I’ve made a lot of financial mistakes in not a lot of time. In some ways, it was for the best, because I learned a lot of life lessons and it gave me a lot of motivation for getting my financial house in order. In other ways, it’s really kept me from pursuing opportunities that I’ve been interested in.
I worked throughout university, often for 20-30 hours per week! But I still maxed out my student loans every term because I thought that’s what students did. Every August, I would send off my electronic application and every September, I’d receive almost ten thousand dollars from the government.
Instead of only using the amount I needed to pay off my tuition, I took the loan amount, divided it by 12, and used it as my living and spending money. I have no idea what happened to the money I was actually earning at my job!
Over my four and a half year undergraduate degree, I racked up almost $40,000 in student loan debt. I was fortunate and had $10,000 forgiven based on academic performance, but that still left me with $30,000 to pay back upon graduation.
Lesson learned: Only use student loans as necessary and never EVER think of the money as “yours”.
I was in my first year of university, walking through the student union building when I was accosted by a marketer.
“Hey there, are you interested in getting some free [insert useless but vaguely tempting item] ?”
Being the poor starving student that I was, of course I wanted free stuff! One handy, easy-to-fill-in form later, I was signed up for THREE different credit cards. One had a rate of over 20%!
Over the course of a year and a half, I racked up almost $10,000 credit card debt. I never missed a payment, but I never got anywhere either. Every few months, they would increase my credit limit and I would spend more money. I haven’t nothing to show for the money that I spent – indeed, I don’t even remember what I spent all that money on!
Lesson learned: Don’t buy into the free s#*t. The MBNA Mastercard with 20+ percent interest took me all of university and a year or two past to pay off. If you are interested in building your credit, get one Visa or Mastercard from your bank. Later, after you’ve graduated, add the other one.
In some ways, it wasn’t even a real “Joneses” that I was trying to keep up with – my friends were generally not any more well off than I was. Most of them lived far less extravagantly! It was this image I had in my mind of what a successful young adult should have – a nice apartment filled with nice things. Things like a nice new LCD TV (well over $1k back when they first came out), a fancy digital camera ($450) and a nice laptop ($2k).
And there’s nothing wrong with buying these things, depending on how you define your life goals. But I was buying them on debt. Not even credit card debt – STORE credit card debt. Worse – I bought into ads that proclaimed “no payments for three months” and signed myself up.
Three months would pass and I would have made a grand total of zero payments on my purchase. Three months worth of interest would get slapped on my purchase and I’d be stuck with another monthly bill payment.
Lesson learned: Don’t buy into promotions that promise no interest or no payments. The interest and the payments will come… it’s just a matter of now or latter. Far better to have the money in the bank before going to buy the latest gadget.
It took me about a year and a half after graduating to pay off my credit card debts. This was not an easy year and a half – I was working my regular 9-5 job and also working 2-3 days a week in the evenings and weekends in retail. It’s mind boggling (and depressing?) to imagine all the interest that I paid and what that money could be doing for me right now.
I’m proud to have paid my way through my debts and get to where I am now. It’s far more satisfying to devote money every month towards myself rather than towards my debt.