Digging My Hole

January 31, 2010

Year one…

When I started college I had one Capitol One credit card with a $500 credit limit, and it was the only credit card I had during my first year of college. I had applied for the credit card in the beginning because I wanted to begin to build a good credit history. I remember my first big purchase was my college textbooks: $460… At the time, I had not heard of Half.com, Amazon, or Campus i (now DealOz). I remember walking up to the counter, handing the cashier my credit card, and saying, “Charge it.” Twenty days later I received the bill, sent in my payment of $460 within the grace period, and was back to a balance of zero.

Year two…

At the end of my freshman year of college, I had two credit cards:

  • Capitol One: $500
  • Washington Mutual: $1500
  • Student loans: $4000

As you see, I had $1500 of credit to play with. In my mind I knew that this was more than enough credit to do some major damage if I was not careful. Careful, I was. Each month I set a limit of $200 between the two cards. At the end of each month, I paid the bill.

One might say, “Wow, you’re pretty good at this whole credit game.” I seemed to be educated about the evils of credit. I had no bills. I had no monthly expenses. And every time I considered paying with credit, I made sure I would have the funds at the end of the month  to pay the bill.

Year three…

  • Capitol one $500
  • Washington Mutual: $2000
  • Citi AAdvantage: $1500
  • Student loans: $13,000

Going into my Junior year of college I had a total credit limit $4,000. How anyone would lend $4,000 to a college kid working a minimum wage job 20 hours a week is beyond me. My credit limit was half of my annual income at the time. I still kept a zero balance on all of my credit cards and I still followed through with paying my bill at the end of every month.

In the summer prior to beginning my third year I got smart. My home and my family were in California, but I attended school in Texas. I did not have a car, so I traveled by plane between semesters. I decided to apply for a rewards card that would give me points to use toward flights. I had taken out at $13,000 loan to may tuition. I signed up for a payment plan, made all charges to my credit card, and used the money I received from the loan check to pay off my bills.

By the end of my third year, my available credit was pretty high

  • Capitol One: $500
  • Washington Mutual: $2500
  • Citi AAdvantage: $1500
  • Student loan debt: $21,000.

I had $4,500 in credit available and I was already $21,000 in debt due to student loans. Considering credit, I was digging myself into hole by taking out student loans. But that’s about it. As far as credit cards go, I was digging a small hole at the beginning of every month and then filling it back in at the end of every month.

The summer before I started my Senior year of college, I had received letters from my credit institutions which decided to increase my credit limits: Total, I had $6,500. Too much damage could be done with that much credit. But I was confident that I could handle  the responsibility. After all, I still carried a zero balance on all of my credit cards. I was already in debt due to student loans, but that did not bother me too much since I knew I could find a high paying job as an engineer… right?

As confident as I was, I was not ready to handle what the next year had in store for me…


My Debt Story

January 20, 2010

I live my life by the following statement:

An object at rests tends to stay at rest and an object in uniform motion tends to stay in uniform motion unless acted on my an external force. – Isaac Newton

My Story

I was a senior in high school. I signed up and was granted approval for my first credit card one week following my 18th birthday. It was a Capitol One Platinum credit card with a credit limit of $500 and 21% APR. I remember thinking that $500 was just enough for me to purchase some things that I really wanted, but not enough to do any sort of damage. At the time I worked 20 hours per week at a major department store, earning $7.10 per hour. That comes out to roughly $560.00 per month. I knew I would be able to pay my balance every month if I were to max out, but maxing out was rarely the case.

For the remainder of my senior year and high school and through my third year of college, I made it a goal of mine to pay my credit card balance every month. I was successful in achieving my goal. In a matter of three year I was able to qualify for three more credit cards and three credit increases. My total available credit was $9,500.

At no time in that three year period did I carry a balance on to the next month. That all changed in a matter of 15 minutes…

Digging My Hole to come next.

Let the Journey Begin

January 19, 2010

I graduated college in May 2009 with a Bachelor of Science degree in Mechanical Engineering. When I started college, my parents did not have the funds, nor the income, to afford my tuition at a 4 year private univiersity. As a result, 60% of my college expenses were financed by federal subsidized and unsubsidized loans, private loans, and three major credit cards.

To make a long story short, I am a whopping $90,000 in debt.

Fortunately for me, my interests in math and science growing up were the leading forces that influenced me to pursue a degree in engineering. After graduating college, I landed a job as a design engineer for a respectable wellhead manufacturing company in the US and Canada oil and gas industries. I earn a rather median salary for my position, which is 10% more than the median houshold income for the city I live in. Being single, living 1700 miles from my home and family, and starting my career, I am learning a lot about living frugally, saving money, starting a retirement fund, and paying off debt.

Over the past few month, I noticed a large number of individuals who have held and are holding themselves accountable for their debt through blogging about their struggles, achievements, and climbing out of the hole of debt they originally got themselves into. I figured I would give it a try.

Now, I am not an expert at finances. I do not intend to give advice on money issue. What I will give you is my experience. What I will do is provide updates while I am on this path to financial freedom. This blog is mainly for personal accountability. But, I also welcome any comments, suggestions, and encouragement from readers who will choose to follow me while I am on this path to financial freedom.

Net Worth - January 2010