The Amateur Financier

I try to share as much of my personal life with those of you who read this blog as I possibly can, particularly when it comes to my finances.  Besides being useful in illustrating the broader points I  try to make, it also helps, I like to think, in building a connection with you, my readers.

With that in mind, there’s something I haven’t been sharing which I feel I should: I have credit card debt.  Not just ‘a few charges on the card, which I will pay off at the end of the month, allowing me to collect bonuses from the credit card companies for free’ debt, but an unpaid (if still relatively small) debt that is accumulating interest as we speak.

How Did This Happen?

If you’re a long term reader of this blog, you might remember that I lost my job back in November; that was the starting event.  Given my extended period of unemployment before that point and the short time I was employed, I hadn’t managed to accumulate much of an emergency fund to that point.  Luckily for me, Pennsylvania has a pretty generous employment program, which, thanks in part to the numerous extensions passed by the federal government, I was still eligible to receive benefits, which provided me with an income stream roughly half the size I was previously receiving.

Unluckily, or more accurately, unwisely, I was still spending money as if I was getting my previous full income.  In fact, I actually ended up spending more, in large part because upon losing my job, I soon moved out to live with my fiancee.  While I adore being able to see her everyday and spend time with her, it did make a major dent in my bank account.  Besides the increased number of date nights that we went on (thanks to no longer living 330 miles apart), I went from living essentially for free in my mother’s basement to contributing a sizable amount of my unemployment to bills and food expenses.  (The trip to Philadelphia for NCECA, while fun, was probably also ill advised given the state of my employment and finances.)

What happened shouldn’t be a surprise to anyone who’s done much reading in the personal finance sphere.  I started dipping into my savings accounts to cover the credit card bills; when those funds were gone, I was dependent on getting my unemployment benefits in a timely manner to cover the expenses.  Before long, trying to beat the clock caught up with me; as of May, I didn’t have enough to pay off the bill in full when it came due, so I paid the minimum and starting floating the balance on the card.

The bane of my existence

I was still pretty confident, though; by that point, I had gotten my current job at Wal-Mart, and with that income combined with the continued unemployment benefits, I was sure that I could quickly wipe out the remaining debt and even start to accumulate savings again.  (Since I’m not working full time at Wal-Mart, Pennsylvania’s unemployment system allows me to keep drawing unemployment benefits in addition to collecting my pay from work.)  It was working pretty well for a while there, too; only about $150 of last month’s bill needs to be paid (although, the charges for my spending in May are due soon, as well).

Unfortunately the bottom has fallen out of that plan; while filing for my latest set of benefits, I discovered that I’ve exhausted what the Pennsylvania unemployment system is willing to provide for me.  I’ve gotten my last unemployment check, which was much smaller than I was expecting, to boot.  My Wal-Mart income, about one quarter what I was earning at my previous job, will not allow me to pay off my debt for at least a few months.  In other words, all my attempts to keep unemployment from interfering with my fun and enjoyment have blown up in my face, leading to a hunk of money sitting on my credit card bill, just taunting me.

The Lesson

I’m not sharing all this to win any pity; given that most of the people who comment on my blog are fellow personal finance bloggers, I’d expect more recrimination and ‘What were you thinking?’ comments than pity, anyway.  I’m sharing this because I hope it can serve as a warning; it’s easy to delude ourselves into thinking that we have everything under control, even as it starts to get out of hand.  Had I stopped to notice what was going on, or had the courage to really take myself to task for my increasingly bad money habits, I might not be in this situation now.

Here’s my advice to all those who find themselves in similar situations to the one I was in since November: Be realistic, even pessimistic, about how long it will take to get a new job, how much you earn from that new job, and how much you can really afford to spend.  It’s easy to tell yourself that you’ll get a job soon, that unemployment will see you through, that you don’t need to make any changes to your lifestyle now that you have less money coming.  If you fall into that trap, though, you’re just going to end up hurting yourself.  A much better, although admittedly less fun, method is to treat unemployment or any other bad situation with all the seriousness it deserves, and act accordingly: decrease your spending, cut out any vacations or other large, optional expenses, and do your best to keep your costs under control.

As for me, I’m doing my best to take care of this credit card debt as fast as I possibly can, and then a bit faster.  I’m doing most of my spending with cash, rather than cards, and am closely monitoring that to ensure I have plenty of money left over to cut down my debt.  (I haven’t gone as far as cutting up my credit cards, at least not yet; if I don’t see enough improvement on my debt in a few months, though, it’s into the shredder (or at least, into a huge block of ice in the freezer) for them!)  I’ll have that debt gone in no time, you can count on that; and then it’s back to more personal finance goodness in the coming weeks!

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