In my early 20s, I got into a bit of credit card debt … to the tune of $9,000. Coupled with student loans and no job prospects, it forced me to move back in with my parents while I got back on my feet.
My credit card debt brought about some harsh lessons and sacrifice. But in the end, I learned from my missteps and found ways to implement better financial habits.
I’m happy to report my 30s have been much more fruitful — I’ve been debt-free for almost 10 years and have plenty of money to put toward my financial goals. I still use credit cards, but now with a sense of responsibility.
Still, I can’t help but think about what financial advice I would give my younger self about credit cards if I could go back in time.
Credit cards aren’t free money
When I first got a credit card, I had a general idea of how it worked: I could spend money I didn’t have yet and pay it back later. And if I paid it back before my statement came in the mail, I wouldn’t have to pay interest.
This meant that, even if I didn’t have the means to pay for something, I’d put in on my credit card. At first, it was simple things, like groceries. Then, I moved onto fancy trips abroad.
Unfortunately, I didn’t allocate my funds as well as I should have and found myself both spending the money I did have in my back account and also neglecting the credit cards I needed pay off.
I had no idea that only making the minimum payment every month meant I’d be paying off large amounts of interest over time. And I’m certainly not the only one who would’ve benefited from financial advice about credit cards at a younger age.
Only 35% of college students said they had ever taken some sort of personal finance class, according to a recent report from EverFi about money on college campuses.
Another report from the Council for Economic Education found that only 17 of 50 states in the U.S. require a personal finance course in order to graduate.
Now, I’m not saying that taking a class would have prevented me from getting into credit card debt, but that sort of financial advice could have made me more aware of how credit cards worked.
Credit cards can’t replace savings
Living paycheck to paycheck, I found myself relying on credit cards to pay for daily expenses. I had no money in the bank and wasn’t sure what I could do to earn money.
Needless to say, the importance of saving money would have been nice to know at that point in my life. Instead of feeling like a burden on my parents — remember, I moved back in with them for awhile — I could have used savings as a cushion until I found another job.
A recent Federal Reserve survey highlights a staggering statistic: Nearly 40% of Americans say they’d struggle to pay for an unexpected expense of $400. And I can’t stand the thought of anyone feeling as desperate as I did all those years ago.
Saving any sum of money can seem overwhelming at first — it certainly did for me — but every little bit helps. I started by saving the tips I got at a restaurant job a few weeks after moving in with my parents.
The amount you decide to set aside for savings depends on your expenses. For me, it made sense to aim for a few hundred dollars at first, and then work my way up to $1,000. A lot of financial experts will tell you to keep three months’ worth of expenses in emergency savings — and it’s certainly nice to have — but start small and go at your own pace.
Don’t let rewards distract you
There are so many credit cards out there, dangling incentives in front of your face. It’s hard not to want to take advantage of it!
Some cards offer cash back on purchases; yes, you get money for spending money. Others give you points toward things like merchandise and travel. A few even offer free memberships to subscription services and discounts at major retailers.
Take it from someone who’s been there: I know how tempting it is to open new credit cards to rack up rewards. But the rewards aren’t worth it if you’re unable to pay the cards off every month. I ended up carrying a balance and paying hefty interest rates — and if you’re not careful you could, too.
Those “free” rewards aren’t as enticing once you realize you’re paying even more for them in the end.
It’s OK to ask for help
This might be the most important lesson of all! Even though I received minimal financial advice, there are so many resources out there to help you.
I was able to enlist the help of my mom, who kindly showed me how to budget — but only after I admitted I was in debt. I also read scores of personal finance books to learn about other aspects of money, such as investing and automating my finances.
There’s no shame in asking for help if you don’t know something. There are lots of resources — blogs, free apps and low-cost services — that can show you how to improve your financial life, plus a few that actually do it for you.
If you have friends or family members who you know are knowledgeable, ask them for advice. And the more people you ask, the more informed you’ll be.
I made my fair share of money mistakes when I was in my 20s, and in hindsight, some of them could’ve been avoided. But the lessons I learned along the way have put me in a position to succeed, and now I know what I need to do now to ensure a healthy financial future.
No matter your situation, it’s never too late to learn how to budget, live a debt-free life and work toward bettering your finances.