When I was 16, I thought that I was grown up enough to start looking into a credit card. In many ways, it was necessary - my father was ill and unable to work. As a result, I was often the member of the family to pay for gas, cover the grocery bill, and loan my older brother money for college textbooks. While I was making what I thought was pretty decent money - a whopping $22,000 a year - waiting tables, I still felt like it would be a good idea to have some sort of a cushion in case of an emergency. My solution? A student credit card.
At first I was afraid of my credit card. I felt guilty even pulling it out of my wallet - no, I have to use my debit card! Slowly I began to grow accustomed to the credit card's presence, and decided to actually use it. It became my "online" card - I began looking for $30-50 things online that I placed on my credit card before promptly paying them off at the end of the month. Smart kid, right?
Slowly, my purchases grew bigger. That workout thing that's supposed to make your butt look so good? I totally need that, right? I know that I have a perfectly functional DVD player, but I need the Blu-Ray. I know that I can find that movie on sale for about $5 in the Wal-Mart bin, but I need it sooner than that - I'll spend $20 on it now. I still made payments on it every month, but I began to let the balance stretch out - rather than paying off the $250 at the end of the month, I only paid $50 a month, and let the balance hang out there in cyber land. It became easier and easier to pull out my credit card instead of my debit card knowing that I could just pay with credit, then make payments on it later. It doesn't take that long to pay off $400, right?
When I was 17, my mother informed me that she would no longer be financially responsible for me - medical bills, dental bills, car insurance, any of it. My father, sick as he was, couldn't pay his own bills, much less mine. Of course, right about then, my wisdom teeth became an urgent problem - they were growing in sideways, pushing my teeth together painfully, and breaking through my gums, risking infection. My dentist informed me that they needed to come out, and soon. He referred me to an oral surgeon with a price tag of $1,066.66.
I know what you're thinking - $1,000? That's nothing. There are people with tens or hundreds of thousands of dollars in debt - student loans, car loans, house loans, medical bills. $1,000? Psh! Keep in mind that I was 17, working 3 "official" jobs with 3 or 4 additional odd jobs - babysitting, mowing lawns, cleaning houses - just to take care of myself and my father. And I was going to school. In my world, $150 was "a lot" of money. I had never held more than $200 cash in my hands. To me, $1,066.66 was devastating. How could I ever come up with that kind of money?
Voila! Enter the credit card. I was up to a $1,200 spending limit on it, and I only had about $300 on it. I decided to max out my credit card to pay for my wisdom teeth removal.
It wasn't until afterwards that I realized just how much $1,200 was when you're not making that much money - and what exactly an interest rate was. My minimum payment of $25 a month wasn't making a dent. My dad was getting sicker. I was missing shifts at work to take him to the hospital. For every $10 I paid off, I spent another $30 on the credit card. My savings were depleted. And I was scared.
Again, keep in mind - I was 17. Everything is that dramatic.
Right before I turned 18, my dad died. My brother and I cleaned up his trailer and few meager belongings, and sold them for enough money to cover the cremation costs and lot rent for the two months it took us to clean out. I had moved out on my own and found a job in a country club, then a CPA office, then finally a part time job running mail in a big city law firm to supplement my tips and oddball earnings. Life started moving forward again.
I stopped eating out. I stopped shopping at Harris Teeter, and started hitting Aldi and Wal-Mart for my grocery needs. I clipped coupons and shopped the sales, only spending around $30 a week on food. I started turning off my air conditioner and heater for months on end during the milder months, not turning it on until it was below 63 or above 80 in the apartment, opting instead to just open a window at night, or piling on the blankets and fuzzy socks. I made conscious efforts to leave the lights off, and opted for books instead of television shows for entertainment. I never went to the movies, but stayed home or went to friends' houses instead. I stopped buying new clothes just for the sake of looking cute, and started perusing the thrift store aisles for clothes that still had the tags on. I buried my credit card in the recesses of my desk drawer at home and never spent it - ever. I made payments on it religiously, putting in extra when I had the money.
I paid it off, and rebuilt my savings.
Yes, this is a very, very small scale example of debt management, but to a kid, it was a big deal. Even now, it's still a big deal - not because of the amount of money, but because it taught me very, very important lessons regarding credit cards, debt, and spending habits that have stuck with me all this time, and will hopefully stick with me for a long...long...time to come.