Saturday, 3 May 2014

Time To Break It Off - Chapter 1




 Dear Baby, Welcome to Dumpsville. Population: YOU! -Homer Simpson

I've lived paycheck to paycheck since I started earning a paycheck, and I know I'm not alone. There are two types of women in my situation, those who have no extra money but spend like they are making six figures, and those who have no extra money and try really hard not to spend more than they have. Who do you think has more fun? Here's a clue, my shoes do not have red soles and I'm not on a first name basis with the cute bartender at the local nightclub. What I do have is a very embarrassing amount of credit card debt that I told myself was accumulated by making emergency purchases. It turns out, after taking a closer look at my statements, that I may have been stretching the definition of the word emergency all these years, and it's time to stop lying to myself.

There are two paths a woman can take when faced with the consequences of her spending habits, suppress the embarrassment and guilt and blindly shop herself into a retail coma, or make some serious lifestyle changes as I'm about to do. I think that I can empower myself to have more fun, get in better shape, decorate my house, save for retirement, climb out of debt, and stay within a modest budget, if I just cut the cord on my cards.
I've decided to spend the next year sans credit cards, saving for the things I want to buy while living large on a budget. I'm going to put a plan in place to pay off my debt, but will I have the patience to wait until I save up the money to buy that new couch, get that long overdue haircut, take that trip, or buy that dress? There's only one way to find out, I will create a budget, track my spending and my savings, and look for new, creative, and frugal ways to have fun, live better, and pamper myself. It's going to be great! I hope.

In order to bid my credit cards farewell, I will have to put them into a category called Debt and leave them there. I must convince myself that any money I put on my credit cards is not money that is magically now available on my credit card to be spent, which has been my fatal mistake all along. Like breaking up with a boyfriend, I have to remind myself how bad the relationship has been for me. Credit Cards have given me a false sense of security, manipulated my weaknesses, charged me interest on my love, and made me look bad in front of my friends when they get cut off at the bar. There are serious trust issues too, as I lay awake at night tormented, thinking of what they are doing with my credit score. No matter how many times I push them away, they always come crawling back asking for limit increases and tempting me with time sensitive offers. Sure I get some nice things once in a while out of the relationship, but I'm left mostly with bad memories of 50% off sales gone terribly wrong and Friday afternoon lunches leaving a bad taste in my mouth. It's time to put all my credit cards in the debt category and remove their number from my little black book. I have to break up with Johnny Debt.

It is said that knowledge is power, but according to Raj K. Chawla and Sharanjit Uppal's article on Household Debt in Canada, the majority of households with the largest amount of debt also claim to be the most financially literate. On one hand, that makes me feel better about my situation since, not only am I not alone, but I'm among the elite. On the other hand, that information is kind of depressing given that even the self-proclaimed financially savvy are not safe from the false sense of security that bank loans and credit cards seem to conjure up for us. Based on a consumer study, the debt to income ratio has increased from 66% in 1980 to 150% in 2011 and the aggregated household in Canada owes $1.50 for every one dollar that they earn. In layman's terms, we're screwed.  However, there is another way to look at it, by breaking down the debt into categories. According to, 67% of consumer debt is from loans, and 33% of consumer debt is from credit cards, and to break it down further, we know that loans are typically secured and credit cards are not. This is where financial literacy comes into play, almost all loans are entered into by an individual who is making informed decisions, weighing their options, and signing contracts locking them into payment terms and amortisation periods. Also, the bank has the right to refuse those loans if they believe the individual does not have the means to pay it back under the terms of the contract. Unfortunately, credit cards are so much easier to get our hands on, and as a very bleak result, many people who end up having to file bankruptcy usually have anywhere from 8 to 12 credit cards and thousands of dollars in debt.

The point I'm trying to make is that loans are fairly cut and dry, they are typically a set amount and we take full responsibility for their repayment, whether the initial loan was a good idea or not to begin with. Credit Cards take on a very different psychological meaning to most consumers. The truth is that most people subconsciously think of credit cards as free money, since we can spend big and pay back small at our own free will, while choosing to ignore the accumulating interest. In essence, we are Mormons when we take out loans and free wheeling rock stars when we use our credit cards. And what happens to hotel crashing, drug abusing rock stars? Eventually they end up either arrested, dead, or sad and alone and completely broke.

