This guest post from GenQwerty is part of the “reader stories” feature at Get Rich Slowly. Some stories contain general advice; others are examples of how a GRS reader achieved financial success or failure. These stories feature folks from all levels of financial maturity and with all sorts of incomes. Reader stories generally run on Sunday and reader questions on Friday; this week, that order is reversed. (Blame it on the jetlag from J.D.'s return from South America.)
I was twenty-one years old and in need of a fancy, professional camera for a contract job. As a senior in college with a part-time job, I had no reserve cash on hand to make such a purchase. With a nod to the future, knowing I would “definitely” be using one when I graduated that spring in my full-time volunteer job with Americorps, I made the instinctive American choice. I went to Best Buy and bought one on credit with no interest for 12 months.
Of course, I neglected the fact that I could rent one, I neglected the fact that the job barely paid enough for the down payment, and I neglected the fact that I would be graduating soon and making no money at all.
My Nosy Family
A few months after my purchase, my family became aware of my naïve mistake. I came home during a break with a nice new camera everyone knew I had no way to afford. After lecture upon lecture from my accountant father and older brother (who majored in economics in college), my brother offered to loan me the money to pay off the camera purchase. I begrudgingly accepted, only after it was made evident to me by the fine print in the camera contract, which said interest would start accruing at 32% at the end of the 12 months.
I'd have to pay my brother 3% interest to cover inflation, but that was much better than 32%.
I tried to explain, to no avail, my thought process when entering this contract. I had a plan and was no child!
My plan was this: Take a zero interest transfer credit offer from a credit card company when the 12 months was up and swap the charge forward to another company. When that was up, if I still hadn't paid it off, why of course I would just transfer again. It was like check kiting, but with credit. What could go wrong?
I was annoyed at my nosy family. I was angered at their judgment of me and their condescension. How could they think of me as such an idiot? I'd always been good with money.
The truth is, I was an idiot. I had no idea what I was doing.
My parents had worked extremely hard to put their children through college without debt. This meant that I attended a state school, but still I graduated debt free. What a gift they had given me! But in the process, no one had really explained how credit works. No one had really explained debt to me, APR, zero interest loans, credit cards, and all the other trappings of modern financial life.
Learning My Lesson
Through enough heart-to-heart talks and badgering, I came to see credit as an option only to be used for large, important purchases like homes or cars. A credit card is really just a month- to-month loan. No down payment, no interest loans are for suckers who get stuck with 32% interest on a $2000 loan for a camera they don't really need. I potentially could have paid almost $8,000 for my camera when it was all said and done.
During my two years of full-time volunteer work, I managed to avoid the temptations of credit cards and cash loans. Working in a high school I had the summers off and worked enough to pay my brother back, with interest. I was able to start a real job, making real money, and live modestly enough to save a considerable amount of my paycheck.
As a thirty year old, I am a rare breed amongst my friends. I have a savings account with money in it, a retirement account outside of my work-provided retirement fund, and my husband and I have no debt except for our mortgage. In between twenty-one and now I have had my fair share of emergencies, car crashes, and pains. But had it not been for a nosy family, which is still nosy about my finances to this day, I might not be in the position I am today.
Of course, I'm nowhere near where I would like to be financially — but who is?
Not Afraid to Speak
I am now the nosy friend and family member myself. Everyone is afraid to talk about money, to talk about their debt, to talk about their financial plans. Just imagine if I had never brought that camera home. If no one had ever had an opportunity to anger me with their input, might I be racking up the debt blindly in good ol' American fashion too? Might someone you know be making a mistake right in front of you too?
We are so terribly afraid to anger one another at the risk of offending someone's intellect. But what we really stand to lose is the same thing we're afraid of losing by speaking up: a loved one. The difference is if we don't speak up, we become enablers of their financial self-destruction.
I can't say when or how or what to do in this situation, but all I can say is that thankfully I had family members willing enough to step in and do something about my fiscal blindness.