I had a moment of reflection today, thinking back to 1992. A pivotal point in my life.
What does a credit card represents to you? For me at that time, it was like striking lottery, financial freedom, like a validation for all the hard work. Little did I know.
The first time I received my credit card bill, I only paid the minimum sum, usually $50. Clueless state of mind rationalizing “I have more money in the bank account by paying slowly”. No idea absolutely of the interest factor. It went on for several months. By then, I had accumulated five credit banks.
Can I borrow money?
If your best pal call desperately asking for money, would you have the heart to turn them away? Not me. This was someone I had known nearly 20 years and caught in a family situation not of her own making. Apparently her sister had signed on as guarantor for a friend and the friend had defaulted payment and now the creditors were after the sister. Emotions could sway all logical thoughts. Despite misgivings, I lend a few thousand dollars and wrote a cheque from an overdraft account. All these was happening while I was preparing for an overseas graduation trip to get my degree for a long-distanced course. Debt and more debt.
Where’s my money?
Reality knocked a few months down the road. Bills and more bills arrived. I remembered clutching four bills and staring into nothing. Friendship could be destroyed because of money. No, I haven’t heard from my friend about returning the money, till today. I was caught in a nightmare of my own making. On top of that, the mortgage must still be paid.
The road to recovery
One day, enlightenment happened. I had to take a hard look at my life, learn to forgive, forget maybe not, but move on with life. If anyone is facing a similar situation or had gone through the same situation, have faith, take control of the situation and not let it control you.
Step by step
First – accept the situation, don’t try to hide the bills.
Second - forgive yourself, it can happen to anybody. Water is cleansing – take a shower, go swimming.
Third – write down a plan.
Executing the plan
In 1992, there wasn’t that many financial softwares. Now, just google away. I found that calculating manually makes me feel closer to reaching a solution and it also makes the brain think harder. So there I was, using a calculator and a notebook charting how long it would take to clear all the debts.
- On a fresh page, write down the outstanding bill of each credit card.
- Calculate how much to pay for each credit card for that month, write down the balance rollover for next month bill.
- Add the interest (usually 24%), that amount will be next month outstanding balance. Eg. Sept bill is $5,000, you pay $50, balance rollover is $4,950. With interest ($4950 multiply by 24%, divide by 12 months) of $99, next month bill will be $5,049 ($4950 plus $99).
- Do the same for the other credit card bills. Work out the following months bill until there is zero balance. For each credit card, you can see how many months it will take to clear the debts.
- Play around of making a higher payment for each month and the debts are cleared much faster. The road to recovery is within sight.
Of course today you can use Microsoft Excel or Open Office Calc to work out the sum.
Bring a sandwich for lunch, eat in not out, cut away or hide your credit card. Put a picture of your loved ones in your wallet – the first and last thing to be seen when you open the wallet. Each time you want to buy something you don’t need, think of them.
For every bad experience, there is something to be learnt. Don’t give up, learn and move on.