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How I Got Into Debt

getting out of debt to travel moreThere was a time when I thought it was normal to be in debt. As I finished school and entered the work force, I believed it was normal to sign up for the debt club with a new mortgage, new car, and all the trappings of the lifestyle people told me I needed. Eventually, debt lost it’s glitter, and it took control of my life. I’m here to tell you how smart people get into debt by spending too much, believing in good debt, getting approved for too much credit, and thinking that making payments means you can afford it. Later this week, I’ll tell you how to stop the cycle because debt does not have to be forever.

How I Got Into Debt

People only get into debt one way, by spending more than they earn. My initiation into the debt club came on my first day of optometry school when I picked up my first ever student loan check to pay tuition. Since my income was zero and I’d just spent $10,000, I got immediate silver status!

Fast forward four years, and I graduated with a really nice diploma, a residency position that paid $25,000 a year, and gold status in the debt club with $60,000 in student loans. I was not worried as I knew there were big opportunities to come.

Instead of paying interest during residency, I put my loans into deferment so I could concentrate on the important things like buying a new mountain bike and taking ski trips to Vail and Telluride. Granted these were bargain basement trips where I slept on people’s couches, but it still cost money I should have been putting toward my student loans. I could have afforded to do both, but everyone else was in deferment, so it never crossed my mind.

Ten Years,  Over Half A Millon in Debt

Over the next ten years, I added a husband who brought to the marriage all of his lovely traits and personality plus an extra $40,000 in student loans. We bought and sold a starter house, then built what is likely our forever home.  I also bought an optometry practice. Up until this point, we had pretty much avoided consumer debt except for the new cars we traded every 3-4 years.

After building our house, we were pretty much platinum debt members, owing $215K on our mortgage, around $250K for my practice, $100K on our student loans, and about $50,000 on vehicles. Also during this time, I purchased half of the commercial building that housed my optometry practice for $125,000. That’s almost $700K in debt! However, society told us the business, mortgage, and education were good debts, and we didn’t think the car loans were a big deal. Everyone has a car payment!

 When You Have No Money, Charge It!

After moving into this big, new house, we had empty rooms and a desire to keep up with the Joneses. Even though we owed a ton of money, we had great credit scores and a high income. As a result, no credit company ever turned us down as we proceeded to rack up credit card debt from buying furniture and stuff for the lawn. We went on trips. We had all the latest electronics and sporting gear. We often went to the mall just for fun, which always meant more shopping and a dinner out.

We thought we were doing great because we bought almost everything on sale and always bought Hondas or Nissans instead of BMW’s. What bargain hunters we were!

Debt Steals Your Choices

I read a great post at No Nonsense Landlord about how financial independence is really about choice, regardless of your income. This post really sang to me because at the height of our debt, I had no choice other than working like mad. I was putting in probably 50 hours per week seeing patients with another 10-15 dealing with administrative tasks and networking. On the surface, I looked like the perfect young professional. Inside I was miserable, and I used to wake up in the middle of the night wondering how we’d survive if I couldn’t work. Jim was only making around $30K per year as a teacher, so we would have been in trouble without my income.

In 2007, life took a 180 degree turn when I gave birth to our daughter. We put off kids for years due to a number of reasons, a huge one being my work schedule. I had no idea how to balance motherhood with our debt and need to keep the business growing. If you wait for the perfect time to have kids, it will never come, so we jumped in and decided to figure it out as we went along.

The Motivation To Get Out of Debt

I’d love to say I was able to handle everything, but having a child made me despise what I had become. As I dropped her off at day care every morning, I felt like the worst parent in the world. Even during time off, I was trying to catch up on home chores. I was not the parent I should have been. I resented Jim and all the time off he had to spend with our daughter. It was not a good situation. We had to find a way to get out of debt once and for all.

During this time, some close family members lost their home to foreclosure after their jobs dried up during the recession. Like us, they had been basically living paycheck to paycheck to support their consumer debt habits. Their house of cards came down, and I realized that could easily have been us.

You Owe How Much In Credit Card Debt?

When Jim and I sat down and decided to get out of debt, we honestly had no idea how much we owed in credit card debt. We made the payments as quickly as we could every month so as not to ruminate on the outstanding balances. As we sat down and added up all the credit card bills, I almost had a heart attack when they added up to over $30,000.

I’d be lying if I said we were all smiles and giggles at our new plan to get out of debt, but I’ve never felt so hopeless in my entire life. After a brief period of mourning, we focused on a new plan that eventually led to no more consumer debt.

Summary

I’ll be sharing some more motivational posts later this week about how to void your platinum membership to the debt club, but I thought it was important to first share how two relatively smart people can get into debt. Debt doesn’t make you a bad person, it just means you probably made some bad choices.

