That’s a lot of money. A fiscally smart person could use it buy a car, pay rent for a year, or feed a family of four for even longer. But when I was in my twenties, I wasn’t fiscally smart. My husband was in graduate school, and I was supporting us. My salary was good and covered our basic expenses, but I was lonely and bored and really, the idea of living “within our means” seemed so, well … conventional.
In those days, getting a credit card meant you had “arrived” because banks only gave them to their best customers. So when I received an invitation to get a credit card in the mail (something relatively rare in those days), I thought, “Let the fun begin!”
I remember the first time I flashed that card. I was sitting with friends at a bar, and instead of forking over the requisite cash, I pulled out that shiny new plastic and said to the waiter, “Drinks are on me.” Soon I was buying shoes, dinners, tickets to concerts, wine (lots of wine) and paying for it all with money I didn’t have. I did my best to pay off the bill each month, but the expenses got ahead of me.
And then came the reckoning.
Not long after he graduated, my husband and I sat down to review our financial situation. He’d been so busy with school, he hadn’t focused on bill paying or money management. For two years, I was exclusively in charge of our financial life. I’ll never forget the look on his face when I told him we had thirteen thousand, seven hundred and forty dollars of debt on our credit card. Oh, and by the way, our monthly interest rate was nearly 20 percent.
Yeah. Not exactly one of our marital high points.
Together we made a plan. First, we borrowed money from his mother to pay off the bulk of it. She gave us a much more reasonable rate and agreed to waive the interest for the first six months until we could “get back on our feet.”
Then, my husband became a Kelly Girl. We were in the process of moving across country so that I could start graduate school (it would be his turn to support me now). We had three months between the time he graduated and I would be starting. So instead of taking a much needed break, my husband typed, filed and answered the phone as a temp. His meager salary was enough for us to pay off another chunk of what we owed.
For the next two years, while I was in school, we lived frugally. We didn’t buy a much-needed second car. We rarely went out to eat. I never shopped. And what vacations we did take almost always entailed staying with friends or family. It worked. When I graduated, we had no additional credit card debt and had even managed to save a little for the down payment of a house.
We believe we were lucky. Without the help of his mother and the determination to live within our means, we could have landed in bankruptcy. Since that early painful lesson, we have NEVER incurred credit card debt again. We pay off our monthly expenditures in full and do our best to keep unnecessary spending in line.
Apparently, we are in the minority.
According to the Washington Post, Americans have nearly 700 million all-purpose bank credit cards and nearly 500 million retail store cards. And today, the average credit card debt is over $15,000. My generation just refuses pull in the reigns on its spending.
But the good news is Millennials have it figured out. A recent report from the Pew Research Center shows that young adults are not spending what they do not have.
From 2007 to 2010, the median debt of households headed by an adult younger than 35 fell by 29%, compared with a decline of just 8% among households headed by adults ages 35 and older. Also, the share of younger households holding debt of any kind fell to 78%, the lowest level since the government began collecting such data in 1983 … Younger households have pared their credit card balances. In 2010 only 39% of them carried a balance, down from 48% in 2007 and 50% in 2001.
Millennials are postponing the purchase of big ticket items such as cars and houses until they have the financial stability to do so. And when they do spend, they are investing in their future. We know student loan debt is at an all time high, but I believe this investment will pay significant dividends over time in both their own careers and what it means for our society. A better educated, more informed populace benefits us all.
So, on behalf of my generation, thank you Millennials.
Are you a millennial without credit card debt? What inspires you to be financially responsible?