Jane thought life was great! She was out therapy. Bills were getting paid. The savings account was growing! Financial stress was a thing of the past. And Jane was finally starting to grow up a little.
The keyword here is a little. While she didn’t do more than very weakly offer to take back her student loan from her parents, an offer her father refused, she DID take the initiative with a gentle nudge from her sister to take over her car insurance, promising to take over the car tags and registration as soon as she bought another car — something she was planning to do in the next year.
Though what she thought was planning was more like just thinking about it. Because in the 18 months she had been in her townhouse, Jane had only managed to save a total of $3,500 in the bank. And while that was a far greater balance than it had been, she was a long way away with her income from having enough money saved for a car, especially since in that year and a half, she had wracked up almost $10,000 in credit card debt.
Talk about living above your means!
Despite the fact that she promised herself she wouldn’t sign up for anymore credit cards, by this time, she had FIVE more shiny new ones anyway. Cards that came with limits in the thousands. She told herself she was getting them to replace the one she had been using the most often — a card she cancelled out of fear of losing control — a card that had kept growing until it had a limit of nearly $15,000! She practiced every ounce of self-control she had to keep it under five grand, and surprises of all surprises, she actually did.
However, she replaced that card with four others that surpassed the limit of that one. She wasn’t using them all, but she had them all activated and ready to go all the same.
To see how quickly she could save for a car, Jane finally sat down and looked over her expenses in detail. When she did and realized how much of her income was going towards minimum payments, she immediately saw the horrible, horrible mistake she had made in not paying attention.
Now, Jane had to come to terms with her terrible spending habits. This time she couldn’t blame her situation on not being able to make ends meet. This time, the credit cards weren’t bloated with groceries and gasoline and clothes and the occasional thing that really wasn’t a need. This time it was mostly things she didn’t need with the occasional grocery store and gas station popping up for those times Jane ran her account down too low couldn’t wait until the next paycheck to buy gas or dinner.
She discovered too late that now that she had money in savings, she could have always transferred money over into her checking cover an actual need, like gasoline, and paid it back when she was paid. She discovered too late that she could have always left enough money in her checking at the end of the month to cover things like this in the first place.
Now, she was sitting at her desk, pouring over her credit cards for HOURS to see how she gotten herself into this position (AGAIN), and was finding crazy purchases on her finance software. $3oo at the fabric store! It’s a hobby she loves, but she doesn’t love it that much! She was eating out to the tune of over $150 dollars a month. When she went over budget, she had just started charging it. Eighteen months of ignoring her budget and spending money like she had it had ruined her.
Jane was finally getting a really good look at her habits, and it was painting an ugly picture.
Poor Jane was horrified. How on earth was she going to save up for a car when she had $10,000 in debt? She would have to pay the debt off first, obviously. And with the increased expenses that came with townhouse ownership, and also some things she didn’t need like a loaded satellite dish, it would take two years of heavy sacrifice to get it paid off now. And Jane’s 13 year old Saturn was getting old and starting to smoke when she drove it across town.
Jane couldn’t possibly save up enough money to buy another car before that one started costing her a lot of money. She couldn’t take out a car loan. Not only was that one of two finance things she learned from her father growing up, NEVER, ever have a car payment (and save for purchases – something she had obviously been ignoring since college!), she couldn’t afford a car payment anyway.
She had been doing research for several months at this point and knew about how much money she would need to buy a good, four or five year old car. There was no way she would be able to do it under three years with the mess her finances were in, and three years was ridiculously optimistic.
Jane was desperate. She went into a frenzy selling things for her car fund and doing pretty well, but it wouldn’t be enough to get a car in the next year. It would barely put a dent in the debt she had. There was only one place she could get money: the “emergency” credit card she hadn’t used since her parents bailed her out. The card now had a $9,000 limit, and though she knew she shouldn’t, that it was stupid and even so much as made her sick to think about it, she uploaded the card to Paypal and transferred $7,750 into her savings account.
OUCH! Freaking out, Jane transferred half of the balance to the newest 0% interest card she had opened, another thing she knew she had no business doing (both opening the account in the first place AND using it), and now, Jane had truly set herself up for the biggest mess yet. Because now, Jane had almost doubled her debt to nearly $20,000 in one stupid transaction, on one cold, dark night in December.