What I’ve Learned From Carrying Hundreds Of Dollars Of Debt On My Line Of Credit For 7 Years
Building a good credit score was always important to me, so I was always aware of my credit card balance and I always paid it off in full. But unfortunately, despite my best efforts, occasionally I had to dip into my line of credit in order to supplement my paycheck so that I could pay off my credit card bill in full or cover my rent. Even though I had spent the first part of my adult life building my credit and paying off over $15,000 in student loans, I continued to live the same pattern: use a credit card for any and all expenses, allocate one bi-weekly paycheck to pay off the balance, dip into my line of credit when “necessary,” and then try to shore up expenses the next month to pay it back.
Since I opened my line of credit in 2012, I’ve carried small balances on it, ranging from $100 to $2,000. I can only remember short stints of a couple of months of having no balance at all. I rationalized to myself that low-interest debt was fine, especially if your credit score was still in decent standing. But the reality is, my debts were not justifiable or necessary. Because I could take on more debt to cover an unnecessary splurge or to cover “emergencies,” like that annual expense or wedding I had known about for six months, I was. I am lucky to have unused credit to fall back on, but I have used it as a crutch and allowed it to enable by bad spending habits.
My first instinct was to curb unnecessary expenses, and the most obvious one to me was the fact that I spent money whilst at work every day. Every. Single. Day. I would buy something — a coffee, tea, snack, or lunch. And as upsetting as it is to think about how much money that amounts to over 3+ years, I am also really proud to say that over the course of 2017 and 2018, I became much more disciplined when it came to spending money on food and coffee at work. I now habitually pack my lunch for work as well as bring a thermos of tea.
These habits have changed the amount of money I’m spending at restaurants, as well as the frequency I actually utilize my credit card. To accomplish this shift in my lifestyle, I started out by tracking my progress in a small notebook. I made a weekly grid with the days of the week at the top and filled the rows with daily to-dos. Two rows were dedicated to positive financial habits: (1) bring tea to work in the morning (2) pack your lunch at night. I would give myself a check mark or an “X” and color-code accordingly on a daily basis. Forcing myself to track these behaviors, and even having to honestly score myself, helped make these behaviors part of my everyday habits. This year, I have started baking weekly treats that I can bring as a snack along with my tea and now I have essentially zero reason to spend any money at work throughout the week.
Although my spending on coffee and lunch decreased, theoretically allowing myself to increase debt payments for my line of credit, the reality was that I very much redirected these funds to other, non-essential spending like skincare and makeup and extra-luxurious hotels for vacation. Ultimately, I didn’t end up increasing my debt payments significantly and as I neared the end of 2018, I was really disappointed that I still had debt on my line of credit despite making room in my budget to pay it down. It’s almost February 2019, and there are three things that have me feeling really positive about my debt repayment:
1. I set-up 26 automatic transfers to my line of credit to coincide with my biweekly pay cycles and I will pay it off by the end of this year. I could have and should have done this sooner, but I now know that without these automatic transfers, I can’t be certain I’ll make more than the minimum payment.
2. This January, when an annual charge appeared on my credit card, it motivated me to take stock of what other annual or seasonal expenses I have. Over the course of the year, I pay over $1200 in annual fees, membership dues, and recreational sports leagues. For the first time, I created an annual budget that also includes these annual fees which has forced me to calculate how much money I need to save a month in order to cover my annual costs. Instead of relying on savings or a line of credit to help cover these costs, I’ve set-up “sinking funds” in my budget that are separate from my TFSA contributions and my general savings. The notion of “sinking funds” has revolutionized the way that I think about budgeting and storing my money.
3. I am taking much more time to deliberate purchases. I am committed to not splurging and instead waiting until my next credit card cycle before making a purchase. I also try to read/watch as many reviews as possible. I write my wants down which allows me to prioritize my purchases and also ensures I have enough money allocated to them.
I look forward to the time where I can redirect my debt payments towards my sinking funds and my savings. Until I get there, I am going to embrace this feeling of being more proactive, and less reactive, with my expenses.
Jessica is passionate about education, the arts, and sustainable food systems. When she’s not working she’s likely baking or snuggling with her cat.
Image via Unsplash