Ahh, gotcha. Well, anything to support my fellow Dopers!
To me that $10,000 debt is overwhelming.
The interest rate on credit cards is high, plus you’re not sure how much is personal and how much is business. (And you have no cash on hand to deal with the unexpected.)
I think it’s easy to get into either spending or saving habits.
I always paid off my credit card (and saved for a house deposit.)
Things have worked out as planned for me and now I own my own house and could retire tomorrow (I’m 56.)
Any credit card debt to me is unacceptable, other than that which I rack up over the course of 30 days. But that’s just me.
When I was 23-24, I was about $6k in debt, from credit cards. My debt wasn’t directly due to business expenses, but it was due to my business. My partner and I were still building our business and our incomes had both been extremely low. Since I lived with my parents, I was gracious enough to let my partner get paid first.
Our incomes did pick up I did work to pay down that debt, enough to buy my first new car at the end of the year, and then build up enough savings plus pay off all my CC debt to buy a house when I was 25.
With the house came a $10k debt to my grandpa (loan for part of the house downpayment), plus $6k for an air conditioner, and then about another $10k in credit card debt associated with setting up and fixing up a clunker of a house.
Between 27 and 30 I worked my butt off to pay off that $26k in debt and finish off my car loan. Now at 30 I’m debt-free except for a mortgage.
I took a gamble on myself, that the business would keep up (it did, and it grew). I was one of those people who got one of those mortgages that could have helped ruin the economy had the business not kept up. But, I had my priorities straight and kept my eye on the prize and now I’m doing ok. I’ve even got a bit of savings.
A $10k CC debt is not crushing IF you are using it as a short-term loan to yourself. If you see it as “I do not actually have all of this money to spend, and I will pay it back as quickly as possible.”
Since I got the house, every penny I made that didn’t go to my regular bills went towards my credit card balance. I didn’t budget to pay X a month or the minimum or anything - every. single. penny (ok, $50/mo into a savings account). It didn’t make sense to me to be paying 11% in interest while money sat around making 1% interest in my savings account.
I’ve always been a firm believer in using credit cards the way I used them, and not being ashamed to use them or to carry a debt. Thing is, you gotta be responsible about it and realize that the money you’re using is your money, whether you have it today or have it in a few months. The worst thing is racking up more debt while you are trying to figure out how to get rid of the old debt. Easiest just to pay it all down.
It seems like a hell of a lot to me. That’s 1/3 of your income, and you are hardly in a stable place right now. Furthermore, it seems like you don’t have a reasonable plan to stem the spending. Presumably your business is going to continue to need expenses, and you are going to have to keep paying them.
My boyfriend has more than that in business startup expenses - frankly, he owes ME almost that much in business expenses. It isn’t that bad.
I, on the other hand, have about half that… but in stupid-ass American credit expenses. THAT is not good.
You definitely need to do this morphing, starting immediately if not sooner, simply because the interest you pay on business expenses is a business cost and is handled very differently from interest you pay on personal expenses.
For past months, you’ve got to try to separate the expenses (and interest charges) out. For the future, if you maintain two separate accounts it’ll make that a hell of a lot easier to figure out come tax time.
Specifically to the OP: 11,000 personal CC debt is scary. 10,000 business debt, as a necessary expense of starting up your business, is less so. Obviously at some point you’d like your business to be cash-positive consistently enough that you wipe out the dept and have cash reserves to even out the troughs.
Did you mention whether or not you have a budget, or did I miss that part? If you don’t, I would suggest that you put yourself on one as soon as possible. That includes a personal budget and a professional budget, since you manage both your own business and your household expenses. Ideally you would keep them separate, but estimate a minimum amount of cash generated from your business (I guess based on worst-case scenario or your lowest monthly income after your business became solvent) to your personal living expenses.
I know from owning my own business that that can be difficult to do if you don’t know your own income from month to month, but at least that way you can better understand and hopefully control your expenditures.
As for the amount of debt you have… I don’t think it’s unusual, especially for someone with their own business; however, I wouldn’t feel comfortable with it at all, especially since, as you say, your income can vary wildly from month to month. If I were you, I’d make an aggressive plan to get rid of that debt.
As others have said, the badness of this amount of CC debt depends entirely on your income and how quickly you can/will pay it off.
In the situation you’ve described, however, it feels like you’re at a tipping point. If you get things under control, no big deal – you’ve used some expensive short-term credit to help launch your business. However, here’s the point where I think a lot of people get into trouble – you’ve already got $11k on the cards, what’s another $100? (And another, and another, etc.) Next thing you know it’s $20k, or $30k, and you can’t afford to pay much above the minimum payment. And then you’re screwed.
If I had 10k in credit card debt I don’t think I would be able to sleep at night. I am really paranoid about going too far into debt.
I generally have about $400 on the cards per month that gets paid off and then recharged again a month later. I keep paying it off and then the cat needs to go to the vet or something and I need to use the card. This tells me that I am living slightly above my means and that I need to curb that but we have a couple of expenses that will be going away shortly and my boyfriend is getting a 5k pay increase starting in October so at that point we should be even and no longer need to keep a rotating balance on the cards.
The biggest issue I see here is not the debt, it is that you do not have a handle on your finances. For anyone that is a bad thing, but for someone running his own business, that is heading towards disaster. You don’t know how big your problem is because you don’t know your numbers at all! You don’t know how much is business/personal debt? Your accounts are co-mingled? You don’t even know how much you make! How do you set up a budget or know how much you can spend on anything that way? (How are you ever going to file a tax return?) You can’t just spend money any which way ‘for the business’ and cross your fingers you make a profit at the end of the year.
You need to sit down and answer these questions or $10,000 in debt will be the least of your problems. Set up separate accounts for home/business and keep track of expenses with a spreadsheet or software, for starters. I would advise taking a basic small business finance course or something also.
Just a second; are you using your credit card to finance your toilet paper abuse?
Given your username and the question, I’d say rein it in. We don’t want your debt to become Soul-crushing.
Now that polls have been activated, it’s time to start pushing for the next new feature that would greatly improve the SDMB experience. Namely, a button that anyone could push and give gigi an electric shock.
As a general rule, $10,000 or less is a part time job.
Anymore you need to consider bankruptcy depending on your situation, such as do you own anything of value and your likelyhood to get into debt again. For instance, are you charging willy nilly or was it due to a job loss or a medical problem.
If you’re judgement proof you might as well default and wait for 7 years for it to fall off, rather than do bankruptcy. Of course that means living with cash only for seven years.
I just realized I never actually answered your question in your OP. Your amount of debt is right in line with the average US household where someone in the household has a credit card. That average is $10,679 as of the end of 2008. I like this site for general info about credit cards, you might want to peruse it.
from here:
I do have to agree on this, and I’m sorry for being one to add to your credit card debt without adding to your income (however I did enjoy the free client dinner :D).
From my own opinion, I don’t think $10,000 is too much debt for you, since you do you have plan to pay it off, and it was spent trying to expand your business. If it means anything, you are paying only 7.14% APR in interest on your only debt, credit cards. In my case, I will have $120,000 in student loans at 6.8% APR interest when I graduate in one year eight months. As Clark Howard would say, debt is acceptable as long as you have a plan to pay it off, and it is for a worth while cause.
Oh, and hopefully I’ll be able to help you pay some of that debt off in about 7 months (if not sooner, still have your business cards in my wallet if the opportunity presents)… However I might have you buy me another free dinner 