Keeping up with the Jennifers and Jolies
Today’s post is by Gabriela Vega.
In today’s society with the numerous magazines covering the world of women’s fashion, countless television shows featuring vain reality stars and limitless red carpet coverage scrutinizing the clothing of celebrities, it is easy for a woman to get overly-wrapped up in concerns about her clothing, jewelry and shoes. Our society seems to be dedicated to the acquisition of stuff. However, focusing all of your energy on such acquisitions can have negative effects that, in the long run, influence your quality of life.
Now, I am the last person to tell others how they should or should not comport themselves. Growing up in my family, as new immigrants, we lived simply. My mother would buy us some new clothes at the local discount store at the beginning of the school year and then add winter pieces during Christmas. My parent’s motto to financial education was, “we cannot buy that, period.” No further explanation was given. Needless to say when I got to college and discovered the world of credit cards and “free money,” well, I thought I was on my way to making it. Now, I was never Confessions of a Shopaholic bad. But, last month as I paid off the last of my credit card debt, I realized the numerous ways in which acquisition mode effected my life.
I’m sure you have experienced it before; your boss is a pain or you are in a dating black hole and you decide that you need a ‘pick me up.’ The quickest way to turn your frown upside down is to head for the nearest department store shoe (or purse, or make-up, or clothing) section for a little ‘shop therapy.’
You step inside, smell the new leather and see the rainbow of colors and array of styles. You pick up a pair of red, four-inch stilettos and all of a sudden all of those words that you could not say to your boss or the guy with whom you just broke up disappear. You try them on and they make your legs look incredible. You know that you have to experience this feeling again. Because you don’t get paid for another two weeks, you decide that you will put them on your credit card. You reason that this would have been the amount that you would have paid for a therapist or that they are an investment that will ultimately help you land that next job and you take them home.
Unfortunately, come Monday you still have to deal with the same boss or when the weekend comes, you don’t have a date and you are back in the same spot. Spending money, can give you tremendous high, particularly when there are other things that are trying to bring you down.
Eventually, in order to get the same satisfaction you must spend more and do it more often. Guess what? That is the sign of an addiction. Unfortunately, over-spending is accepted and, even at times, encouraged (anyone remember President Bush saying it was patriotic to spend?)
The reality is that the shop therapy good feelings never last and you must still face that which is bothering you.
If you have ever put anything on a credit card that you could not immediately turn around and pay off, you must know that the big ticket purchase you made will cost you more than the price tag (I’m not a mathematician but here is a simple example.) With interest rates and even annual fees, a $1,000.00 purchase can eventually cost you anywhere from $1,150.00 to $1,220.00 (for credit cards with interest from 15% to 22%, which are average rates of interest) and that is just for one year.
If you are a person that must continuously shop to repeat the same emotional high described above, your debt can quickly get out of control. Without careful monitoring, you will end up maxing out one or more credit cards. Add that to only the minimum payments and you have dug yourself a nice hole. After all, the minimum payment is only enough to pay that month’s interest rate plus a little extra. Thus, you continue to pay on the same debt without seeing a significant drop. As a smart, professional woman you would never let a business operate in this manner and you know what? Neither should you.
Creating a Recovery Plan
All of this happened to me. Finally, I got to the point that I decided that I would not allow myself to continue on the same cycle. For me, it was additionally difficult because unless I had monthly amounts automatically debited from my checking account, I would sometimes forget to pay on time, which only led to more fees. So here is what I did.
1. Accept that you are going to feel ‘poor’ for a while.
If you are committed to becoming debt free, you may have to come to terms with the fact that you may not have disposable income for a while. Thus all of those wonderful extras to which you have become accustomed to must go. Monthly manis, pedis and facials, gone. A new pair of shoes every month or dinner and drinks with your friends every Thursday night, gone. But, and this was important for me, realize that this is your choice and that you are on your way to true financial independence. This will give you the resolve and strength to say no whenever your friends want to meet for a lunchtime pedi.
2. Begin to pay everything on time.
Whether you are like me and you need things to be placed on automatic withdraw or not, making timely payments is critical to success because otherwise you are stuck with extra fees that ultimately begin to incur interest themselves (debtors are so clever.)
3. Pay more than just the minimum.
Whatever your minimum payment, resolve to pay a minimum of three times above that. For me, it was beneficial to actually seeing amounts cut down at a rate that made me feel like there was a light at the end of the tunnel. Plus, the more you see your debt reduced, the more you likely you are to become even more aggressive and pay quicker.
4. Pay the cards with the highest interest rate quicker.
As I stated before, I am not a mathematician. But, it doesn’t take a mathematician to figure out that if you have a credit card with a 22% interest rate and one with a 15% interest then the 22% credit card has to become your top priority. For this reason, if you need to shift the amounts you send, say four times above the minimum rate and two times the minimum rate then by all means, go for it. Once you pay off the higher rate card, send all of the money that you were sending to that credit card to the other(s.)
5. Consider Interest-Free Credit Cards.
If you receive a viable offer for a “no interest for a year” credit card then consider transferring all or a bulk of your debt to that card. Once that is accomplished, determine how much you need to pay each month before the end of that year and pay it. For example, if you have $5,000.00 of debt transferred to an interest free for a year credit card you will have to pay $416.67 per month in order to get it paid within that year. But, beware of these cards, as sometimes they will add all of the interest back if you do not pay them off within the year.
Whatever, you decide to do remember you are a smart, strong career girl and as with all trials and tribulations that you have faced, this one too shall pass.
What tips do YOU have for those struggling with debt?