  • Spending More Than You Earn Leads To Debt, Even if You Make over $100,000 a Year.
  • All Debt Is Debt, and Just Because Someone Calls Your Debt Good, That Doesn’t Give You A License To Rack Up More.
  • Just Because You Can Get Approved For Credit Doesn’t Mean You Should.
  • Being Able To Make Payments Does Not Mean You Can Afford Something.

Debt is Not Forever

This post is part of the debt is not forever movement that Jackie Beck at the Debt Myth is hosting this month. My family and quality of life are my reasons for paying off debt.

Do you feel or have you ever felt like debt is forever? What is your motivation for getting out of debt? 

 

 

 

Over time, I became a platinum member of the debt club, eventually racking up over $30,000 in credit card debt to go along with all my other monthly bills. At that point, I wanted to cancel my membership

About Kim Parr

Kim Parr is a private practice optometrist, freelance writer, and personal financial blogger. You can follow her journey to 20/20 financial vision at Eyes on the Dollar.

24 comments

  1. Thanks for the mention Kim! FI really is about the idea of being able to do things you want, when you want. Just a roof over your head is not FI. If you do not have enough money to allow a certain amount of freedom, you might as well keep working for a bit longer. Just enough to survive doesn’t cut it.

    • I don’t want to merely survive but be able to do what I want and not to do things I don’t want to do. You are right about that being the definition of FI.

  2. Nice post Kim! I too thought debt was just something everyone did and was no real problem to have it. Like you said though so much of it does come down to choice. I didn’t see it then, but it’s much like anything else important in life – if you want it then you have to make the choice to go after it and work for it. So glad it worked out for the both of us in the long run. 🙂

    • Yes, I’m sure we could both be much wealthier if we’d not made mistakes early on, but it’s how you learn and change that’s the important part.

  3. It’s amazing that everyone remembers there debt stories so well! I know I had cc debt off and on my adult life, but I have no idea how much or how I ended up paying it off. I think it was with tax returns and bonuses, which when I think about how I could have really used that money I kick myself. I’m really proud of you for for what you have accomplished! That’s a lot of money to pay back!

    • We still owe a ton, but at least it’s on assets that make us money instead of take it away. Someday it will all be gone!

  4. I was the worst kind of debt user because I ran up my balances all the time right before I received a bonus check and then paid it off with the bonus check. I rationalize that I didn’t have a problem because I always paid off the balance, but what I didn’t realize was that I could have been building wealth with those bonus checks rather than playing catch up with my credit card debts. It’s painful to think about the past you, but not nearly as painful when you have since changed your ways.

    • I have my moments of regret, but by and large, I’m thankful for the experience of debt so I can appreciate life without it.

  5. I don’t feel like debt is forever, but I certainly don’t see myself getting out of it anytime soon, especially if I go get my MBA. I do think you need to leverage debt to benefit financially (i.e. a low-interest mortgage debt is a big winner right now because you gain equity over time at a ridiculous interest rate). I try to focus on building up my retirement savings and increasing income. I assume that if I focus on those two things that debt will be taken care of over time.

    • I think that is the best strategy but somehow so hard for people to actually put into play. You’ll be in a great spot by the time you’re 40!

  6. The mindset that everyone has debt has become so prevalent and is so dangerous. It trips up many people because they think it’s normal, so they don’t worry about it until it’s reached a critical level. I’m glad you changed your money mindset and now are living a life where you can choose how to live it.

  7. I thought I was “too smart” to get into debt too, but it happened and I was so embarassed. I’d wake up in the middle of the night stressing about how much was in my bank account, but scared to actually look. I’d overdraw my account a couple times/month. I’d never have more than the minimum to avoid fees in my savings account ($100). It was awful! I’m not perfect yet, I still have a long way to go with the debt and building savings, but I’m so much better off already now that I have a budget.

  8. The days of looming debt still are quite clear to both of us. We are now saving and busy paying off our mortgage, unfortunately the mortgage is going to take a while but that will be a huge bonus! On the bright side I no longer feel as though we are just treading water.

    • At least with paying off a mortgage, you get equity. Paying off credit card debt gets you nothing and it’s hard to even remember what you bought in the first place.

  9. I’m working to cancel my membership to the debt club too! We want to take a vacation but it’s hard to think about vacationing when you have credit card debt. That debt is going to get knocked out in a few months;0)

  10. I Agree Kim! Debt is not forever! What we only need is a strategy and motivation. In the end, we all end up debt-free if we go all the way! I am sure of this. Save first before buying anything.

  11. Thank you for sharing this. I feel like your story is similar to what a lot of people experience–the gradual ramping up of lifestyle inflation and the commensurate spending. I think it’s so awesome that you turned things around and paid it all off. Congrats to you. And I think your story will give folks hope and the reassurance that they can do it too.

  12. My story is very similar. Most debt started with my first semester of law school. Professional school is so expensive and everyone is pretty much living on loans that debt becomes very normal.

    • It was almost like a form of welfare. We lived fat when those checks came in and pretty lean towards the end of semesters.

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