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!