You all know that I have debt. What you don’t know is how it came about. This post was not an easy one to write, and I am sure some of you will judge me. It’s okay. I am not perfect. I am just a girl who struggled to understand money and spent years in financial denial. I am now recovering from my old financial habits, learning to appreciate every hard-earned penny and building a brighter financial future. Penny by penny.
I grew up in a nice house and was sent to a good school. My parents were not rich, but they earned a good living. My father made a career in construction and my mother was a stay-at-home-Mum looking after us kids until I was 10. Since both of my parents had good jobs, they could afford to buy us kids nice things, pay for private tutors, invest in a summer house for our summer vacations and take us on holidays abroad. My parents divorced when I was 14 and my father moved to a different country, so I have my Mum to thank for everything she has done for us since then. She worked hard to ensure we received a good education and had what we needed.
Whether my Mum was busy building a successful career, or simply did not find this relevant (I was born in Estonia during the Soviet times where the word “borrowing” was non-existent and the word “bank” a foreign concept), we never really had “the money talk”. You know, the sort of conversation where your parents sit you down and explain the importance of money. Perhaps, not even sit you down, but mention every now and again the importance of saving. I never had a piggy bank to save my coins for something that I really wanted, and if there was something that I wanted, my Mum would normally get it for me. Don’t get me wrong, she wouldn’t buy us every single thing that we laid our eyes on, but we were privileged to own nice things. It is worth mentioning that my parents have never had any sort of debt (to this day my Mum does not own a credit card). Everything my family has ever had was purchased in cash. There was enough cash, but it was hard-earned.
I am not sure what went wrong and perhaps this is something worth digging deeper into, but I took out a loan when the first opportunity presented itself. It was a student loan that I took out when I was 18, but… and here is the shocking part… I did not need to take it out as I was one of only four lucky students in my year who got their education funded by the government (how? you had to be a genius at school). Despite this fact, they were offering a low-interest loan and without thinking twice I took it out (not a genius after all?). In my defence, the principal amount of my loan was £3,000 (I took it out one time when I first started Uni), it was at 5% APR and I spent half of this money to get my driving licence. You guessed it, the rest was spent on expensive restaurants, clothes and makeup. I was not a party girl until I turned 25 (and that only lasted for about a year) so I wasn’t spending anything on partying as I was simply not into all that. I was into brands, though. Expensive brands. Perhaps, I wanted to keep up with all my friends back in the day who used to splash their cash on gorgeous Chanel bags and shiny Dior lip glosses. I would never ask my Mum for these things since I was not a child anymore and was supposed to earn my own living, but the reality was I was not making enough cash to afford all the beautiful things that I thought I needed.
When I was about to finish university, my Mum helped me buy an apartment. She made a down payment on my flat which I paid her back within two years. This was the promise I made and I could never go back on that promise or any promise made to my Mum for that matter. The most valuable lesson that I learnt from this was always to pay back on time as promised, always; which is why I have never missed a payment in my life. Unfortunately, this has not changed the fact that I had zero knowledge on how to handle money that was coming in, and I wanted things that I could not afford, and I wanted them now.
I wanted a car and to fund it I took out a car loan. This was not any car, this was a brand new shiny vehicle and it was custom made. All my friends had new shiny cars that were financed, so I figured there was nothing wrong with taking out a car loan. My car wasn’t an expensive make (by no means Mercedes or BMW, although I do remember spending quite some time at the Mercedes dealership *cringe*), but still it cost around £10,000 back in the day. I paid it in full in 3 years and sold it after driving it for a total of 4 years.
There was another car after that, and this purchase I am still paying for now. I wasn’t going to buy a brand new car this time around and I settled for a second-hand car that I paid around £4,000 for. By “paid” I mean “took out a loan to fund the purchase”. I don’t own this car any longer but I am still paying for it.
My other big expense that I am still paying for now was my cosmetic dental surgery 2 years ago. I am not going to go into too much detail as really, who wants to hear about someone else’s dental issues? Let’s just say they were working on my smile for nearly a year and ended up costing me around £5,000. The money I did not have and had no desire to save, instead I went to the bank to ask for it because I wanted beautiful white teeth now!
The rest? The rest is on my credit card and this is the cash I spent along the way. Mostly, on things like expensive restaurants, clothes and makeup. The only cash that is due back to me (which technically means my current total debt figure is £11,495 and not £12,495 as I state) is £1,000 deposit that I paid when I moved into my current flat. Yep, I borrowed this money as I was
unable unwilling to save.
At the very peak, my total debt figure was £13,830 (yes, this was my original debt that I started to pay off just under 4 months ago, in May 2013). The funny thing happened. On my return from my holiday in Spain where I spent all my cash, I got up in the morning and realised how tired I was living from paycheck to paycheck. Somehow, this thought had not previously crossed my mind. I was making payments religiously but I just wished my debt was gone. Once and for all. Forever.
Years of bad financial decisions. Years of poor money management. Years of throwing money down the drain in interest charges. Just over 10 years being in and out of debt. Wow, this one hurts. It was time to open my eyes and smell the coffee. Unlike my parents who have never been in debt and could actually afford the lifestyle they were living, I was paying for this lifestyle with my bank’s money. The money that I still owe (well, some of it) plus interest. I can’t say that all this cash had gone down the drain, I did get some use out of it, but there is nothing to be proud of. I didn’t save this money, I simply borrowed and paid back with interest later. I call this stupidity, and I have no one but myself to blame. We make our own choices, and clearly I made all the wrong ones. Now that I’ve finally taken my pink Prada sunglasses off (better late than never, right?), I am serious about learning how to successfully manage my money and how to make the most of my money. I made a promise to myself (and my Mum, and you know what this means: I cannot ever break this promise), that once this mess is over and I have paid my debt in full, I will do everything in my power to never allow for anything like this to happen again. Ever. This girl’s financial future is bright and from now on it is all about growing money.
We may have not had money discussions at home, but my Mum taught us one thing that I am overly grateful for: in life do not count on anyone but yourself. This is how I turned out to be a very independent girl. My Mum did not have to support me financially through my university years and ever since then. I do not count on her to bail me out, I never have. I only count on myself, and I am more than capable of sorting this mess out on my own, and this is exactly what I am doing. I think one day this is something I can actually be proud of. I am grateful to my parents and my wonderful Mum in particular for the truly magical childhood we have had and all the beautiful memories we have created. I can only hope that one day I can gift a similar childhood to my children that I earn through my hard work. Earn. Penny by penny. Like my parents did. But you betcha, my children will have regular financial lessons that I hope they can benefit from. Starting early.
Curious facts: 2 years ago I spent my Christmas bonus to fund one year of law school (every single penny of it). I remember being torn (I could’ve spent it on a very expensive handbag or a few pairs of very expensive shoes), but I did the right thing. Also, I have never used a credit card to pay for my travels (somehow, this was the only thing I could actually save for). Maybe, after all, there’s hope for me.