Money Obedience

A friend of mine had many years ago run up credit card debt of around $25,000. She was fortunate enough that a senior member of management where she worked at the time loaned her the entire sum and allowed her to pay it back over time without charging interest. That interest-free loan made it a lot easier for her to eliminate debt rather than paying the 18% or more in interest charges to the credit card company. Think about it: 18% on $25,000 is $4500 per year or $375 per month – a hefty amount of money just to carry debt and get nothing for all that extra pay.

Anyway, my colleague paid off her interest-free loan in less than two years; quite an accomplishment. To do it, she cut back on her spending, especially on careless spending like buying shoes and clothing she didn’t really need, and going out. Before she knew it she was debt-free and she loved it.

When she told me how she got out of debt I felt really good. I like hearing financial success stories like that. She also stayed out of debt for a few more years. But then something happened. Well, nothing really happened except that she fell back into her old habits of spending money carelessly. She loved adding things to her shoe collection and wardrobe, and she bought nice and often pricey stuff. Needless to say she has run up credit card balances of about $25,000 again. But now, her other friend is no longer around. He retired a long time ago and moved away. So she does not have a financial knight in shining armor. If she wants to get out of debt she has to work a lot harder this time around.

It appears to me that reckless spending is a bad money habit that needs to be controlled vigilantly. It is all too easy to fall back into bad habits. For some, it’s more like an addiction. Any recovering addict can tell you that you have to stay alert so that your former addiction does not catch up with you, maybe years later when you think you are “safe,”

So, I’m writing today to say that eliminating debt is only part of the equation. You also must make sure that you stay out of debt. Don’t think that a small credit card balance years after having become debt-free won’t make much of a difference. It normally doesn’t all on its own. But if you are a debt-junkie a small balance can start attracting more and more debt and grow into a big balance before you know it. (Just ask my friend!) Once you are debt-free, stay alert to make sure that you stay debt-free forever!