This is a guest article by Glen Craig, the publisher of Free From Broke and Parenting Family Money. See how he currently deals with his family and finances and find out how you can too. In the article, Glen shares his story of how moving back with this parents provided a second chance for his financial life, mirroring a similar experience in my life. It’s a common thread with the “Boomerang Generation.”
Once upon a time there was a care-free bachelor. He had his own apartment, a full-time job, lots of credit card debt, and virtually no savings. That person was me.
I moved out of my parents’ place before I understood what it really meant to take care of my finances myself. I got by, though. My rent was paid on time, as were my utilities, but over time, my credit card debt grew. And when I say I got by, what I really mean is I was living paycheck to paycheck, crossing my fingers that I’d have enough money until my next paycheck came.
Living on your own is expensive. I don’t need to tell you that. And the money for all of the little things had to come from somewhere. Dishware? Credit card. New broom? Credit card. Going out? Credit card. CD player dies and I need a new one? Credit card. You get the picture.
I managed to get thousands of dollars in credit card debt, and all with just about zero savings.
I knew it was no way to live. I hated seeing my credit card debt growing without anything to really show for it besides my CD collection. (Remember those?)
So I started to wise up and figure out how to get rid of my debt. I called up my credit card companies to get my interest rate lowered. I made sure to get my bills paid on time after getting hit with a bunch of late payments. I did what I could to pay more than the minimum. I even transferred a balance or two to new cards with zero balances so I could pay my debt off faster. I stopped putting so much on credit — if I couldn’t pay for something, well I couldn’t get it.
I saw my debt going down but not by as much as I wanted.
Then an interesting thing happened: I lost my apartment.
I was living in a converted one-bedroom apartment basement in a house. What I didn’t know was that the house wasn’t zoned to be two-family. Somehow the city found out and I was forced to leave the apartment. What to do? My rent was pretty reasonable where I had been — and know I knew why. Finding a new apartment would mean higher rent, a bigger security deposit, and probably paying a broker’s fee to get a place. That was a lot of money I would need up front, and remember, my savings were hardly existent at the time.
Quite honestly, I felt choked just thinking of how I was going to afford another apartment. I mean it, I felt sick. I was just getting to the point where there was a dent in my credit card debt and I was slowly starting to put away money into my savings. I was even getting smart about retirement, upping the percentage I was putting into my 401(k) at work.
There was another choice, but it wasn’t pretty: move back in with my parents.
Look, I love my parents, and they have always been there when I needed them, but giving up my freedom was a hard pill to swallow! The alternative was going back to just eking by on my paycheck because I had to pay more in rent every month.
I sucked it up. I needed to retreat and build myself back up financially before I could live on my own again. It was the only way to even have a real financial future.
My parents were awesome and welcomed me back with wide-open arms. I agreed to pay them a rent for my room and utilities, an expense that was much lower than any rent I would find.
It wasn’t easy. Moving back with my folks and my sister brought back a lot of memories, wounds, and arguments. If I was going to start-over with my finances in order to put my financial future on the right path, I would have to make sacrifices, and this was one of them.
Moving back with my folks meant that my paycheck stretched much farther than it had in a long time, but I didn’t go and blow it all. I tried to be smart about this second chance. I started putting money away in savings. I had heard about this online bank, ING Direct, that I took a chance on, socking away a good amount of savings every month. I increased the percentage that was going into my 401(k). This was a little bit after a stock market crash, so I was purchasing the funds in the plan relatively cheap.
Next was the credit cards. I was putting a lot into savings, but after some time it dawned on me that I was still paying a lot in interest on my credit card debt. I was paying more than the minimum payment, mind you, but there was still a lot of debt to take care of.
What was the point of saving more money if I was still losing on credit card interest? I switched things up and attacked my credit card debt. I put all I could into paying off that debt. With my new lower rent and expenses it didn’t take long to pay of my credit cards entirely. You don’t know how good it felt to mail out that last check!
With the next paycheck after paying off the credit card debt, I started putting money back into savings. I realized something. For the first time in I don’t know how long I actually had a positive net worth! I wasn’t in debt anymore. It was such a liberating and validating realization. The money in my paycheck was mine again and wasn’t slated for a credit card company. Yes!
It was a tough road, but after many years of increasing my debt without a whole lot to show for it I was able to come out ahead again.
Fast forward many years. I’m now married to a beautiful woman with three awesome kids. We just moved into our first house this past summer, a house we purchased with a down payment of more than 20 percent, in large part because I was able to wake up about my finances and take steps to improve my situation. And we have zero credit card debt.
If you told me when I moved out for the first time that I would move back with my parents, and it would be one of the best financial decisions I would make, I’d have told you that you were crazy. But it was one of the best moves, by far.
Here’s the moral of this story. You’ve heard other people say it, but if I can get out of credit card debt then anyone can. It’s about being able to make the sacrifices. For me that meant moving back with my folks. What does it mean for you to get out of debt?
Updated April 26, 2011 and originally published April 22, 2011.