How I Did It: Got Into and Out of $30,000 in Personal Debt

This is a guest post from David Bakke of MoneyCrashers.com.

There is a way to get out of huge personal debt.

David Bakke, 46, shares his story about getting out of debt on the personal finance blog MoneyCrashers.com. He lives in Atlanta with his young son and works full-time as a freelance writer.

Before the passage of the CARD Act in 2009, credit card companies had few rules when it came to marketing their wares to college students. In fact, the dangers of credit and credit card debt weren't as prevalent or well-known back when I got my first card. And as a college student, that made me easy prey for credit card issuers. Unfortunately, I didn't become aware of the dangers of misusing (or overusing) credit cards until it was too late. In spite of the protective CARD Act changes, credit cards can still be dangerous. To avoid the temptation of a seemingly endless line of credit, read on.

How It Happened

I was in my mid-20s and my second year of college. My parents were financing my college costs and living expenses, which was a blessing, but with a full course load I had little time to earn much spending money. One day at school, I noticed a tent with credit card reps featuring a free T-shirt for college students. I was intrigued because I didn't know much about credit cards at the time. My parents only had one, and rarely used it.

When I found out that I could buy stuff without actually paying for it, I was in hook, line, and sinker.

When I found out that I could buy stuff without actually paying for it, I was in hook, line, and sinker. The second I got my hands on that new credit card, I was off to the races. I bought new clothes, entertained friends, and went out on expensive dates.

How Expenses Added Up

Believe it or not, the debt I accrued didn't involve any big-ticket items. Sporting events, concerts, bars and restaurants, and weekend getaways added up in a hurry. It didn't help that a few friends of mine jumped on the deal as well and were equally irresponsible with their purchases. Once I maxed out that first card, I signed up for another. And another and another. I was able to keep up with the monthly minimums for some time by taking a part-time job, but my debts eventually became unsustainable. Most of those credit cards were closed because of nonpayment or because I went over the limit. By the time I graduated, my balances combined with what I owed my parents for college totaled $30,000.

How I Changed Course

I lived at home while I was in college and one day, my parents saw one of my credit card statements. After discovering the extent of my debt, they gave me an ultimatum: either change my ways or they would take over my finances. Not only was this humiliating, but it was a severe wake-up call, and to this day I'm grateful for it. I immediately got on a budget and reduced or eliminated monthly bills where I could. But where I made the biggest inroads was with my personal spending. I started with the small, seemingly innocuous expenses. I cut out fast food and trips to the convenience store. Eliminating those alone saved me over $100 every month. Then, my Mom taught me a neat trick—she said, "Every time you grab for your wallet, ask yourself one question: ‘do you really need this?’" Based on that strategy, I virtually eliminated all new clothing and electronics purchases, and I cut entertainment expenses back drastically.

What I Recommend

With extreme measures, I ended up getting my debt resolved within a few years. But if I could go back in time, I would choose a different path. I would have asked my parents about credit cards or done some research before signing up.

Jumping into credit card ownership when I was making hardly any money was simply foolish, and believing I could pay it all off (plus interest) once I graduated was unrealistic.

Jumping into credit card ownership when I was making hardly any money was simply foolish, and believing I could pay it all off (plus interest) once I graduated was unrealistic. Sacrificing the things I'd grown to enjoy—new clothes, nights out on the town—was difficult for a time. But it was only temporary. Once I finally paid off that debt, I was able to enjoy myself a lot more and felt immense satisfaction with what I'd accomplished.



Final Thoughts

Credit card debt is often unnecessary and should generally be avoided. Cut costs, restrict purchases, do whatever you need, but avoid carrying a balance. It's true that emergencies may occasionally come up, during which case a credit card can help. But only if you commit to paying the balance as soon as possible. If you enjoy the convenience of using cards, simply pay off what you owe every month. That's the best way to secure a future of financial success.

[Any reference to a specific company, commercial product, process, or service does not constitute or imply an endorsement or recommendation by the National Endowment for Financial Education.]