catapult magazine

catapult magazine

Vol 5, Num 15 :: 2006.07.28 — 2006.09.08


Credit spending was my addiction

In a yet to be published book that I completed this year, 100 Things I Learned On My Way To Going Broke (Inspirations for Difficult Times), I wrote:  “Based upon what I heard, spending everything you make is like experimenting with drugs; spending more than you make, through credit, is like being addicted.  And, the withdrawal from credit spending appears to be just as bad as withdrawing from any addiction.”  I also quoted actor Erroll Flynn who said “my problem lies in reconciling my gross habits with my net income.”

The book was written following my personal bankruptcy in October of 2005.  And, like most bankruptcies, it was a result of not paying enough attention to the amount of money being spent on credit and the amount of income available to pay for it.

The above quotes are part of the 100 things I found to be the humorous and sobering realities of the situation I got myself into, and the lessons I learned from the experience.  However, the time spent developing the book didn’t bring about the reality that I actually had an addiction.  My casual glancing at this catapult issue’s theme triggered a thought that suggested “maybe I have an addiction” (or at least did—I don’t have credit any more).  My addiction was to spending money I didn’t have.

One definition I found for an addict is “to give oneself up to a strong habit.”  I went bankrupt at age 59.  I had my first charge account at age 16 or 17.  I’ve basically gotten myself into deep credit debt for 40 years.  I AM AN ADDICT.

My first credit experience was as a teenager with a paper route.  I talked my father into co-signing for me so I could open a “teenage charge account” at a local jewelry store.  The attraction wasn’t jewelry.  It was newly available electronic equipment that was more portable than previously available.  Things like (over priced and really-not-needed) record players, tape recorders, radios, etc.  (remember this was the 1960s).  Because I had to pay for these things out of my paper route profits, many times I found myself out of money as soon as I paid my weekly paper route bill.  So, I’d collect from some of my route customers who paid by the month so I would have spending money for the week.  Like all good deficit spending, it eventually caught up with me.

The last day on the route was the day before high school graduation.  I was behind on the purchases for the newspapers by about a week and a half or two weeks.  At my graduation party the next day, all of the graduation money I received went from my hands to my parents’ hands so the past due bills would be paid.

Right after high school, I went on active duty for the U.S. Marine Corps.  After my time with them, I worked various jobs until the fall semester of college started.  I didn’t really apply myself and my grades suffered.  Without good grades, my parents’ economic support was cut off.  So, it was “off to work I go.”

I finally found a trainee position with county government.  I was in heaven.  I got to wear a suit to work every day; and, I was making $4,134 a year (remember, 1966 dollars).  With a “good” paycheck and a government job, credit was very easy to get.  So, I got a credit card and a relatively new car.  I was dressing well, eating well and socializing quite well.  Three years later, when I moved to the Detroit area and took a similar, but more advanced position with another county (at $8,000 per year), I had to work two full time jobs to try to get out of my economic hole.

After crawling most of the way out, I quit the job and went back to college on a full time basis.  This time, my grades really took off, but I had little money after making a car payment, paying the rent and trying to eat.  So, a year later I begged for my former government job back—I got it.  Guess what?  I started my spending pattern all over again.  Two years later, I got married.  The debt at that time wasn’t too bad; but, there really wasn’t much left for “extras”.  And, nothing was being put away for a future cushion.

In 1976, we moved to a different city where both of us were more committed to our careers than to each other.  Our marriage ended in divorce and my share of our house equity was around $11,000 (1981).  I have no idea where it went.  I certainly didn’t have much to show for it.  Some of it did cover me while I went back to college (I finally got my degree).  However, if I could retrace my steps, I’m sure I would find that it allowed me to not work as hard as I should have in building my own business.  So, I blew my cushion and used my credit cards.

In 1982, I moved back to my hometown and remarried in 1984.  Because I had no money (but did have good credit because of my long history of charges and paying my payments on time), I had to borrow money for a down payment on a house for my new family—I also had two step-children living with me.

