There’s a new hero in town ready to tackle your credit card debt. (hint: it’s you.)
Credit Card Debt Sucks
Literally. Credit card debt sucks freedom from our daily and future opportunities. If you have credit card debt, you already know this. You also probably know that:
Most Americans have credit card debt.
Credit card debt affects your credit score.
Making only minimum payments will cost you tons of money over the long term.
Credit card debt is such a common issue that if you google ?get out of debt,? you’ll get daily editions of new articles from well-meaning personal finance sites with steps to take action. Don?t get me wrong, there’s usually nothing wrong with the advice given. But many of us can?t use it for 2 reasons:
If we believe there are no actionable steps we can take, we freeze. We may think that the minimum payment is all our budgets can handle, or that paying off credit card debt with a personal loan is risky. So we do nothing. We feel trapped. This is where most of us give up.
Our biggest problem is that we are convinced that we can?t do anything about our credit card debt.
That’s When Financial Predators come out to “help”
In many cases, we just continue making minimum payments, hoping for some day in the future when a windfall might come along and get us out of the situation. Or, we throw up our hands and pay for credit card counseling or debt repair services. Be careful here. There is a huge difference between honest credit card counseling and sketchy debt repair services that could impact your credit score for years.?
Even if you erased your debt with a credit card ?repair? service or a bankruptcy, your FICO credit report sticks with you your entire life. A few mistakes and you’re stuck with that crap for years until it drops off your report.?Today, our credit scores also impact us in ways that have nothing to do with banking. Even potential employers are pulling credit scores.
Why Fixing Things Yourself is the Best Approach
You?re always better off sticking with a Do It Yourself (DIY) method to manage your credit debt. Not only is it cheaper, but through the process you will learn how to avoid debt in the future, so you can avoid falling back into the same trap.? And while that might seem overwhelming, you need to believe that you have the power to change things, because you do.
Don?t give up before really giving DIY a chance
We really have to bite the bullet by overcoming our own fears of facing exactly what we owe and what it?s costing us over time. This can be hard. We don?t want to see it. It?s depressing and makes us feel like giving up. The more we look at it, the worse we feel. I know. But if you bear with me for a moment, I want to explain why you shouldn?t feel like a loser if you are in a credit card debt spiral.
How Banks Take Advantage
The banking system is not broken. It?s actually designed to work exactly as it does: not in your best interest. So stop feeling like a loser. You aren?t at all and you need to wrap your mind around that.
If you are stuck in minimum payment Groundhog Day, you are exactly the kind of customer a bank wants.
If we talk a bit about what banking and debt really are, you’ll realize that, far from being worse off than everybody else, you’re actually very much like most people. You will realize that this is all one big game, and you simply need to learn how to play it. It may take some effort and creativity on your part, but it?s so worth it. We have to change the way we think about banking. Check it out…
1. Banks Like to Double Dip
Banks don?t create their rules to benefit us, they create their rules to benefit them.
When you deposit your paycheck in a basic checking account, the bank gets to use your money however it wants to, and you get paid nothing for providing this service to the bank. Conversely, if you want to use some of the bank?s money, the bank charges you interest. A bank makes money from the difference in what it earns in interest by providing loans, and what it pays in interest to depositors. With the minuscule rates banks pay in interest on savings deposits, if you are paying interest on a credit card, you are getting shafted. And if you are paying monthly banking fees, well, you can see where this is going.
The bank is making money off of the money you ?loan? it and off of the money it ?loans?? you. Think about it that for a minute.
2. Your Deposits are a Loan to the Bank
?But wait,? you say. ?I don?t have any savings in the bank, I just use it to pay my bills.? Doesn?t matter. When we deposit our paychecks in a bank, that money sits in our bank for around 2-3 weeks or so until our bills start coming out of it. What is happening to your money while it?s sitting there waiting for your bills? The bank loans your money out to someone else and collects interest on your money. So, even if you only deposit your paycheck until your bills clear, the bank gets to use your money for around 50-75% of your life for free. But if you want to borrow the bank?s money, even for a short while, you have to pay the bank interest. The banks are double-dipping.
