At the age of 23 I took off on my first big overseas trip. It was a three week adventure seeing some of the biggest sights in the US. I went to LA, Vegas, a quick glimpse of the Grand Canyon, San Francisco and New York. I had an incredible time.
I’d been planning the trip for a quite a while. I’d saved a pretty reasonable amount of cash but I also thought it would be a good idea to have a credit card – “just in case”. Of course once I was over there and having an amazing time, it didn’t take long to spend what I had saved and max out my credit card. I thought “I’m not going to be doing this again soon – so why worry?”
I came home with a bad case of PHD – Post Holiday Debt! With no savings, I wasn’t in a position where I could pay off my credit card balance quickly. I hate to admit it but there were a couple of months where I only paid the minimum.
I knew paying the minimum wasn’t that smart but I didn’t quite realise at the time just how dumb I was being. Did you know if you owe $5,000 on your credit card (interest rate of 17.15%) and pay a minimum of $100 per month off it – it will take 74.5 years to pay off. Yes, you read that correctly – 74.5 years!!!
It certainly took me longer to pay off than it should have but it taught me some really valuable lessons.
In my next post I’ll talk about how this has influenced not only the way I use debt but how I work with clients to better manage their debt.