07 September, 2011

Debt Story Part II: Eric's Past Mistakes

Check out part one and our disclaimer...


The title of this post may lead you to believe that I made nothing but mistakes in the past when it came to money.  On the contrary, I made a lot of “wise” decisions, but they could have been better.  Here’s how.



I’ll start where everyone seems to start, once they become a real adult and enter the working world permanently.  When I graduated from college I had a small amount of debt owed to my parents.  Thanks to my parents, none of this was student loans.  What this debt was from was overspending on entertainment and food, which I’m sure everyone can relate to.



The first 2 years of college, I would rack up small debts to my parents and pay them off with the money I earned in the summer, while earning a little extra for the upcoming year.  Then between junior year and senior year, instead of paying my parents off and saving up a little, two things changed.  First, I decided not to live on campus my senior year, and knowingly rented a place more expensive than the budget my parents gave me.



Second, I took a 6-week summer course in London, which thanks again to my parents who paid travel expenses, tuition, and room and board, I wasn’t going into huge debt for.  However, six weeks for my first time in Europe and my site-seeing and personal travel expenses quickly double the debt I already had to my parents.



So when I graduated college with enough debt and uncertainty on how to pay it off, I sucked up my pride and moved back in with my parents.  Living at home with no expenses, giving at least half my paycheck to my parents for the debt, I still had half left.  What did I do with the remaining half?



Instead of paying my parents off quicker or saving the money, I bought new gear for backpacking, climbing, kayaking, and mountain biking.  I started racing mountain bikes at least once a month (entry fees aren’t cheap) and going out to beer bars four or more nights a week.  The only thing I was doing right during this time was paying for everything in cash, while still paying half my income to my parents.  Even with all of my toys and expensive activities, I still managed to pay off my parents in less than 10 months after graduation.  Now I could really have fun.



Within months, my parents third car, which I had been driving and only paying gas for, died.  Knowing my dad wanted a Mustang for himself and having fallen in love with his Wrangler, I bought the Wrangler for what the car dealer offered him.  By bought, I mean I now owed my parents money again and started making a regular car payment to them.  This time I owed them interest (note: I’m not complaining, just stating a fact).   Since I owed them interest, I actually felt like it was a more formal arrangement and didn’t feel bad about only paying the minimum payment.  This meant I still had the majority of my paycheck to play with.



I proceeded to buy a shiny, new road bike in cash and a used motorcycle, half cash, half 0% credit card for 6 months.  I barely made the final payment by the 6 month mark, just squeaking out of paying a ton of interest.  I was still going out to beer bars and also going on a lot more dates with Elizabeth.  Around October of that year, my parents told me they were going to be moving to a condo, which meant I had to move out on my own by the time the house closed.



By December, I was fully self sufficient.  I rented a townhouse with a childhood friend, Lance, which cut my commute in half and was way closer to Elizabeth and all my friends except my mountain bike buddies.  Luckily the entire townhouse was furnished with very nice hand me down furniture since my parents were downsizing.  



I now had a car payment, rent, grocery bills, and all the other normal bills that are associated with living on your own.  Because I was unwilling to change my habits and I had all of the additional expenses, I quickly ate through my savings account.  I was doomed for debt at this point.  Then, by the grace of God and a good friend, Sam, I got a new job which paid more, just enough to sustain my lifestyle.  Over the next year, I didn’t change my habits much, which meant I was living paycheck to paycheck and, on bad months, eating into what little savings I had left.



Now, with my lease about up, Lance moving out,  and Elizabeth and I getting more serious, I started thinking it was time to look at houses.  I didn’t look far and was approved by the bank for a 3 bedroom townhouse in the same community Lance I were renting in.  I borrowed the 5% down payment money from my parents. But soon decided it was a really bad idea because I didn’t have a clue as to what I was really getting into.  Phew, that was close.  



But, since I had the money from my parents and financial institutions thought I was in good enough financial shape to give me a mortgage, along with the fact that I love Elizabeth, why not take all of that money from my parents and buy Elizabeth an engagement ring.  This time I followed through and I wouldn’t change a thing, although I might have told my parents that I was still going to spend their money, just not on a house.  Now I was even further indebted to my parents, but they didn’t seem to care since they had a wedding to plan and so did I.  Then it sunk in.



I needed to get serious about life/finances since I was about to be responsible for a household, not just myself.



Did I make some mistakes?  Absolutely.  Have you made similar mistakes, convincing yourself that you weren’t as bad as all your friends since they were spending more that you?  



Do I regret my mistakes?  I don’t think I can, since I learned so much from them … and I did have fun while doing it.  Was the price of your “fun” too much?  Would you really do anything different?  How else would you have learned?  What did it take you to finally start setting things clearly?



4 comments:

  1. I AM LOVING THIS!!!! Zach and I had a "come to Jesus" talk last night.  We are just being so careless!  I have huge issues with CC and Zach can't pass up on eating out....a bad combo!  Can't wait to hear how you got debt free.  We would be debt free if we weren't so careless with the extra money we bring in.  Can't wait for some tips!!!

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  2. I'm so glad you're enjoying! We had planned on just one post (tomorrow) on our tips, but we're thinking it might end up being two parts:  emotional/mental and practical.  We'll see out things edit out tonight :)  It's been fun writing this together and reliving the last 3-4 years

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  3. I am loving your "debt segment". All of our debt is student loans, and it is a beast. But we are determined to be Debt Free! (dave ramsey yell) someday...

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  4. Keep it up!  It's soooo worth it :)

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