First Person: Overcoming My Credit Card Dependence

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I used to live my life on credit. In my 20s, I made an impulsive decision to move across the country in pursuit of a get-rich quick "opportunity" to sell water filters in an MLM company that was later shut down by the government. For about 6 months I depended on credit cards to pay everything from my utilities and rent to food, gasoline and clothing. After racking up tens of thousands of dollars of credit card debt, I had to learn to live without credit cards. I was maxed out. Getting out of credit card debt was a lot less fun than getting into it. I spent four solid years working 7 days a week and living far below my means in order to get out of debt. My austerity measures helped me prioritize, budget and plan so I could overcome my credit card dependence. Ten years later, I'm still free of credit card debt thanks to several key rules that I adopted after retiring my credit cards.

Writing down my dreams

I've heard of lottery winners who claim they wrote down how much money they wanted to have on a piece of paper and put the paper under the pillow. I don't believe in magical thinking, but I do think it's important to write down financial goals. I still remember setting the goal to own my own home when I was in debt. I knew I couldn't get a mortgage while I had a poor debt-to-income ratio like I did. To avoid getting into credit card debt again, I write new goals to keep me on track.

Counting the cost of credit

One of the reasons I so easily slipped into credit card debt was because ignorance is bliss. I never wanted to consider how much money I was sending the credit card company in the form of interest payments. Although I only have consumer debt in the form of a car loan and mortgage, I write down exactly how much interest I will be paying if I take a certain amount of time to pay off either of the two debts. I always pay off my credit card balance because it seems like a waste of money to pay interest when I don't have to.

Building an emergency fund

A lot of people say they keep a credit card as a backup in case of an emergency. However, I think it's better to have a debit card that can be used in an emergency. By saving money into a rainy-day fund, I feel more secure about facing any financial rough patches. I take the money I used to spend on minimum payments and funnel that money into my emergency savings accounts.

Thinking about my future self

Some experts speculate the reason people get into debt is because they aren't in touch with their future selves. They rather live in the moment today because it's more real than anyone they will be in the future. While I'm happy with my life now, I realize my quality of life is better because I've made financial sacrifices in the past. I live below my means so that I can afford more down the road. I want to be more financially comfortable in the future for myself and my family.

Although I could pull out my credit card to pay for a new leather sofa or countertops, I rather wait until my mortgage is paid off in full. I know that in 10 years, I'll still be the same person. I wish that person a debt-free life.

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More from this contributor:

Reaching my Debt Set Point

When I Don't Follow a Millionaire's Advice

Keeping Our Expenses at 2005 Levels

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