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BOO! Your financial horror stories

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As a dude in my 20s, Halloween is my favorite holiday for obvious reasons.

Your favorite blogger and New York Times best-selling author, Ramit Sethi

A few days ago, in preparation for this magnificent day, I asked the people on my Insider’s List to send me their financial horror stories.

Here are some of the best:

*     *     *     *     *

“How do I re-build credit when I can’t get a credit card?”

Hi Ramit,

Loving the savings and credit updates; I can’t believe you give out this advice for free!

Here’s my financial horror story:

In an attempt to assert independence and get out of an unfortunate living situation my freshman year of college, I moved out of my parents’ house into an apartment I couldn’t really afford.  I planned on paying my rent with my ‘leftover cash’ from financial aid.  A few months later I felt the crunch and borrowed from family members to make payments and racked up over $5,000 in credit card debt to pay for food and entertainment.  I was drowning and it was all because I wanted frozen pizzas, ice cream, ramen, and independence.  So, so stupid.

I entered credit counseling and five years later am credit card debt free.  I got your book and started reading on how to save.  Automated saving is so simple and so effective.  My car got totaled this past Friday and I actually have the money to deal with it – a far cry from my college days of financial irresponsibility (read: days of denial). I even started a retirement account through my employer.  Not too shabby, eh?

So here’s my question: Since I went into credit counseling I’m having a hard time getting accepted for a credit card, but I need to rebuild that credit.  I’ve been reading your tips about limit increases, suggested best credits cards (LOVE IT when you share your favorite things!), but I have to get back in the credit game first.  I’ve called my old cards and tried to shmooze them into reopening my old accounts but that didn’t work either (I even kept a spreadsheet tracking those convos, per your command)  So how can I get back in the credit game with my irresponsible college past hanging over me?

Thanks!

-Jackie

My answer:
Nice job, Jackie, and congrats on changing your life around.

To rebuild credit, get a “secured credit card.” Go into your bank and ask about them. You’ll have to put down some money to “secure” the card, but after a few months of paying it off regularly, you’ll graduate to being able to get a regular credit card.

*     *     *     *     *

“I have $180,000 in medical bills…”

Financial horror story: I’m in my late twenties and just got pointed to you. I am divorced and have custody of my 3 kids. My ex does not work and will not get a job, so I get no child support. I bring in roughly $3200/mo, but half of that goes to daycare. Keep in mind I still buy diapers and wipes, food, clothes, etc.

I live in Texas where land values, and thusly the cost of living, are lower, which is how I survive, but I still have to live with family… Texas does not have alimony by the way…

I’m so broke I can’t even afford your book, so I’m having a family member buy it for me for Christmas.

The horror part is that I got in a wreck a year and a half ago which shattered two vertebrae, and I didn’t have medical insurance because the company I contracted through at the time didn’t offer it, so I have $180,000 in medical bills sitting on my credit report.

Now I have a better (not contract) job and medical insurance, but still no money.

I like your advice about cutting down eating and entertainment expenses, so I’m going to figure out what I spend each month on those and try to cut that down as you suggest.

Hope this is enough of a horror story for you.

Please keep my name anonymous. Thank you.

My response:
Sorry to hear about your situation. Two things:

  1. Keep an eye out for an email from my staff. I’m sending you a signed copy of my book.
  2. One thing you should know is that medical bills are HIGHLY negotiable — often for pennies on the dollar. Research it (just Google it) and spend a few days reading articles, posts, and forums. Considering the hospital has no chance of recovering $180K from you, they likely will settle for tens of thousands of dollars off the “retail” price. Good luck.

*     *     *     *     *

“The people you make fun of are out there…”

Someone I work with– who is building a brand new house–said her husband wants them to bring their own coffee to work in the mornings from now on to save money for house payments.

The people you make fun of are out here…

Nick

My answer:
Jesus Christ

*     *     *     *     *

You want a financial horror story. You got it!

You want a financial horror story. You got it!

I dont blame anybody for this just me and only ME.

I was in an MLM; ok, i will give the name what the heck, Amway, for about 7-8 yrs. My choice, I dont blame anybody not even my family.

I have seen success stories with my own eyes. But it is NOT for every one. Well, in my opinion, 98% fail because they dont do a squat with it, dreaming to become rich one day.

I did work on it but may be not 100% or close to what it requires to succeed. Anyways…

Coming to my story, long story short, i spent close to $1000 – $1200 per month average on products/conferences/meetings/

TIME the whole ball of wax. Over 7yrs it amounted to 70k approx.

Should i say more 🙂 you got the picture.  I QUIT!!!

-Ravi

My answer:
2 things:

  1. If you ever get in an MLM again, I will personally find you and kill you myself. Everyone else considering MLM (then again, if you are, you probably cannot read these words because you are illiterate), see my previous article: I Hate Indian Network Marketers So Much
  2. Btw, MLM does not fail because people “dont do a squat with it” — it fails because it is systematically built to extract value from people at the bottom of the pyramid, while those at the top revel in the profits from the constant inflow of clueless newbies.

*     *     *     *     *

“I started living off my credit card…”

After graduating college in May of 2009 I had no credit card debt (with the exception of my graduation invitations and party supplies), problem was I had no job either.