3. Banks Even Lend out Money they Don’t Have
And if that pisses you off, as it should. Did you know that banks can loan money they don?t have? Banks only have to keep in reserve 10% of your deposits, and they can loan the rest out without your permission. What this means is that for every $1,000 you deposit in the bank, the bank can loan out $900 of your money and make money off of your money. This is called Fractional Reserve Lending and it?s completely legal and normal in our country. So you could say that, in effect, we do not have money system at all. What we have is a complicated system of IOUs. ?
Banks can create money by extending credit and loans to customers from money that it doesn?t technically own.
So, when you think about your debts, try not to look at yourself as some sort of failure. You aren?t. You are simply caught up in a game designed by the banks for the benefit of the banks. And it?s not your fault because we weren?t taught this. As depositors and borrowers, we are in a losing game until we learn the rules, learn how to play to our advantage, and flip the script on the banks.
How can we flip the script on the banks?
First, understand that you are no more in debt than the US government, the banks themselves or anyone else. Our entire economy is leveraged. It?s how the game works. You are just in a more vulnerable position because credit card consumer debt is usually for goods and services which are ?consumed.? For example, compare credit card debt to a business loan used to start a business, or a mortgage to buy property. These types of debt, though still debt and still incurring interest, are doing something for you. This is why credit card debt is the worst debt to have. It does nothing for you but does wonders for the banks. They love it. This should make you angry enough to want to do something about it.
Forgive yourself and start small
If we want to get ahead in this game, we have to get interested in it. We have to get involved. The problem is, ?money? is emotional. It?s hard to deal with. But you have to get out of your own way and stop taking it personally. So, stop with the debt-shame. It?s pointless, and it?s the primary reason that people remain stuck. If you get anything from this post, understand that changing your mindset and even taking one small action can begin to destroy your feelings of powerlessness and shame, and set you on a path to change your thinking and behavior so that you can change your relationship with money and the banking system.
If you don?t like the way you feel when you think about your credit card debt, you can change it!
While there is no quick fix for the credit card debt itself, you will be surprised at how taking action, no matter how small, can begin to empower you and temper feelings of shame and angst. Once you start, you will build momentum over time. The most important thing is to start.
Where do I start?
A guide to eliminating your credit card debt for good.
Ignore your feelings of overwhelm and let’s walk through some simple steps. First, you are going to want to grab your most recent credit card statements so that you can see all of your balances and the interest you are being charged for each account. Armed with this knowledge, you can get a picture of the options available to you.
I?m sure there are more people out there like me, people who woke up one day and realized that they were fucked. Over 50, broke and in debt, I’d been living month to month for years.?When I read about how to invest for retirement and see those little graphs that show how much you would have saved if you’d started socking money away years ago, I feel completely defeated.?
I?m going financially backward, and I?m getting older.
Trying to stretch each paycheck to cover childcare, your kid?s needs, the bills – you really don?t think about what you will be up against when you?re older.?I used to have a three-month whiteboard on my kitchen wall. I would faithfully update it with my son?s soccer, football and Taekwondo practices. Fees. Where he was going after school when I was at work. More fees.?I remember having to start saving in February to pay for his summer camps, aka ?childcare,? because adults don?t get summers off from work. (Why are we and our kids on different time schedules anyway?)
Then they go to college.?I tried to get him through without a student loan. I failed. That last year I cosigned a loan. It?s a huge burden for him now as he applies to law school. We chat online about how large of a loan he would need for the schools he’s interested in. We discuss how to come up with all of the application fees without him incurring more debt.?I wish I could help him, but I’m tapped out, broke and in debt.?
Save for retirement?
When you become vividly aware of your financial vulnerability, it?s like waking up to a bad dream. ?Wtf were you thinking? That you would never be old???We all truly have but two choices: get old or die.?I certainly didn?t imagine that I would be dead, so how did I fail to imagine that I would still be alive, only older … broke and in debt?
