Compulsive Spending

When I was 20 years old, I bought a brand new car. The only credit I had at the time was a cell phone bill that I was never late on, and somehow that was good enough that I didn’t even need a co-signer! I was so excited, and my dad bragged about how awesome I was at handling my money! This is where it all began…

At the time, I was selling digital cameras and eyeing them up everyday. We were planning a vacation and I decided since I had such good credit with the car loan, I would apply for my first credit card at my place of employment, and splurge on a new camera. Those idiots gave me a $3000 limit, and I went crazy. First it was the camera, but very soon after I needed a laptop for college. They advertise the great deals of “no interest for 18 months” so I thought for sure I could pay it off by then. Then I needed a printer, and a wireless router, a new camera case, and a laptop case, and on and on and on. Very quickly I had maxed out that card, and was barely making the minimum payment each month.

A few months later, I got a new job. One night I decided that I wanted to buy my boyfriend the new Madden XBox game. They had JUST released the 360, so I decided to be the greatest girlfriend in the world and buy him that to go with the game. I opened a credit card for it, and again, thought I’d have no problem paying it off. This card came with a “Bonus Card” with another $500 available. I had no intention of even activating it, until I washed my cell phone and needed a new one. I decided to go with the brand new Krazr for $400. Note: I was still not paid off on my other cards.

Once I was out of college, and moving to Pittsburgh, my mom decided I should get a gas card, so I could get the $0.05 off per gallon. This card ended up being a Visa I could use anywhere, and I decided to get myself a new iPod and a second digital camera (because I needed a small one to take to the bar without ruining my good one.)

When I moved into my own apartment, I bought a lot of my stuff at Ikea, so I got a card there. I maxed it out in three trips.

Are you seeing a pattern yet?

By the time I was 24, I was $6000 in credit card debt. Not to mention the $40,000 I had in school loans. BTW, I obviously did not get that computer paid off in 18 months, and got slammed with almost $3000 in interest!

I needed help, and I wasn’t sure where to get it, because I could NOT let my mom find out how bad it was. The minimum payment I was making on my credit cards wasn’t even paying the interest, so each month my balance was actually getting higher instead of lower. I finally talked to some people, and decided to seek out a loan. Of course, I got denied because my debt-income ratio was too high. The bank suggested that I pay off as many small balances as I could and then reapply.

After six months of paying as much extra as I could on the low balances, I finally paid off two of the cards. At that point, I tried again on the loan, and was approved! Now I’m paying back that $4000 loan at 10% interest, instead of SEVEN cards each at over 20%!

I’m a compulsive spender. I know this. I spend money to make myself feel better when I’m having a bad day. I convince myself I need something, when in reality I could obviously live without it. I “treat myself” when I feel like I’ve earned it.

My spending habits have had a huge affect on my friendships, simply because I could not afford to spend time with them. I chose things over people too many times to count. At the same time, though, my compulsive spending affects my friends in a way that I guess could be considered positive, at least on their end. I often insist on paying for everyone at the table. I am always offering to buy rounds for the group. When I want to go out and someone can’t afford to join us, I’m always willing to pick up their tab. Thankfully, I have a group of friends who would never abuse this horrible habit of mine, or I’d certainly be in even more debt than I am.

At least now, though, I am aware of my problem, and I am truly better than I used to be. I still splurge on things, (like my recent DSLR and macbook!) but I know what I can and can’t afford. I make sure I can justify it before making any purchase, and a lot of times I actually ask my boyfriend permission even though we don’t technically share our finances yet.

I can also say I’m much better than I used to be, based on my score on the  Charles Schwab’s Financial Fitness Check-Up Tool. I got an 86/100!! This is probably because I keep an insane spreadsheet of all my finances so I always know where I’m at, and I am investing both into a retirement fund through work, and another account.

Like I said, I know what I can and can’t afford now, and it’s much more rewarding when I make a purchase, to know that I won’t still be paying for it three years from now!! I have certainly learned my lesson, and hopefully continue to stay in the black now that I have more self-control.

Disclaimer: This post is part of the 20SB Blog Carnival: Friends & Money, sponsored by Charles Schwab. Prizes may be awarded to selected posts. The information and opinions expressed in this post do not reflect the views or opinions of Charles Schwab. Details on the event, eligibility, and a complete list of participating bloggers can be found here.