Being a credit card holder is like being accepted into a socialite club. When you pull out that card to pay for not only your meal, but, your friends meal too, you give the air of being of a slightly higher class of individual whom banks concur is a solid outstanding citizen with strong morals and unlimited worth and means. Why else would you have a credit card if you weren't amply able to pay it back every month while using it as a very convenient form of payment all over town? The truth is that almost any idiot can be a part of that club and as soon as you pull out that card you are subjecting yourself to a sociopsychological and emotional game that will not end until you gain control of your ego, stop spending recklessly, pay off those cards and start living within your means. Come to terms with the fact that you are a pauper, not a princess. Unless your name is Kim Kardashian, you should not be buying lunches for your buddies to give them the impression that you are doing well financially. If they are truly your friends, they will be happy to pay for their own meal, or just meet for coffee instead.

In Tom McFeat's Personal Finance article on CBC News Online, he points out that Canadians have 50 million Visa and Master Cards with interest rates as high as 20%, and 24 million more retail cards with retailers charging up to 30% interest on unpaid balances. More and more retailers are joining the game every year, offering points and incentives. Banks play the game as well offering six months of no interest to get you to use their product and get you hooked. You know what they say about drug dealers, the first one is always free, that's how they get you addicted and coming back for more. It should be illegal the way individuals are being manipulated into spending money they do not have.

You don’t have to hit rock bottom to change the path you are on, you just have to make the decision to regain control of your life and your finances. Making the decision is the easy part, it’s setting the goals, timelines, the steps to take, and actually doing the work, that is the hard part. The good news is that when you change your perception on how you view your credit cards and start creating new habits, there will inevitably be a ripple effect into all areas of your life. When you reprogram your habits and develop new automatic behaviours you are strengthening your willpower. So balancing your books will lead to weight loss, becoming more organized, and an overall increase in your fabulousness, You'll see!

Credit Cards are so sexy when you're getting to know each other, acting all supportive of your dreams and desires, inflating your ego, buying you new clothes and cocktails, but what you don't realize right away is that there are strings attached in the relationship. That dress that you paid $100 for will cost you a lot more in additional interest if you don't pay Mr. Credit Card back for them within thirty days. But he doesn't mind in the least if you don't pay him back right away, that way he's got a firm grasp on you and he knows that you aren't going anywhere, except back to the mall.

Why do most of us neglect to pay back our purchases in full every month? Because we are spending above our means and can't afford to pay back our purchases, it's that simple. When I look at how I've accumulated so much debt, I don't remember where it all began and how it got so out of control. Vague images of limit increases, treating myself to dinner out when I didn't feel like cooking, and that retail store that always has the best deals, flash before my eyes. How did it add up so quickly and why wasn't I paying the money back? The answer, I guess I thought I was paying it back with monthly payments of whatever I could afford or bare to part with from my paycheck. If I was a little wiser, I would have realized that I was spending so much more than I was paying back each month. I was clearly in some sort of drugged state for many years where I thought that little fairies were coming in the night to pay for all the extra crap I bought on a whim, without a second thought and almost without noticing I was doing i

I have a friend who will not make any purchases on credit. She told me this years ago and I marvelled at the idea, how is that even possible? The last time I saw her, she told me that her new thing is to attend estate auctions with her parents and she thinks she's becoming addicted to it. I remembered what she told me about never buying on credit and I asked her if that was still true. She told me that yes, it was still true, but she used her card here and there for small purchases. She told me that her current credit card balance was (I'm still in shock) a couple hundred dollars and that she would pay it off before the end of the month. She's my hero. I don't know anybody with a balance under a thousand dollars and who is willing to pay it anytime in the near future. I have another close friend who is so far in debt that she had to move back in with her mother! And then there's me - I've been slowly paying down my debt, moving money around, getting creative, but I'm still in it up to my ears because, like I said, I have the bad habit of spending on my cards after making payments to them. So just like a smoker, drug addict, or alcoholic, I have to cut myself off and go cold turkey. I'm scared. Seriously! But maybe since I'll be keeping a diary (this book) of my successes and failures, I might just be able to do it.