The fear. The overwhelm. You want to run away from it. To do the exact opposite of what you need to do. I froze for a long time. Deer in headlights. I had no idea where to begin. At first, it took me a while to fully accept where I was. Then it took me even longer to learn to let go of how I got there.?And when I finally started researching, I found out that I wasn?t alone.
The hardest part isn?t starting, it?s getting out of your own way so that you can.
Money is loaded with emotional baggage. Fear, regret, greed, angst, sensuality, illusion. Behavioral economists have been studying this for years. Apparently, when you are experiencing scarcity of any form – time, money, love – it can affect you cognitively to the extent that you can make poor decisions, decisions that increase scarcity. Scarcity mindset. It decreases your ability to plan while increasing your impulsiveness.
I have friends whose debt is greater than half their home?s value. When they get a windfall, they buy season passes to something. Or a new toy. In that same breath, they might mention how they wished they hadn?t taken that 2nd or 3rd mortgage. ?The things we could have done with that money!? These are good people, smart people! It became apparent to me that when you are used to living month-to-month, you are used to spending all of your money every month.?And this got me asking some deep questions about my relationship with money.
What is money anyway?
Digits in a ledger, with the power to dictate how we spend our waking hours. So, really important digits in a ledger. But the financial world can be intimidating. Take compound interest, for example. That thing that will definitely bleed us out if we?re broke and in debt, or could possibly multiply our money if we?re invested. While the theory itself may be simple to understand, the actual calculation is a far cry from balancing a checkbook.
The more you learn about money, the more you wake up to how crazy debt is.?Yet it’s up to me, and only me, to rid myself of any ignorance of something that has such immense control over my life, how I spend my time, where I can go, and what I can do.?I know I have baggage around money. But at this stage in the game, I also know that I don?t have time to uber-analyze why.?Because the other thing that goes with saving money is time. You need them both.?And I?m running out of time.
So, I decided it was time to learn how to crawl out of this mess. And to do this, I had to first stop freaking out about it. My odds of facing this challenge with a self-deprecating mindset were low. I tried to treat myself with compassion and forgive myself.?I had to start, somewhere.?And when you’ve been using your credit cards as a source of income, looking at your?credit card statements isn’t fun. It brings up?a flood of negative feelings. I tried my best to do it with the cold eye of a surgeon?s scalpel. Void of emotion.
I approached it like a puzzle. Like a game. Something separate from me.
First I looked for any recurring payments that I might have set up and forgotten about. Book club websites, Skype, Amazon Prime, Netflix, memberships… I canceled them all. It felt cleansing. Did I notice? At first, a little bit. Then?I stopped using credit cards completely. This took a huge change in mindset. I?d always looked at credit cards as that go-to?when something came up.
No longer could I visit my family on holidays. You search for hours to get a good price on a ticket and end up paying in interest what it would have cost you to fly first class. No longer could I buy that new thing because it was on sale.??I had to charge it but it was 20% off!? Five years later, you?ve paid double for the thing that you’d already gotten rid of two years prior. Crazy!
How I Hacked Peace Of Mind
The first rift between my emotions and money occurred when I began to see that money had nothing to do with spending. Spending was something I did. Money is just a tool. And I had some problems that only that tool could fix. If I truly wanted to get out of debt forever, I had to create a platform where going back into debt at the slightest mishap or desire was off the table.?I had zero savings. Everything always went somewhere. Why couldn?t I just leave it alone? Just let it sit there and ignore it?
I started to ignore the money in my account in the same way I had been ignoring my debt. I pretended that it just wasn?t there, and continued living as if I just didn?t have any to spend.?So far I?ve saved a couple months’ worth of monthly expenses. Ten years ago that much money would be vacation fodder. Today, I want to be alright with myself more than I want a couple weeks of hotels and airplanes and souvenirs. A vacation would be lovely but it would also set me back in time.?And I?m terrified that I won?t have enough time.?Who is going to take care of me if I get sick? The government? Ha!
My biggest fear is that I will die broke and alone in some shit apartment, and no one will know until they smell the body.
