The following is a guest post from Martin of Studenomics. Martin has just released a super-helpful guide that shows you how to completely conquer credit before you hit 30. “You can’t leave your mark on the world if you spend your 20s paying off credit card debt. I did all of the boring research for you so that you can see how easy it is to figure out credit.”
I’ve learned from Crystal and many other internet entrepreneurs that transparency is the way to go. Today I’m going to be more transparent than I’ve ever been before. I’m going to make a confession about being in credit card debt. I often mention (perhaps brag?) that I’ve been able to avoid credit card debt and student loans. Well today I need to confess to something.
I recently spent just under a month being stuck in credit card debt.
For the first time in my life I found myself in credit card debt and scrambling to get out so that I didn’t start getting hit with interest payments. I finally knew how it felt to be on the other side of the war against debt. This is my story…
How did this happen? How did I get myself into debt?
I was traveling through Europe for a month with my backpack and my laptop. I was using my laptop to work on Studenomics and my other online ventures (don’t worry, I’m not becoming a lifestyle design blogger). I pretty much bring my laptop everywhere I go because I can’t go more than a day without checking up on my blog stats, responding to comments, and checking my email.
There’s just one problem with this. I had been using some crapy laptop that I bought for like $500 three years ago. It was nothing special, but it got the job done. Considering the amazing technology out today, it was embarrassing when I pulled out this brick in a coffee shop. I had debated purchasing a new piece of equipment before I hit Europe because I knew that I wanted something more reliable and a lot lighter. I ended up not buying a new laptop because I put it off for too long.
Everything was going well until one day my laptop just wouldn’t start up. Normally I would just go to the computer store on the corner or call a buddy up to help me out. The only problem is that I was in Budapest, Hungary. So I sort of freaked out! A few of my new friends at the hostel tried to help me figure it out. I used a friend’s laptop to Google every possible solution. I found out that the software had just died.
The good news was that I was able to recover some of the files through using Linux (well the German version since my new friend Toby didn’t understand English and he was doing all of the fixing).
The bad news was that I was out of a laptop. I knew that I needed a new laptop. I didn’t know that this would happen in Budapest.
Then it happened. I guess you can say it was a blur. You can compare it to a drunken night out on the town because I don’t really remember much. All I remember is walking around town with my friend Zack from Long Island. Then I vaguely remember walking into an Apple Store. Then my next memory is walking home with a MacBook Air.
I went from using the worst laptop on the market to holding a brand new MacBook Air. I had my credit card to thank for this. I was officially in credit card debt.
How did I pay off my credit card balance?
I don’t write about my financial infrastructure as much as Crystal does and I definitely understand that I need to be more transparent. I wanted to try being transparent by showing you how I paid off my credit card debt.
I have two main banking accounts:
1. An account with ING Direct where I keep all of my main savings and my free checking account. I also have my sub-accounts setup for my various goals.
2. Then I have an account with a local bank where I’ve connected my credit card, retirement account, and investment accounts.
I took some money from my Random Savings Account in ING Direct, transferred some money from Paypal, and moved some money from my checking account. I was finally able to become debt-free.
It took me almost a month (until my balance due date) to pay off my credit card because I didn’t know where I should pull the money from. I had the money saved up, I just didn’t have the money budgeted in for a brand new MacBook Air. You can bash me in the comments!
How can you prevent this from happening?
This credit card debt dilemma could’ve easily been prevented. I want you to prevent yourself from getting stuck in a similar situation. Here’s how you can do it:
- Don’t be a sucker for a brand name. I obviously didn’t have to get the MacBook Air. I could’ve easily purchased any other laptop for like half of the cost.
- Always be prepared. You can call it an emergency fund or you can call it a savings account. Call it what you want but you need to save up some money just in case.
- Invest in yourself. I preach the gospel of investing in yourself and yet I still found myself using some old laptop to get my work done. It never hurts to have excellent technology on your side.
How did it feel being in credit card debt?
I absolutely hated being in credit card debt. The stress of knowing that you owe someone money is just too draining for me. Even though I had the money I just couldn’t handle knowing that I had to see it go. I really couldn’t get myself to transfer the money to my credit card. That’s $1,800 that I’ll never see again.
