $30k in debt. I’m in one of those “I’m tired of paying off debt” ruts, and it’s nice to get these reminders. Three years isn’t that long, and I’ll improve the rest of my life by getting this debt paid off.

MoneyBlogga
MoneyBlogga
12 years ago

It has taken me years to understand the root of my financial chaos. I just didn’t want to face it or own the reasons for it. Now that I have, I am three months down the road to a better, balanced life. I really enjoy your writings – I check in at least once a day. It feels good to know that when I think I’m the only one with problems, other people have them too and have stuck with their goals like you have for 3 years to turn it around. Moving from chaos to balance is going to… Read more »

Andrea >> Become a consultant
Andrea >> Become a consultant
12 years ago

10 years ago, I’d only been out of university for a year, although I’d been working for years. I was lured away from a fantastic job to work at a start up…that laid everyone off the day before we were due to start. So I started consulting. I didn’t have a ton of money at the time, although I didn’t have any debt. I had retirement savings, a good emergency fund and a paid-off car. Today, I’d estimate that my half of our current net worth is about 12 to 25 times what it was. Buying a home has been… Read more »

KW
KW
12 years ago

Saving is good, but savings accounts are mediocre. You get a 3% return, and then on top of that you have the insult of paying taxes on that return. So depending on your bracket, you’re really only getting a 1.6%-2.5% return, which is less than inflation. This means that you can buy *less* with your money the longer you wait. As such, I’d point out that once you have a small “emergency” fund together, you’d do much better by buying stocks or other similar assets. They have a better average growth rate than a savings account, and most importantly, you… Read more »

Wanna Be Independent
Wanna Be Independent
12 years ago

10 years ago I was earning a dismal $19k a year, supporting a dead-beat addict of a husband, and in debt to the tune of $18k on top of a $140k mortgage. I had no retirement fund, and was considering tapping my investments to live on. Today, I earn $50k a year, have reduced my mortgage to $114k, have no credit card debt, paid off my HELOC, have a 401k, a stock portfolio, a $5k emergency fund, and my net worth is approaching $400k. Thank you, JD, for your openness about your own situation. It was good to think back… Read more »

Katrina R.
Katrina R.
12 years ago

As many of us here do, I have a tendency to look back on my financial life and think I’d do things differently, if only I knew better. But screwing up is how we learn our best lessons. I’ve learned a lot, but two things I have learned this year is #1: Just when you think you know everything you need to know about doing your finances and feel you have a handle on it all, something new comes into light. Be open to the fact you still can improve. And #2: I haven’t used a credit card in 6… Read more »

finance girl
finance girl
12 years ago

What a powerful, redeeming experience! My husband was over $70k in debt when we met and not a penny in savings let alone retirement.

He did what you did (with my help) and for the 2 years after we married his whole paycheck went to paying it all off.

He has the bug now though, and is addicted to saving, maybe more than me!

He feels very empowered now that he understands the psychological reasons behind why he was doing what he was doing, and now that he understands how money works.

kick_push
kick_push
12 years ago

way to rebound and bounce back with your finances JD.. keep it movin’

kdub
kdub
12 years ago

This was a really timely article. Currently I’m paying off a credit card, which is slightly over $4K, while maintaining a $2200 emergency fund and I just opened an Orange savings account to start a down-payment fund. It has a paltry $130 in it right now. Looking at how much I have to pay off still, and how far I have to go to have even a decent-size chunk for a down payment, so I don’t have to dip into my 403B for so much, I got very frustrated and depressed about it all the last couple days. But last… Read more »

John
John
12 years ago

Now that I know better, my biggest financial regret, from about eight years ago, was not signing up for my first employer’s 401(k) plan. They had a *very* generous match, but I was too scared to really learn anything about how investing worked, so I let the signup form sit on my desk, and then eventually filed it away in the circular file. Thankfully during that time, I was focused on eliminating a lot of high-interest credit card debt that I had racked up during college, so it wasn’t a complete loss…but now that I know better…AAAAGH! 🙁 At least… Read more »

ben
ben
12 years ago

This article is like looking in the mirror. I got my first post college paycheck 3 weeks before I turned 22. Then the downward spiral began.

Question: Did your parents instill in you wise money management strategies?

I’m not looking to pass blame, but I eventually learned money management on my own. My wife, however, learned it from her parents. As a parent now, I’m determined to teach my son money management so he hopefully won’t follow the same path I did.

J.D.
J.D.
12 years ago

Hey, Ben.

No, my parents did not instill wise money habits in me. They didn’t know the strategies themselves. I talked with my mom a little about it recently just to see if my memory matched hers (you know how a kid sometimes stretches things out of proportion), and she said that yes, we were poor, and no they did not save.

I don’t blame them, either. They did the best they could. And dad *did* pass on a passion for entrepreneurship, for which I am deeply grateful.

jtimberman
jtimberman
12 years ago

JD, One of the keys to our success in getting out of debt was to budget a ‘blow,’ or ‘spending’ category. This is where a lot of miscellaneous entertainment purchases came from over the three years we did the debt snowball. We went to movies, bought DVDs and video games and went to the Zoo, Museum, etc from this category. Now that we’re out of debt, we simply make a plan for our entertainment expenses each month: books, movies, games, activities, etc. Not only is it nice to know what we’re going to do, but its nice to just pay… Read more »

John z
John z
12 years ago

GRS – re: Paying your mortgage w/o paying $11 fee. Does your bank checking account offer online bill paying? I pay my mortgage (currently held by Citi…there’s no charge for me to submit my payment electronically via a service other than their automatic bill pay…they of course charge you for their service if you use it) automatically every month. I just scheduled the payment through my free bank bill payment system. If your bank doesn’t provide free bill pay then, since you’re an ING customer, think about an ING checking account. I’m pretty sure they offer free bill payment and… Read more »

Cindy Brick
Cindy Brick
12 years ago

I decided to post something similar on my blog, J.D. — great idea, and I enjoyed reading the various bloggers’ contributions, as well. What would I have done differently ten years ago? Probably skimped more, and definitely tried to buy land. Back then in this area of Colorado (south of Denver), you could buy 5 acres for $10,000. I know, because we daily passed by a sign offering just that. Today, that same land is going for $10,000 or more AN ACRE. Darn it.