Just recently, I?ve begun to learn a bit about how to make money grow. Not by reading expensive and complicated financial books or hiring a financial advisor, but by actually doing it on a tiny scale. Nothing I can?t afford to lose. Like 25-100 bucks a month. I?ve lost nothing yet. I?m diversified?(don?t put all your eggs in one basket).?Microbalances. (Tiny amounts.)?You can see what it?s doing and learn without hurting yourself.?I started picking up part-time gigs. I stopped buying coffee and other little crap throughout the day. I bought a cheap unlocked smartphone and a budget sim to get out from underneath my ridiculous cell phone contract.
The internet can open doors for you if you use it.
The internet gives us access to free financial information. I started reading Investopedia, watching Youtube videos, investment for beginners blogs, anything. I discovered that I didn?t need some professional financial person to introduce me to the world of finance and investing, and I also learned that you don’t have to be rich to invest.
Today there are services for people just like me to learn about investing by doing it on a small scale. I started learning about?roboadvisors, fintech sites, cryptocurrency.?And then another weird thing happened. I actually became interested. The financial world was no longer a necessary evil, it was fun. Bit by bit the little pieces of financial jargon were no longer as mysterious as Chinese characters. They began to have some context.
It’s easier to play the game when you are interested in it.
As I became aware of my feelings around money, angst, excitement, stress, fear, greed, desire, depression, sensuality, I tried to be mindful of them and acknowledge them without getting involved. I also began to challenge my thoughts, to get used to the discomfort of these emotions, and just sort of check them out rather than let them dictate my behavior.
I’ll be honest, it isn?t very pleasant at first. Perhaps this is why so many people pay high fees for brokers to make decisions for them so that they don?t have to get involved. But it?s getting easier. I?m learning. And the more I learn, the more I realize that I’m not alone in the struggle to extricate emotions from money issues.
I found out that even Wall Street and emotions are not mutually exclusive. I laughed out loud when I discovered that you can check the emotions of today?s market on CCN?s Fear and Greed index.? Nobel?Prize Winner Robert Shiller, professor of economics at Yale, talks about the relationships of the stock market and human emotions. He says that bubbles and crashes involve the human psyche on a mass scale. And it all makes sense. We can separate nothing from our humanness.
Money is a human creation.
Flipping The Script
We needn’t be?ashamed to discover that our emotions around money may have been causing us to make long-term financial mistakes. Many of us inherited weird stuff from our parents and culture around money.
We shouldn’t be afraid of not knowing enough about the financial world to start learning. Many of us have zero financial education. I remember having a one-off class on balancing a checkbook in Middle School. That?s about it.
Couple this lack of financial education with the aggressive marketing and consumerism we have been subject to from impressionable ages thereon, and you have an interesting mix of bullshit running malware through your head when it comes to managing money. My senior year in college I received countless pre-approved credit card offers after starving to death to work my way through school for years as a single mom. It was like a feast. My new consumer debt slipped right in next to my student loan. I was a good little American.
We are programmed to comply on a daily basis. A new phone. A new car. New, new, new. We need the latest iteration of everything. We have a twisted and erroneous idea of a success. It is empty. Short-lived.
We are leveraging our future for the appearance of success.
We get into debt, get out of debt, get into debt, get out of debt.The cycle is insane. And a lot of us have been doing it for a long time.
I?m intent on shattering this financial pathology.?A few more months of saving and I will be able to attack those credit card balances so I can stop the bleeding once and for all. I imagine the joy I will feel when they are gone. I know it won?t be easy. And I now know it’s going to take some time. But I can use that time to learn about how to grow the money I will get to keep after I?ve finished. And I can use that time to heal from the twisted mentality that has kept me swimming in this financial toilet bowl for years.?
I?m over 50. I’m broke and in debt. I?m at Ground Zero.
So fucking what.?It?s a mathematical puzzle game. And I?m going to learn how to play it.
The stories in Life are real. Sometimes the names are changed at the author’s request.
Send us your story if you’ve been duped, on the road to financial recovery, conquered your finances, or want to give feedback. email@example.com