Now don’t get me wrong, I believe in using debt as leverage (which I’ve done but that’s another story for another guest post). It just totally sucks to spend today’s income on yesterday’s fun. If you’re in debt, I want you to get out of debt. If you’re not in credit card debt, I want you to avoid it at all costs.
Have you ever found yourself in credit card debt out of nowhere? How did you handle this?
Don’t forget to pick up your copy of Completely Conquer Credit.
Crystal’s Comments: Based on this definition of credit card debt, simply having a balance but paying it off before interest hits, I am in credit card debt every day of my life pretty much. My husband and I use credit cards for everything but pay off the balances within a week of the monthly statements being emailed to us. BUT, MD doesn’t seem to have all of those little, crazy emergency fund and savings accounts my husband and I have for splurges and pop up expenses, so I can understand why he freaked out. Thank you MD for sharing here! Good luck with your new book!
I’m sorry but the author was NOT in credit card debt. Credit card debt is when you carry a balance for months, UNABLE to pay it off because you don’t have the money to do so. I think this post is a little insulting to people who actually do have credit card debt and are truly struggling to get out of it.
The stinks about your laptop, but at least you HAD a savings account to pull money from so technically you really weren’t in debt. I’d say you just had an unexpected expense and it was somewhat painful parting with money you had saved. Being prepared and debt free definitely has its advantages!
Sorry for any misunderstanding. I just wanted to share my experience from carrying a balance (something that I hate to do). I wanted to share how unexpected expenses can throw our finances off and leave us scrambling.
Thanks for hosting my piece Crystal!
@Martin, thank you for posting!
Best way to avoid credit card debt? Don’t have a credit card. It’s very simple but most people just can’t wrap their minds around it.
You really didn’t need one while you were in Budapest to buy that new laptop. You obviously had cash available in various accounts to pay for it, but you chose the easy convenience of the credit plastic instead of the debit kind.
It sounds like you may have even spent more than you intended. That’s what the convenience of buy now, pay later credit purchasing does to you. The money is not real in that moment and there is almost no barrier to saying “ok, lets go for it” and spending more than you intend. That’s how people get into deep debt.
Thank goodness you had the cash to pay it when you got home.
I’m not sure if that counts as credit card debt. Credit cards are great for emergencies. Granted he could have continued on his way without a laptop but it seemed like he really needed (wanted) one. And if you can pay it off in a month or two great.
I ended up in a hospital in Greece in college and ended up having a $800 medical bill I hadn’t budgeted for. That was the first (and only) time I’ve never been able to pay off my credit card at the end of the month. But that is what credit cards are for emergencies. I was lucky to be healing quickly and able to pay it off in full after two months.
This was not credit card debt, and your term “carrying a balance” is very misleading. You paid it off before the due date, just like people who are in control of their finances amd use credit cards wisely normally do.
If I buy a pack of gum, am I in debt and carrying a balance? Maybe technically, but I don’t really consider it be debt as long as I pay it off within the grace period and have the savings to cover it in the mean time, just like you did.
Maybe it wasn’t credit card debt but it was an impulsive purchase that is associated with one aspect of credit card debt.
As much as I lust after Apple products I feel they are a huge part of the consumer culture. I have a perfectly good iphone that is over 3 years old. Apple no longer supports it so I can’t use it to it’s full capacity. It drives me frickin’ crazy!!
You did ok. You weren’t carrying a balance and weren’t in a downword spiral where you couldn’t pay off the balance. You just made an impulsive purchase and who among us hasn’t done that!
I don’t get it. Where is the “credit card debt” in this post? The OP charged a purchase on a credit card and then paid the balance by the due date. Isn’t that an example of using a credit card responsibly? Why all the hand-wringing? I do this every single month.
I changed the title to hopefully focus the conversation on the point that Martin splurged and was super stressed about paying off his bill before accruing interest. He doesn’t usually discuss his own personal finances and I hope he doesn’t give up completely because of these comments – he may have misworded his predicament, but he was trying to convey his stress…
It is hard to deal of carrying a balance without any notice to come. But that was an obligation to be pay for. It drives me freaking crazy. Thanks for this info. I do experienced that kind of problem.
Credit cards are great for emergencies. Granted he could have continued on his way without a laptop but it seemed like he really needed (wanted) one. And if you can pay it off in a month or two great.
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