I know people who have done that - and if they make educated choices - and the job market holds - it works out well. Either funding living while getting an education, or funding living while starting a business.
It isn’t without risk, however. There is always the chance that you make less than you thought when you are done with school, don’t find a job at all, or, if starting a business, the business fails. I went to college with a ton of people who thought they’d make $60k a year - and ended up with $22k a year jobs and $20k of debt. Shame was, it was undergrad, so they really had no idea what life outside the dorm was going to be like, and racked up the debt in beer, music, and Spring Break trips.
I once had $38,000 in credit card debt and didn’t realize it. Why? Well, between my husband and I, we had accumulated about 14 credit cards.
Looking at each individual bill when it comes in, everything seems fine. Hmmm…$2,000 balance here, $1,500 there…oh, here’s a biggie $4,000. Looking at each bill individually often obscures the entire picture. We also tend to look at a balance in relation to its credit limit, and if you’re not close to being maxed out, it looks less threatening.
One day I decided to save all my credit card bills so I could add up my balances and my available credit. It was just an exercise in curiosity. To my horror, I owed over $38,000 and still had over $50,000 in available credit!!
Today, my outstanding debt is still approximately $5,000 and I have no more credit cards!
I got up to $10,000 (canadian at least) on my visa and I still don’t regret it. I was travelling through the uber-expensive U.K. and ran out of money about halfway through my trip.
I thought to myself “Soon I will be entering the world of panyhose, mind-numbing officetalk and cubicles and will be unlikely to escape for years to come, especially for a summer-long vacation. Do I just go for it now, spend and worry about it later? Or do I cut my trip short and go home?”
I chose to have the time of my life. I’m still paying for it 4 years later, but I got to party like royalty in Scotland, Ireland, Wales and England. And trust me, it was EASY to wrack up that card.
I was complaining to a friend the other day that I felt my credit card debt this month was pitiful - it’s up to $8k, but that’s mainly because I switched a high interest installment note on some volunatry surgery over to a new card with 0% interest. After a year, that card will have a 3% interest rate, but that sure as heck beats the 13.99% I was getting charged on the note.
If I had the credit limit, I’d give serious thought to switching my car over to the new card as well, as the 3% still beats the interest on the car (5.65%). That would add another $15,500 to the balance.
But, the plan right now is to pay off the credit card debt within 10 months, and pay out the car out until then. Then, after the cc is paid, take that money and put it towards the car, reducing the term. Then, maybe I’ll consider paying off the mortgage early, but probably not - it at least is deductible.
Mrs. Skammer & I got rid of every one of our credit cards about two years ago. We have a debit card that we can use as a Visa, that pulls money right out of our checking account.
We also started aggressively paying off our other debts - student loans and a big car payment - and in two our three months we will be completely debt-free (except for the house). It’s very liberating!
For the last couple of years we just haven’t bought many toys or new clothes; we’ve eaten out less frequently and packed lunches instead of buying at the cafeteria.
No way would we go back to credit.
“The borrower is servant to the lender” - Proverbs 22:7
we came back from overseas, no money but my partner walked into a great job which qualifed him for a mastercard gold card. we had no furniture, appliances, car, nothing.
the fact that my partner had never lived in NZ before and had no NZ credit history ment he could never get hire purchase credit at any store. my credit history is ruined thanks to my student loan. so we had no choice but to buy everything on the mastercard.
it was that or sleep on the floor and lick our clothes clean and always eat take out as we had no fridge or stove.
I was in Business Ph.D school in the go-go early 90’s at a top tier school when first year profs at second tier schools were getting offers in the $60-75,000 dollar range. A friend of a friend was a college financial aid officer who knew all the tricks and got me all the loan money I needed. So I lived pretty comfortably as a student and bought lavish Christmas and Birthday gifts on borrowed money. (I think that may have been fraud.) But, sadly, I did not graduate and never got that $60-75,000 a year offer yet I still owed the money. After consolidation it came to $237.50 per month for twenty years at 8%. It’s like four consecutive car payments, without the cars.
I do not regret it at all. I had no interest in the starving gradual student lifestyle, wearing the same clothes over and over or agonizing over whether to order a pizza once in awhile or live on 39 cent generic mac and cheese and popcorn. I had done all that as an undergrad and by then had had a real job that afforded the occasional luxury. There was no turning back for me.
Nowadays the 8% APR looks high and I wish I could find anyone interested in refinancing these state (not federal) student loans.
I think it happens the same way you get fat. Slowly, over the course of time. You gain 5 here, or so and say that you will lose it next month, next year. After 10 years it is suddenly 50 lbs. I think it is comparable, although probably it happens more quickly. You spend some here, and promise yourself that you will pay it off next month, and so on. On my part, I don’t have the problem with credit cards…
I can’t tell if it was on purpose or not, Lorenzo, but I love it:
As with astro I used credit to keep going when I had my own business. A bevy of credit cards (I had ~two dozen) got me up to $56,000 in debt, and some of that went directly into the business. The more you use 'em, the easier it gets.
I paid off the last of the debt two years ago, and I haven’t charged anything on a Visa or Mastercard in 6 or 7 years; I still keep one just for the possibility of needing to charge something where they don’t take Amex.
Skammer, you must be a Dave Ramsey convert, like I am! Way to go! Congrats to Cillasi too.
This thread warms my heart…
I’m so tired of the “Should I just declare bankruptcy and be done with it, cuz I don’t want to pay all of these bills” type of threads. Those who don’t learn from their history are doomed to repeat it.
Me, I’ll have my $4,500 credit card debt paid off before the end of 2003 (God willing) and then my car is going to be paid off a year early.
After that, I save 6 months of living expenses & go back to college (on GI Bill) for a career field that I want to be in. That’s what being out of debt can do for you: free you.
PS - To the OP, I am in debt because I lived beyond my means. I had “dessert” before “dinner”. I bought things that I wanted, I was too impatient to save up for them. Lesson learned. All credit cards are destroyed, I use debit cards and I have an Emergency Fund of Cash for emergencies, everything else, I save for.
I have about $4500 on mine right now, mostly from moving expenses (new furniture, etc.) and my wedding. I had hoped to have a lot of it paid off by now, but we never anticipated how difficult it would be for CrazyCatLady to get a job. Now that job prospects are looking a little better and I have a good-sized tax refund coming, we should be able to take care of that by the end of the year.
I also have a $10,000 supplemental loan that I took out during my fourth year of med school for residency interview travel expenses, a new computer, and a trip to Italy. I have to start paying that back next month at a ridiculously low long-term interest rate.
This is, remarkably enough, the sum total of the debt I emerged from med school with. Most of my friends have at least $100K, if not $150-200K, in long-term debt; I have $10K in long-term debt and $4500 in short-term debt. I can’t complain.
Thanks for the interesting responses. Let me reiterate I am not asking about “crisis” debt – lost your job/medical costs/car repair or about education debt. Just consumer “stuff” debt.
I can’t speak to the first poster but as to Ringo’s post his situation is somewhat similar to mine in terms of income coming in bursts and at some point carrying and managing card debt just becomes part of the way you do business. You are looking at 56K in card debt as being inherently unmanagable, but it’s not if you have a 100K in commissions (or whatever) booked and you are using the card as a source of bridge funds to run your business until the checks come in.
The card is just another source of loan funds and if your credit is golden like Ringo’s and mine you can easily carry 5 figures with rolling 3-9 month teaser rates at 3-5 %. If the cards get too expensive you can simply get a personal line of credit at the bank.
Way to go! Congrats to Cillasi too.