My Personal Debt Beginning

A lot of people will tell you that having a credit card in college is a bad idea.  Well, I am someone that likes to prove people wrong.  Unfortunately, I was just another victim of the “magic” plastic card that gave me the ability to get what I wanted, but pay for it later.  Man, did I pay for it later…..

My personal debt story begins the same as many people’s does, with one credit card and the feeling of freedom on the horizon.  I got my first credit card during my freshman year in college.  I was working at the time, but didn’t earn much.  I had enough to pay for gas and go out when I wanted to eat something that was not made during a creative cafeteria night.  My credit card was a SonyCard, which gave me points to get free Sony electronics.  This was a win-win for me because I love electronics and I love being able to “afford” the things I want.  This card was the beginning of a long journey that I will never forget.

Where It Went Wrong

In the beginning, I was pretty vigilant with my spending.  I used my card and then paid it off every month.  I would put my gas purchases, books, food, and random expenses on the card in order to earn rewards.  I was doing exactly what my parents taught me to do with revolving credit.  If I pay if off every month, I would never see any interest and would get to keep the rewards.  I thought I was exactly where I wanted to be, but then it happened.  I was faced with my first major car repair,and I didn’t have the money to fix it.  Well, I needed my car, so I went into my wallet and pulled out the plastic.  I remember that swipe.  It didn’t bother me then, but now it hurts my ears every time I think about it.  That one swipe is what pushed my financial control off the track and started my downward fall toward the bottom.

The Tumble

After the large charge to fix my car, I started to only pay the minimum payment.  That went on for a while and then I started to pay a little more than the minimum, but maybe only $10 or less.  I knew that paying more than the minimum would help me get rid of the balance faster, but I forgot one simple rule of finance.  Stop spending more than what you earn.  Since I was in college, I didn’t earn a living.  I started using my credit card for more purchases and the payments just started to pile up.  Instead of just cutting myself off, I decided to get another credit card with a higher credit limit and transfer the balance.

That was a mistake!

Now I had two credit cards, one paid off and another with 0% interest for 12 months.  I believed that I was finally going in the right direction.  Wrong again.  I started to pull out the new card more and more because it had the larger credit limit.  Small purchases, big purchases, it didn’t matter.  I just wanted the things that I thought I needed and money wasn’t an object.  I was trying to keep up with the Joneses.  My debt had rose to $15,000 after the first two years of college.

The Entrepreneurial Spirit

My family has always had the entrepreneurial spirit in them.  My parents both owned their own business, my brother owned his own business as well.  After seeing their success, I figured I would try and fit in their shoes.  I was in college for business, so why not.  Not only could I be self employed, but I could use the profits to pay down my credit card debt.  This was my initial plan.

My college was located in a small town that really only had one place to shop and that was Walmart.  Since I have a passion for electronics, I was always angered by the selection at the local Walmart.  If I wanted anything good, I had to drive 1 hour away to find a Best Buy or I had to purchase things online.  My solution to the problem was to start an online electronics company.  I researched the business concept for quite some time and thought that I would succeed in the online ecommerce space.  I mean, how hard could it be?  Short answer is very hard.

My business started in junior year of college.  I had taken my time to get all of the proper documentation, business licenses, sales tax certificates, and everything else that I needed to legally own and operate a business.  Now, it was time to learn how to create and maintain a website.  I am pretty technologically savvy, so this only took a little time to learn.  Once my website was up and running, I needed to start the marketing process.  Marketing was my college concentration, so this was right up my alley.

One factor of marketing that I learned really quick is that it costs money to do quality marketing.  I took a lot of time to create free marketing buzz, but in order to get the customers that I needed to succeed, I needed to spend money on marketing.  Since I didn’t have any money, my credit card became my business loan.  Soon, I found out that I would need another credit card to continue with my marketing plan.  Another credit card added to the bunch put my total to 3.  Two of which were close to being maxed out.  My travel down the credit card turnpike was becoming bumpy.

4 Years and $75,000

I operated my business for 4 years.  I had some ups and downs, but I learned a lot about business.  The main thing I learned was to never, ever use a credit card to start and run a business.  This is a bad idea, no matter how you slice it.  Even though I made money with my business, I always ended up putting it back in.  I bought more advertising, upgraded the website, and purchased software to make the customer buying experience better.  This all seemed great at the time, but it never made the money back.  These were bad investments, plain and simple.

After the economy took a plunge in 2008, I decided to get out of my business.  It was taking a tole on my personal life and my health.  I didn’t feel the passion for it any longer.  In 2009, I officially shut down the business.  I had to make the hard decision and that decision hurt for a long time.  In the end, I felt it was the right one, and I still feel this way to this day.  Though I was done with my business, I was not done with the damage that it left behind.  Four years of personal and business related expenses went onto my credit cards.  My ending balance was hovering around $50,000.  Seeing this balance made me sick to my stomach.  I never knew I could accrue so much debt and have so little to show for it.

This was the moment I decided I needed to get my life back in order.  I had a deficit of $50,000 on my credit cards and $25,000 in car and other loans. I was in the hole for a little over $75,000! I needed to find out how to start digging myself back out.  After long nights of research and many days of crunching numbers, I came to a solution that would work for me.  I was ready to begin my journey toward financial freedom from credit card debt.  This was the start of my Wealth Bytes.