Sophomore year was up and running, but Jane had become an addict. By the end of the first semester, she would add two brand new shiny credit cards to her wallet, for a total of 5 credit cards! Five credit cards for a girl who had no job.
Jane started off paying the balance down as much as she could, but soon, she fell into a dangerous pattern of only paying the minimum payment. As long as there was money left on her limits, she felt like she had money to spend.
When she wanted to move from a prepaid cellphone to a contract phone, she charged it! When she was just a few more dollars short of being able to buy something she wanted, she charged it! And never once did she stop to think how long it would actually take to pay all this stuff off by only paying the minimums, nor did she think about how much it was costing her to carrying a balance from month to month.
Jane didn’t know what her credit score was, and she didn’t care. It was good enough to get a cellphone, and she had FIVE credit cards to play with — five credit cards totaling almost $3,000 worth of trouble she could get herself into!
Yep. That was worth it. Let’s go $3,000 in debt to get a credit score so she could avoid paying a $350 deposit to the cell phone company – a deposit she would have gotten back after a year, but Jane didn’t know that. No one ever told her how deposits work.
So Jane was not the paradise she thought she was in. As she neared her limits, her minimum payments got higher. It was taking more and more of her weekly stipend from her parents to keep her head above water, forcing her to rely more and more on the credit cards until Jane was not only a broke college student again, she was much broker than before!
Jane was starting to get stressed! So she applied for an on-campus job, telling herself she would use that money to pay her credit cards down so she could get herself out of this stressful financial cycle.
However, Jane now had some very bad habits when it came to money. The new job paid a whooping $60 a week, but Jane didn’t use that extra money to pay down her cards. No. Sure, she made herself feel better by paying a tiny bit more than the minimums some months, but that was all. Unfortunately, this made Jane feel like her situation was getting better. In fact, she was starting to think it was actually pretty good! Soon, Jane started to feel like she had some actual control over her money!
But when it comes to managing money, when people are not paying attention, the more they make, the more they spend: a scary and statistically high phenomenon called “see money, spend money” syndrome.
Jane was trying to out-earn her stupidity at $5.15 an hour with a job she couldn’t work more than 12 hours a week at.