My earlier posts have focused on health concerns caused by smoking and a poor diet. However, reckless decisions of youth are not limited to one’s body, and I made plenty of mistakes that did not involve my physical condition.

Giving the Credit Card to a 19-Year-Old

When I was 19, Chase gave me a credit card. I had no regular job, and even during times that I did, I made just over minimum wage. Fortunately, I was a relatively responsible 19-year-old and hardly ever used the card.

What that accomplished was that my limit rose from $500 to $4,000 in about a year.

Then I turned 21. I decided to live in an apartment during the summer between college semesters. I had a job at a restaurant and made enough money to get by. But getting by wasn’t enough. I needed other things, like beer, cigarettes, more beer, more cigarettes. Once I got into the habit of using my credit card to get those things, it was a hard habit to break.

Need gas? Credit card. Need to eat out? Credit card. Need to rent a hotel on a trip with the girlfriend? Credit card. Need to fund the trip with the girlfriend? Credit card. Video-game system? Credit card. Video games? Credit card.

You get the idea. By the time I graduated from college, I had a credit card balance of $3,800. My first job out of college paid me just $250 a week in a small town. That was enough to get by, but not enough to put any sort of dent in my credit-card debt.

Student Loans and Piling on Even More Debt

The other problem was that the credit card wasn’t my only debt. I had taken out a few small student loans, but those added up to about $8,500 by the time I graduated. Once the grace period expired, I not only got to find a way to pay Chase, but I also had to pay $50 here and $50 there to my various student-loan lenders.

Again, this was on a pretax salary of $250. I later consolidated my student-loan debts, but that hardly gave me wiggle room.

I was smart for a short period of time. I took a second full-time job and nearly doubled my income. Had I continued with that plan, even for a year, I could have knocked out a big chunk of my debt.

I was, however, not a wise 24-year-old at that point. I decided that my life needed a new direction. I quit both of my jobs. I moved to a different state. I decided to go back to school. And I brought all that debt along with me.

The next step was law school, financed almost completely with student loans. I pursued another graduate degree right after that, and you might have guessed correctly that I took out even more loans for that.

At that point I was married. We both needed cars. And guess how we paid for those cars?

I could continue to summarize my debts, and when I write that I was “only” $116,000 in debt from the balances on the credit cards (plural), car loans, and student loans, that may not sound bad. In fact, it might sound normal to have that sort of debt, especially when our household income was edging closer to six figures.

Of course, the $116,000 did not count our mortgage. We were, in fact, living month to month most of the time because those payments were so high. 

Breaking the Cycle and Stopping the Madness

I learned one year that I was going to receive a substantial raise. My wife and I put a plan into effect where we could take out a home-equity loan to pay for a new edition on the house.

Our house at that time had a fair-market value of about $180,000. Had we taken out the home-equity loan then, we would have wiped out the all of the equity, and we still had the $116,000 in other debt. Using those figures (rounded for the sake of simplicity) we would have been just under $300,000 in debt on a household income of $105,000.

I probably don’t need to remind anyone that the housing market crashed. We are blessed to live in an area with a relatively low cost of living, but the value of our house plummeted. It would not have taken long before we were completely upside down when it came to the house. That’s an easy route towards foreclosure.

Very fortunately, we didn’t take out the home-equity loan. You may not have heard of Dave Ramsey (we hadn’t), and you may not like him if you have. But we were blessed to stumble across an audio CD of his book while on a trip where we had discussed the pros and cons of the home-equity loan.

But the time we had listened to about half of his CD, we had scrapped those plans and were ready to eliminate debt. Three and a half years after starting it, we had paid off all of our consumer debt and had only our original mortgage to pay.

More on that plan in some later posts.