Thursday, February 5, 2009

How did I get in this mess?

It all started with a trip. OK actually it started way before then, but the most recent accumulation of credit card debt began with a phone call from Ramada Inn, offering one of those "listen to our spiel and stay nearly free" trips. A seven day trip to Florida with all meals and car rental included and even an overnight cruise to the Bahamas for only $299. My husband and I have never gotten away by ourselves on a trip in over 20 years of marriage, and things had been a little tense lately, so I begged him to say "yes" to this unusual extravagance. He did and I paid, with a credit card.

At that time we had no credit card debt, as we had gotten a chunk of cash from the sale of a house and had paid off all our debt besides our mortgage (and then proceeded to squander the rest of it, but that is another post). Now, what to do about plane tickets? Florida is a long ways from Montana, and we never get those super deals that come up on Cheap Tickets, so I did a search of credit cards on Google and found a credit card with a low initial interest rate and generous rewards plan. Then I switched as many regular payments as I could to that credit card in order to build up reward points.

We did pretty well for about six months, using the card for regular purchases and paying off the balance each month. Then, slowly but surely, a purchase here and a splurge there began to add to the balance, a few hundred dollars each month. Sometimes it was somewhat legit, like the dentist wanting to be paid $500 up front, and sometimes it was justified by thinking the purchase would save us money in the long run. Believe it or not, neither my husband nor I are spendthrifts. We are by nature somewhat frugal in our habits. But we are poor planners and poor communicators and that is a deadly combination when money is a little tight. In 18 months, we racked up $10,000 in credit card debt. $6,000 was for a new transmission on our Suburban and a new brake job on Old Red, and $500 was for the dentist, but the rest really cannot be accounted for. That is about $195 per month wasted.
Just shoot me now.
And if we had had a savings plan in place, we could have paid cash for the transmission. Sure, buying old beater and not having a car payment is a great way to save money, but only if you are prepared to pay repair costs. My husband and I have pretty much lived our whole married lives this way, thrifty habits but no planning. Can two old dogs learn some new tricks? We shall see.

PS. The other half of the debt is an interest-free student loan from my mother, taken out to pay off another hare-brained scheme that was supposed to make me rich while working from home. I'll save that for another post.

PSS. We haven't even taken the trip yet. But of course with all that debt we did get plenty of points, enough for two plane tickets.

1 comment:

  1. You are preaching to choir here! Especially about the old car, we just ditched our 12 year old wagon for new car (with 3 year warranty) once it became obvious (transmission, U joint> $4000!)we were no longer saving $ by not having a car payment. My much smaller family (4) is trying to make it on one salary and it is tough! Let me re-phrase that, it's impossible, we are on the parental dole, arrrgggg. The shame of it. We just went through a no spend month and heading into another, have you ever tried this? It's strangely liberating to limit yourself buying just food and gas. We saved $800 and I'm not even a shopper! Anyhoot, I'll definately be back to check in on your mission!