Every Tuesday, Smithee presents an article about his own experiences with credit cards and observations about the credit card industry.
So, nobody’s perfect.
After my recent embarrassing splurge that included a digital camcorder, an audio mixer, three microphones and a new Apple MacBook Pro, I was feeling pretty down on myself.
My credit card debt had gone from about $4,500 last July up to about $8,200 in October. Most of that was the computer, which I felt compelled to purchase mostly because I didn’t want to be using a hand-me-down when I started my new job. That sounds like rationalizing, of course, and it probably is. But because of the new job, I can afford to make even larger payments to my credit card. Each of those payments is now $548, and they happen twice a month, as soon as I get paid. I think of each dollar as a bullet that I’m shooting into the armor of my credit card debt. Blam blam blam!
So now, my credit card debt is back around $6,000, just about the same level as last June. I’m about six months away, and I can almost taste the freedom. The freedom to start saving in earnest, I mean.
But it occurred to me that the difference between the post-splurge amount in October and today’s amount is about $2,200, slightly less than the cost of the computer. I paid off the cost of a new computer in less than three months. An overpriced Apple computer, even. Hopefully I will soon be proud of more reasonable things, like owning assets which contribute a cash flow, but for now this small solace will have to do.
Six more months. I can do this.
I recently explained my history of having no money and as promised, will now come clean with the mistakes I’m still making:
I’m driving the wrong car
I’ve never owned a car long enough to get it inspected. The first Jeep Cherokee was a lease, and I foolishly let them talk me into not converting the lease into a purchase. Then I couldn’t afford the new Jeep Cherokee, so I took it back and they gave me a Dodge Neon with a loan amount equal to the price of the Neon plus about $6,000. Then I crashed the Neon. That was actually okay, but only because I had Gap Insurance. Always get Gap Insurance, friends. It literally saved me from being homeless.
Years later I got a Scion xB. That thing was delicious, but I grew ever more jealous of my wife’s Prius, so I traded up and got one of my own. Sometimes I wish I hadn’t done that, because I now have a $595 monthly car payment. I know it doesn’t equal out, but it sure feels good to fill the tank only once every two weeks. I’m taking care of the Prius the way I forgot to with the Scion, and I fully intend to drive it until it won’t drive anymore. I think it’s due for inspection sometime this summer.
I love shiny electronics, and they love me
Like most geeks, I have a rapport with computers that is difficult to establish with other humans, and I tend to hoard sources of entertainment. Gadgets are an expensive hobby. It never seems that way to read about them, because the journalists get them for free. I have to remind myself of that. As an Interaction Designer, I’m always looking for a more elegant solution, for more ways to automate my life, and I can rationalize any purchase by telling myself that exposure to these things will help me in my career.
That’s how I managed to “buy” an iPhone. But as you’ve guessed, I put it on a credit card. Nearly everything I own that is worth something was put on a credit card. But I’m committed to stopping that. As of this writing, I have just over $7,000 in credit card debt, which I expect to have paid off within the next 16 months.
So, I have to keep telling myself that I don’t literally need an Apple TV, or a 1 Terabyte external hard drive. When I force myself to think about it, there’s nothing in the entertainment compartment of my lifestyle that is actually broken. It’s just not perfectly elegant, and for right now, because other things are broken, that’ll have to do.
I don’t sell enough of my stuff
When I upgraded my iBook to a new MacBook last May (see previous problem with shiny electronics), only about $1,000 of the purchase went on a credit card, ’cause I managed to sell the iBook on eBay for about $600. I’ve got a boatload of unused electronics that I could be selling, but it seems like such an effort to even bother writing descriptions for them. If you have any advice for doing this more easily, I’m happy to hear it.
The interest rates are too high
On both our cars and the house, our interest rates are higher than they could be. At the time, of course, it was the best we could do. I should mention at this point that my wife’s credit history is slightly worse than mine, and until we started making mortgage payments, my FICO score was on the positive end of “Fair”. Naturally, the FICO isn’t the only thing that creditors look at, but mine has increased roughly 70 points in the last year. One of these days, I should really look into refinancing at least one of the cars.
It’s somewhat painful to admit mistakes, especially when they’re ongoing and not likely to change anytime soon. But if you don’t acknowledge there’s a problem, the likelihood of it being fixed goes down to zero. So, it’s a start.
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