After blogging for over a year now in the personal finance community, I have certainly seen my fair share of debt journey stories. So, I was a little surprised when I was asked to write about my debt payoff story. I certainly do not have the typical story that I have read, and yet, I definitely relate to debt bloggers.
As I have shared on my own blog, for almost a decade, I embraced lifestyle inflation while I tried to keep up with the Joneses. At the time, I rationalized that I did not have a spending problem because I always paid off my credit card debt. I may not have paid it off in full every month; however, I paid it off over time.
Working for an investment bank, I had a great salary; however, my bonus always comprised a large portion of my compensation, and I typically received this bonus in February. Therefore, I had a bad habit of building up my credit card balances between November and January in anticipation of this bonus.
For years, I ramped up my credit card spending at the end of the year, sometimes as high as $15,000 only to pay off my cards in full every February. I never felt as though I had a debt problem, though, because I always paid off my credit cards once the bonus check cleared.
Then the financial crisis struck in 2008, and the bonus structure changed completely. Rather than getting paid in cash in February, we received some cash and mostly stock options in the company. This new pay structure severely cramped my extravagant year-end spending habits.
Fortunately for me, that first year, I didn’t have a problem paying off my cards. However, I knew many co-workers who apparently spent the same way I did, and could not fully pay off their debts with their February cash. This was the beginning of a year-long wake up call for me. Not only did I want to avoid circumstances that my co-workers found themselves in, but I also realized that I wanted more out of life than just wracking up debt and paying it down every year.
I started to think about all of the money I wasted over the years thinking that I didn’t have a problem because I could pay off my debts. Yes, I paid off my debts. However, I missed years of opportunity of building more savings. Looking back, I probably wasted close to $50,000 on credit card spending. I became a slave, like many others, to a bonus structure only to realize that it was an unsustainable model.
It amazes me to think that during all of this, I never saw myself as having a problem. I actually thought I was responsible because I didn’t rack up debt all year long. I just spent toward the end of the year in anticipation of the bonus. It’s amazing what you can rationalize when you have a spending problem.
Five years have now passed since I stopped the insanity of my year-end debt spending, and there are a number of behaviors I have changed to avoid this trap. The biggest key to my success, though, was finding a purpose for my money. Before I gave my money purpose, it was easy to spend it and not miss it. Now I know that I would like it to support my business, to help my son go to college and to enjoy financial freedom with my hubby as soon as possible.
I regret that my credit card spending days have set me further back from achieving these goals. However, I have learned that it is never too late to change your course. I not only changed my course, but now I help my clients adjust their courses as well, because my changed financial behaviors have allowed me to start my own business as a financial advisor. Change is possible, but the first step is to realize you have a problem, and the sooner you do, the sooner you can get on the road to achieving your financial goals.
Note: This is part of a series called “Debt Success Stories” which features people who were able to pay off a significant amount of debt. If you have a Debt Success Story I would love to hear about it. Please visit the contact page to let me know the details.