Because I never really stopped my spending pattern, I seldom had much extra money; and, when I did, we took trips, bought new cars (the old ones were fine) and I never really saved any money.  We refinanced the house a few times.

Along the way, in 1988, I became employed by a national company as part of their expansion into services that were my expertise.  I was earning a really good salary ($80,000).  The prior debt disappeared; but, new and larger debt replaced it.  I still didn’t have anything to show for it.  As a matter of fact, my financial cushion was so thin, that within two years of trying to re-establish my own business (the company nationally ceased the new services in 1991), and at the size and stature of the company I was just with, I had to bankrupt my company in 1992.  Because it was established as a sole proprietorship (instead of some corporate structure), my credit was pretty well shot for the next seven years, with a few exceptions.

I still had my gas company credit cards because I didn’t owe them money.  And, a new credit card with an $8,000 limit showed up in my mailbox shortly after I filed for bankruptcy, but before the filing became public record.  I should have returned it; but, I didn’t.  And, by early 2002, along with the other credit debt, I closed out my somewhat small retirement plan (smaller then because of the bottom falling out of the stock market) and paid off all of my debt (that was around $30,000).

Also in 2002, I separated from my wife of almost 18 years (divorce was final in March 2003) and began dating again.  At this time, my credit was restored from my 1992 bankruptcy, my debt level was very low and I had a sense of freedom from many sources.

Included in this sense of “freedom” was the feeling, and a new found confidence, that I could have anything I wanted in life.  This led to an attitude that I could buy/charge anything I wanted and I didn’t really concern myself how I would pay for it because I just knew that I would.

In 2003, I bought a condominium with the seller taking back a $25,000 second mortgage that didn’t have to be fully paid off for two years.  I ordered a luxury car to be made to my specifications (it took six months to arrive in the U.S.) and I got remarried in December, taking a two-week Caribbean cruise for a honeymoon.  I was already in financial trouble.

When we returned, I came back to two months without any work—not expected.  My wife, who had worked for me a short time on a major project just before we got married (after hiring her away from another company), didn’t start looking for new work until we got back from the honeymoon.  Due to the job market, she went without full time work until May of 2005.  While my past spending certainly wasn’t her fault, the lack of her anticipated income made my repayment problems greater.

The weight of all of the carefree spending in 2002 and 2003 came to a head in early 2004.  This time, I took very proactive steps.  I sent letters to all of my credit card companies and asked them to close my accounts subject to the repayment of the debt.  I also asked for their understanding and accepting small monthly payments while I paid off the smallest debts first and worked my way up to the larger ones.  Their responses were “nice idea; but, we won’t go along with it”.  And, as time went on, with late fees being added to the balances, and interest rates rising from 8% and 9% levels to 25% and 30% levels, after paying around $35,000 to the creditors over 22 months, I only paid approximately 20% of the principal balance I had in early 2004.  Thus, I went bankrupt to stop the phone calls and letters, to head off the approaching collection agencies and to try to get my life back.

Today, I operate strictly on a cash only basis.  I have to!  And, my bankruptcy was not a complete forgiveness of my debts.  Some will be completely paid; and, others will get pennies on the dollar.  At age 60, I am looking at being under the court’s jurisdiction for another three years.

I no longer fear my past free spending pattern because I have had a very sobering past two and a half years and will have constant reminders (when I send my monthly check to the court) for the next three years.  God (or whatever name you wish to use for your higher energy/spiritual strength) has given me a new found strength to go forward and to renew my belief that we all can have whatever we want (this time with fiscal responsibility strongly thrown in) if we remember that we can’t expect God to do for us what He can only do with and through us.  My prayers and my supporting wife will get me through all of this and into my new and prosperous life.  As Dr. Norman Vincent Peale said:  “The secret of life isn’t what happened to me, but what I do with what happens to me!”  The best Larry, and his life (and all those in it), is yet to come.


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