So what finally motivated me after all these years to make such a drastic change, you ask? It was a combination of things that I think most people in my situation can relate to:

  • I've reached a certain age where I should be stable in all areas of my life, and my balance wheel is seriously deflated in the monetary category.
  • I'm tired of all my money being 'spent' before I even get a paycheck.
  • I have no cushion if I lose my job tomorrow and is down right scary (and likely since I spend most of my time writing/blogging/or on pinterest)
  • I'm tired of having a complete meltdown once a year over my financial situation.
  • I have next to nothing saved for retirement, and I really want to see the world someday (she said with a childlike twinkle in her eye).
  • I recently got engaged and realized that I can't afford to have a wedding, even a modest one, without going further into debt.
  • Having no control over my money makes me feel weak and that's just not acceptable any longer.
  • I want to buy my grandchildren stuff someday and go on vacation with them.
  • I don't want to leave a bunch of debt behind for my family when I die, you know, eventually.
  • I want to give to charity but I feel like I can't afford to.
  • I'm pretty sure this is effecting my blood pressure.
  • I'm afraid to check my credit score.
  • I would be more motivated at work if I actually got to see the money I make.

    None of these feelings are brand new to me, I've had them since I left college. So why haven't I done anything about it until now? Because it requires willpower, determination, maturity, and a complete lifestyle change. When I was in my early twenties, I wasn't about to let a little bit of debt get in the way of my smoking, drinking, and highlighted hair. In my thirties, I had long quit smoking (a sure sign of maturity) and I stopped going to the bars many years before, so why was I still hemorrhaging money? Because, although my habits changed, they did not necessarily improve. I found ways to access more credit and then I used it to buy clothes for work, colleague lunches, dinners out, and I discovered manicures and pedicures - in other words: Spa Days! I would go for what felt like long periods of time without treating myself to new clothes and then I would go on a shopping spree as a reward for my efforts. Silly girl!

    Putting yourself on a budget is like going on a breakup revenge diet except your bank account gets fat, and you can finally fit into that knock em' dead red dress. It's a win-win, no-brainer, let's do this situation! Where do we start? We have to start at the end - the goal. The goal is to get out of debt in three years, or 36 months. In other words, take all your debt and divide it by 36, that will give you your monthly payments and determine your course of action. More on this in the coming chapters. Right now we are at the starting line, let's not get ahead of ourselves. Instead, let's have a bit of fun while finding out what our real goals are. If you like spreadsheets, great! Fire one up. Make a column for each month of the year starting with the month you are in. Use this book to fill in your goals as we go through each chapter. Every chapter will have a "This Month's Goal" section that you can use to fill in your Goal Chart each month. You can add pictures, little green dollar signs, and check marks to make it a little more fun, like a vision board.  The only thing scarier than making changes it regretting not making those changes right now. Are you ready to do this?

    THIS MONTH'S GOAL - Just Walk Away
    Goals can only begin once we decide that we want to make a change. Mentally prepare yourself for all the challenge, and it will be a challenge. Ask yourself what you want from this experiment. Make a vision board or put some pictures around your house, car, work, and in your wallet of an old woman on a yacht or sipping margaritas by the ocean, whatever will motivate you and get you into the mood to get your ass out debt and into a better situation. Maybe keeping pictures of elderly women living in cardboard boxes would be a better inspiration to get out of debt, but it would mean a lot more explaining and, well, it's just not pretty to look at. That's called negative motivation and I'm all about the positive, but it's up to you.

    What’s your story anyway? Spend some time thinking about how you got into this mess in the first place, I mean really think about it. Did you spend blindly and tell yourself lies like I did, or did you just say screw it and spend, spend, spend? Reflect, forgive yourself, and commit to moving forward. This year is going to be all about you. You're going to treat yourself better than ever before without spending money you don't have. You're going to get health and happy and creative. You're going to get yourself into a better situation and forget all about the bad feelings and embarrassment that come with drowning in self-inflicted debt.

    HERE IS THIS MONTH'S MANTRA: Dump that loser!
    Psyche yourself up to break it off with your credit cards, we'll do it together, like breaking up with our boyfriends before going off to college, it's going to be a trip! A little willpower and a lot of humour will get us through this next year.

    Don't put it on your card unless you've got it in your bank. Do yourself another favour while you're at it and remove all the shopping websites you have saved under your favourites online. Just get rid of them. Just by making it a little bit harder to access, you're removing some of the temptation to shop online with your credit card.

    Top 100 Break up Songs for Android application has long been the perfect prescription for a break-up. This application plays the full tracks of 100 songs all about breaking up.

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