When I tell people how I overcame under-earning and compulsive spending – and paid off $185,000 of credit card debt, jaws drop and eyes widen. And then come the questions… My story is an extreme one and people want to know everything, especially: A) How on earth I could have let my money situation get so bad? and B ) How could I possibly have turned it all around?
This week I’m going to tell all. I have no problem sharing my truth because the more we shed light on our money ‘stuff’, the quicker we can heal our relationship with money, overcome any money blocks and make a lot more of it!
What made you realize you were out of control?
I was rattled and shaken all of the time. My anxiety was constant. I couldn’t get a good night’s sleep on the nights when the debt collectors phoned me, or even when they didn’t. I felt desperate and joyless at that lowest ebb. I remember heading into work one day, thinking: ‘I just can’t do this any more.’ I was afraid to answer my phone. I was afraid to open my mail. My world was getting so narrow, I felt like I had tunnel vision. At times, it was as though the walls were caving in on me. I had no idea what to do or where to turn. I remember crying on the train on the way home, embarrassed to be in tears in public. Moments like these made me realize I had to turn things around if I was going to have any kind of life.
Was the debt always on your mind or were you in denial sometimes?
I went in and out of denial as I was accumulating my debt. I was so unconscious when it came to money. I spent unconsciously. I would go into a shopping trance after a bad day at work, then get home with all these shopping bags and the anxiety would hit. Later I would tell myself it will all be OK, but then I would wake up at 3 am with debilitating anxiety. So I could sleep at times, but the money angst would wake me up throughout the night. I knew on some level how bad things were, but I tried to push it down because it was too hard to face.
How did you get more CCs even with that debt?
This is the thing that still amazes me today! The fact that financial institutions were willing to extend my credit despite my shocking credit rating. When I came to Australia, I was able to get several new credit cards easily because they didn’t know my terrible track record in Canada. I shopped around for alternatives. Some of the major banks weren’t willing to give me credit cards when I had ones already maxed out – but I always found ones willing to come to the party.
What were you buying?
I spent a lot on spa treatments: facials and massages, and health and wellness products. A small fortune went on various supplements and skin care. I always wanted the best organic, French, dolphin-massaged products extraordinaire. I also overspent on holidays. Even when I was already in considerable debt, I still splurged on trips overseas. One of my biggest extravagances was when I had maxed out a fifth credit card and got a sixth so I could go on a five-star holiday in Hawaii for a week. I shopped like crazy in Honolulu. Spending a few thousand on clothing in one outing was effortless. Clothes shopping was a real weakness for me. I always wanted to ‘look’ the part and appear like a successful, stylish woman – despite the fact that I was secretly out of control.
How did your family react?
The first shocker was when I told my partner, now my husband, about how bad things were. He almost lost it. Being an actuary and someone who’s always been highly responsible and cautious with money, he couldn’t believe I had let things get so out of control.
I told my family in Canada and they too were shocked. They just couldn’t understand how I could have let things slide so badly. I felt the same way. It was like someone had hijacked my finances and driven them out of control. I hardly recognized myself for doing it. After the initial shock, my partner and family were clear that they were happy to support me emotionally, but it was up to me to sort things out financially.
Did your husband help you?
Financially, not at all! This was a huge shock and disappointment to me initially. I thought he would help me out with some of the debt, but he made it very clear from the very beginning that this was my money mess and it was up to me to sort it out.
He was happy to support me emotionally and encourage me to keep moving in the right direction, but paying off the debt, increasing my earnings and taking responsibility for my overspending was on me.
My Prince Charming dreams were dashed. What I learned, though, is that he did the most loving thing a partner could do. He encouraged me to rescue myself financially.
What would you tell your 20-year-old self today in light of your journey?
These seven things:
- That she’s worth more!
- That she doesn’t need to feel ashamed to reach out for help when it comes to learning about money.
- To pay attention to her money because money self-care is one of the most important ways a woman can look after herself.
- To start negotiating her salary from her very first job.
- To talk about her feelings around money openly and find experts who can give her good advice.
- To take daily, consistent action to manage money better.
- Most important: I would let her know that how she feels about herself has everything to do with how much money she has and how much she earns. I would let her know that she is worthy of a high income and to be comfortable with large amounts of money.
What was the first thing you did to turn your money ship around?
I decided to double my salary. That had to be my starting point if I was ever going to get on top of the debt. I wrote that number down and committed to earning it within three months – I did it in two!
The next thing I did was cut up my credit cards. That was a REALLY tough one – given that I had 11 of them! I knew that I would have to rehabilitate my spending habits before I could use credit card safely again. I had to revert to using direct debit cards and cash. If I didn’t have the money for it, I didn’t buy it. Simple. Difficult, but simple.
Then I started calling all of my creditors. I made a list of what I owed, the names of the institutions and called each and every one of them. I explained my situation of financial hardship, made it clear that I was committed to paying it all off and started to negotiate payment plans with them.
I also created a budget – that was a novel experience! For the first time ever, I started to track my spending. All of the extras had to go. No more magazines. No more than one meal out a fortnight. Packed lunches for work. It was belt-tightening time.
