How I dug myself out – and stay out – of debt (mostly)

Mirror, mirror on the wall… let’s talk about debt.

Debt can be an interesting little mirror. To your peccadillos. Your addictions. Your obsessions. In the early 90s, I was obsessed with 18 hole Doc Martens and CK One. Because I wanted to be Winona Ryder. (Don’t laugh.) But I was earning minimum wage, wearing a kilt and serving Guinness to foreigners.

Cue a store card.

That innocuous piece of plastic set the tone for my 20s: jol now, pay later. Only I was too young and naïve to get that the cost of “pay later” was more than just a few more rands and cents.

“Pay later” meant ending my 20s in a debt hole that mirrored obsessions involving beer, travel and first generation mp3 players. I don’t regret the travel, but I regret finding myself trapped in another country by the money I owed on booze and boogying. And having to spend a whole year paying off credit cards and choosing jobs for the cash rather than the career. And all in a country that’s perpetually grey.

And it meant I entered my 30s with no savings, no investments and no assets.

It was a rough lesson.

On the upside, I’m now allergic to store cards.

Am I debt free? Hell no. I’ve got a mortgage bond and car finance. But I’m comfortable with what that mirror shows me. And I work hard to make sure my penchant for ale and apps doesn’t dig me another hole. Here’s how.

  • I watch my spend. (Note: 22seven is a whizz for this). If the latest obsessions – sushi, shoes – start cranking up, I limit myself. I’m also pretty brutal now about differentiating between whether I want or need something. I’m no ascetic – in fact, I’m a borderline hedonist. But I’ve stopped buying (some of the) crap I really don’t need.
  • I only have one credit card. And it has a low limit. One I can actually pay off each month. I honestly don’t understand why people have more than one card, unless they are inviting debt. One card, that limits me to short term debt I’m comfortable with managing, works for me.
  • I save a little each month towards “big, unexpected shit”. Because I watch my spend, I know that the “big, unexpected shit” is usually house or car related. Roof repairs, new tires, a security upgrade. And it happens every year. And it used to screw me. So now I plan for it.
  • I have a “one in, one out” policy. If I buy anything, I have to throw something away. I started doing this primarily to deal with the clutter in my house. But unexpectedly it also made me think hard about what I was buying. Which meant I bought less. Winning.
  • I’m not afraid of good debt (vs bad debt). There’s a great explanation here of good vs bad debt. I’ve racked up debt to buy my house, start my own business and study further. All of which has paid off. But it’s not just about increasing economic net worth. For me, some debt is worth it if it increases my “experiences” net worth. Like travel.

I know that all of the above might make you want to gnaw out your own eyes with the very dullness of it all, but consider this: what is your debt saying about you? Is it reflecting scatter cushions and seasonal sales? Or Bali and building a business? I honestly don’t care what you spend your money on, but kidding yourself that the stuff is worth the real cost is just silly. It just makes the hole a little more comfortable.

Originally written for 22seven. 

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