Kate
Kate
12 years ago

J.D.,

Thanks for sharing such details of your financial life, and congratulations on the great changes you’ve made in a decade! This is truly an informative and inspirational blog.

Brad
Brad
12 years ago

One of the things my spouse and I do is to give ourselves an allowance. We’ve basically added a budget item and transfer the funds into our individual “savings” accounts.

Put simply, if I’m going to splurge and buy “comics” (read: video games) I pay for it from my allowance. It worked when I was 12, still does.

Cheers,
Brad

Chuck
Chuck
12 years ago

J.D., I really appreciate this blog. I had horrible credit spending habits in my early 20’s with no control. My balances were never that big, but big enough. Maybe 2k in total balances. Then I never accrued any more debit because my credit score was bad. In fact my credit score was a factor in my psyche for asking girls out for some reason, like there was shame in it. I really made an effort in my late 20’s and early 30’s to get my credit on the right track. I did it, but then started to slip again. The… Read more »

Moneymonk
Moneymonk
12 years ago

Nice visual aids, it gives you more interest in the story

Jessica
Jessica
12 years ago

Thanks for the helpful tips and motivation. We are more purposeful than ever with our money and paying off debt, thanks in large part to your blog.

Pat
Pat
12 years ago

I’m 25 and I’m addicted to saving. Everytime I spend money, I feel a little sick inside – seriously. I asked for a raise at work and I scored. I landed a 25% raise. Now, i just save even more. I feel like I can’t have any fun because of this problem. Any help or words of advice? I know I’m only 25, but I can also say, “I’m 25! Time is on my side!”

Marina
Marina
12 years ago

Hi J.D., I’ve been reading your blog for a while and I really enjoy it. One thing that I often wonder about when I read posts like today’s is how your wife dealt with your previous spending habits and your transformation. From previous posts it sounds as if she was more financially responsible than you were. Did she influence you to change? Did she become even more responsible as you took on more financial responsibility? Was she worried about your debt? Does she think you are a miser now? 😉 I understand if you don’t want to talk about this,… Read more »

Bill
Bill
12 years ago

I don’t see *too much* saving as an issue – a modest “spend on anything I want” budget item was enough for me.

Were I 25 again, I’d *max out* my plan at work (in my last corporate job I had money returned to me because I exceeded the 401k cap)

My 10 years ago story:

In my late 20s, I left a Fortune 500 career to care for my mom whose illness finally claimed her a few months ago.

Another Dave
Another Dave
12 years ago

10 years ago I owned my own house with $80,000 principal remaining on the mortage. I had some money saved but no income. My money was rapidly being eaten up by a graduate degree program that I would attain, but would not end up using. I put $8000 into the house, and sold it for $6000 more than I bought it for in 2000 (or just before real estate starting taking off in the area). Two years later, I wouldn’t have been able to afford that house. I was $24,000 in debt with no savings, and no retirement savings. Today,… Read more »

Bob
Bob
12 years ago

JD,
Hopefully you kept your old comics you could sell them and make a fortune.
Maybe that is what I should try to do with the 6000 that I have in storage or maybe I’ll just pass it on to the kids and they can use them to buy their first house.

nicstarling
nicstarling
12 years ago

Ten years ago today I was 18, fresh out of high school with no debt. Two months later i received my first credit card with a limit of $500. The first night I bought a fake chinese vase on e-bay, a pair of expensive shoes, some oakley a-frame sunglasses, and a “talking” watch. I had already reached the limit. Ten years later and after reaching a total balance of $5,600 on various credit cards, I am now one month away from having all of it payed off. Thankfully, I was able to roll over most of that cc debt onto… Read more »

Nottheangel
Nottheangel
12 years ago

Ten years ago I was dropping out of highschool, broke, and starting college at the age of 17. I had no money or job, so personal finance was pretty much not in my mind. However, I was a very good budgeter. My parents offered to pay for my rent if I took care of bills and food and such. I had about 100 a month for these things after everything was said and done. I ate a lot of rice and still managed to buy books and pay my electric bill (which I kept down to around 15-20 a month).… Read more »

Aussie Reader
Aussie Reader
12 years ago

JD, thanks, I always enjoy your writing style and like Moneymonk (comment #38), I appreciate the visual aids. I’ve read a few of the other MBN articles about this and yours was interesting because it gave detail which made the story more compelling for me.

Thank you for sharing, it is really appreciated and valued, even in far off lands!!!

HS
HS
12 years ago

Great post! 10 years ago I was graduating high school. I did not have any credit cards or any money to spend. I remember taking my cd’s to the pawn shop so I could party one night. How sad. The credit card issue for me started in 2001. CITI gave me the first taste of credit and it all went downhill from there.

elena
elena
12 years ago

This is what turned the corner for me.

1. I maxed out my retirement 401k contributions.
Never seeing it in my paycheck made it easier.

2. I married a financially disciplined and frugal fella who makes a decent salary and has serious savings habits.

3.I automated my savings and debt payments. When squeezed, I used to think that savings and extra debt payments were optional. Now I don’t. Now they’re more important than ever.

MyMoneyAdventure
MyMoneyAdventure
12 years ago

Very motivational and great story!

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