I got free advice. I got free legal advice about my consumer credit card rights and free financial advice via government agencies. I made sure I understood what my options were and mapped out a plan. I was told that bankruptcy was the easiest and quickest way to remedy my situation, but I refused to do that. I knew I was going to own my own business one day, so that simply wasn’t an option.
How did you deal with the debt collectors?
I made a list of everyone I owed money to and calculated the minimum amount that I could pay in each case. In the early days, it was really minimal – sometimes only $50-$100 per month which is nothing when you owe thousands. I did my homework and learned that if you make them an offer in writing, they are legally obligated to consider. I researched my options and rights as someone in financial hardship. I contacted each creditor and started the conversation. Some conversations were smooth. Some were not. At least I felt confident being on the front foot, knowing my rights and options. I made it clear verbally and in writing what I could pay on a regular basis.
Were you scared?
Terrified. Dealing with hard-hitting creditors is very intimidating. These are people who are paid to pressure you into payments and, quite frankly, they want you to be afraid.
Once I got honest about my situation and what steps I needed to take, I started those difficult conversations. After I approached the creditors, I overcame the fear and started to feel empowered. There were plenty of days when I had to make the calls and take action – despite the fear I felt. Overcoming fear or any difficult situation definitely isn’t a linear process. There were days when I could stay focused and fully in my power. Then there were days when I felt overwhelmed and like I would never get through it. But I kept taking action, stayed focused on my money goals and recommitted to my plan and vision – which was to pay down the debt in five years or less – every single morning.
How did you work out a payment plan?
First, I worked out the minimum that I could pay to each creditor while still covering my personal expenses. Then, I contacted each creditor and outlined my situation.
I negotiated a payment plan with each based on what I calculated I could pay. I committed to increasing the payments once my salary increased. In most cases, they accepted what I offered. I also negotiated some settlements. The key was doing my homework, being clear on what was manageable, keeping communication open and sticking to regular payments.
How much interest per month does $185,000 incur?
My credit card interest rates were, on average, 20% per card, sometimes a little bit higher because I often used them to get cash advances. So it amounted to almost $40,000 a year in compound interest. Pretty overwhelming. It wasn’t until I was more than halfway through paying down the debt that I felt like I was making any inroads.
What was the moment on your journey when you realized you were finally heading in the right direction?
There were a number of big milestones along the way. I remember the morning I got the call that I had landed my first six-figure role. I had set the goal to double my salary and did it in two months. It felt surreal. I was elated, but also in disbelief.
I also remember the day I made my final payment on my debt. I marked it off my payments list, which I had up on a wall because I always made a point of focusing on what I was paying vs. how much more I had to go. The day I made that last payment was like getting out of prison. For the first time in over a decade, I felt emotionally free. That was the moment I realised that if I could do this – free myself financially – I could do anything.
How do you ‘manage’ your finances now? Do you pay yourself first?
I have both personal and business finances to manage these days. I still find a tried-and-true spreadsheet that works really well for me. I have a clear personal and business budget that I track to. I’ll be honest – I’ve tried a lot of different online apps like Money Brilliant and these can be invaluable. I find the best thing for me is to review what I’ve spent via my bank statement and credit card statement each month. I keep all the dockets, review my expenses and continually look at where I can trim things down. I look for ‘leaks’ and incorrect charges as a regular practice. Yes, I do pay myself first. I also ensure I’ve got enough in my account to cover what I need to look after myself before paying any bills and expenses.
How do you master your mindset to stop spending and truly start saving?
I find that curbing my spending comes down to separating out needs from wants. When I’m in saving mode, I do an internal check when I’m shopping. I ask myself, ‘Do I really NEED this? Or do I WANT this?’ It’s OK to want things sometimes, but I know that practicing money self-care means making sure I have enough money to buy what I want vs. what I need. If it’s something that I want but don’t need, I ask myself, ‘Will I be OK if I don’t have this right now?’ or ‘Is it OK to delay this purchase? Can I wait?’ Usually the answer is yes. I remember that I’ll feel so good about myself if I walk away from something that I don’t need and reserve the cash. I remind myself regularly that saving isn’t a sacrifice, it’s a necessity for me and my amazing future!
How do you stop yourself losing control again?
Like everyone, I still have times when I overdo it with spending. Even though I’ve overcome some hurdles in this area, I’m by no means immune to it. I’m triggered to overspend when I get overwhelmed, stressed or overtired. I know there are times when I have to be extra careful and avoid the shops. I find other ways to nurture myself. If I can’t splurge on a dress, I make a point of having a nice bath and read a book or do something else that feels really loving and nurturing. If I feel tempted to overspend, I know that’s when I need to practice extra self-care. If I’m particularly stressed at work, I know that I need to create some extra time out for myself that week to have some early nights, do more yoga and relax more.
Phew, there you have it! I’m an open book. I do hope this clears up a few things for you and it is always my hope that by sharing my story I can empower others to get to grips with their own money ‘stuff’ sooner rather than later.
Yours in the spirit of honesty and openness,