I used my money from graduation to live for a while, but then more and more items were getting put on credit cards. I would put the items on the credit card thinking I will have a job soon and be able to pay it off at that point. I had about $1000 in credit card debt on my card by the end of July 2009. I did have a position with Americorps at this point though. I made enough that I would always pay more than the minimum payments. I knew at the end of the program I would have a good paying job and be able to pay off all my debt in one month so I continued spending. In February of 2010 I had about $3000 in credit card debt.

I left the program before it finished and did not get the good paying job because I did not finish the program. I started living off my credit card at this point and raised my credit card debt to about $6000. To get out of debt I bought $2500 worth of Mary Kay inventory to sell. Moral of story before I got a job I had racked up about $8500 in credit card debt in a year and two months.

In response to your blog post about raising credit score I was also wondering if it is always a good idea to request credit limit increases. My husband and I are looking at buying a house right now, the lenders requested credit scores, and so my score went down. Should I have the additional inquiries on my record for the two cards I have?

Jess

My answer:
Sometimes I find it helpful to try to analyze someone’s decision-making instead of individual decisions. For example, why did you not finish Americorps? I’m sure you have a very specific answer (“I hated my boss, I was sick, etc”) but ask yourself: Have you not followed through on anything else? Are there patterns?

One pattern might be jumping from one salvation to another (Americorps…Mary Kay…). Another pattern might be not doing your homework, which is why I was one knife slit away from killing myself when I read that you’re planning to BUY A HOUSE. Why?

Have you truly run the numbers? Have you added 40%-50% (not a typo) to your monthly payment to account for taxes, maintenance, new furniture purchases, fees, and more? Have you read my extensive articles on buying a house?

Do you understand that buying a house requires a ton of money down, and you will likely go from being in debt to being in a different kind of debt?

Again, I’m not categorically against buying a house. I will, at some point in the future. But from your question, I want to make sure you’re not jumping from one catastrophe to another potential catastrophe. Do some homework before making the biggest purchase of your life, please.

*     *     *     *     *

Now I’m wondering…if you know someone who’s had their own financial horror story, what did you do? Did you try to give them advice? How did they take it? Leave a comment so we can all hear from you.

BOO

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31 Comments on "BOO! Your financial horror stories"

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Brandon Adams
Brandon Adams
4 years 10 months ago
A story related to the girl with the medical bills, and another option on how to deal with it: Three months after I turned 18, while I was still a high school student, I broke my femur while I was snowboarding in Canada. With hospitals, ambulances, and an airplane ride back to the US, all in all it was an accident that cost about $80,000. I was also poor. My single mother made about $1 above minimum wage, and I’d saved money from job at McDonald’s in order to afford the trip. The airplane was operated by a non-profit, and… Read more »
Lee
Lee
4 years 10 months ago

(It was actually Crassus writing the checks, but still an awesome reference!)

teresa willis
teresa willis
4 years 10 months ago
I have no business giving anyone financial advice – outside of spend less than you earn & pay attention to interest rates. What I tell them is to get your book & sign up for your free emails. It’s a bit embarrassing as a 50-year- old youngster to ask for financial advice/teachings from someone almost 1/2 my age… but I gave up my ego a long time ago. Whatever works & your material helped get me out of credit card debt after I was in a car wreck years ago & missed payments on credit cards and my interest rates… Read more »
Brandon
Brandon
4 years 10 months ago

lol at the picture. Anybody who takes advice from that person definitely has a horror story. To answer your question though, I have given financial advice to people only to get the typical, “I know. I need to do that.” only to find out later they never did anything except buy the new ipad. Guess you are right about all that psychological stuff. In the end, people will do what they want to do until they are fed up enough to want to make a change for themselves.

Eric S. Mueller
4 years 10 months ago
I sympathize with the MLM person. I got sucked into Amway when I was 19. One of my Navy instructors “showed the plan” in the classroom. I wish I could go back in time and complain. That was against the law. (Not being in Amway, but promoting a side business with Navy time and resources and on duty). So for the next several years, I gave up Saturdays going to Rally, gave up weekends for larger functions, cold contacting, etc. That’s valuable drinking time I’ll never get back. I blew a ton of money and time on it over 5… Read more »
JT
JT
4 years 10 months ago
Dad’s and my financial horror story: He started a business when I was two. Somehow he was able to buy a house when I was about 6 years old. Then when I was 13, he “handed over” the financial responsibility to my mom (and seriously when I heard this many years later, I’m thinking WHY??). All of a sudden, I was put on the lunch card program in high school. I still had no idea what was going on except that there were a lot more yelling in the house. Then during my junior or senior year of high school… Read more »
Tyler F
Tyler F
4 years 10 months ago

DAAAAAMMMNN.

Good call on the crazy g/f. Nice job recovering from a very traumatic period in your life, and good luck!!

Shaun
Shaun
4 years 10 months ago
Ramit- Upon extended observation, I have come to the conclusion that there must be some addiction for people to operate at $0 in the bank account. It seems worse than a mere fear of debt, and has advanced to the “I must not have more than $100 in my account at any given time.” For some, “saving” is maybe $1000 that gets blown on junk that depreciates immediately upon ownership, even for the one who “saved” to get it. How often do you work with people who are addicted to operating around zero? How about those that are deeper than… Read more »
Jess
Jess
4 years 10 months ago
I am the Jess with the all the credit card debt. All of that credit card debt is gone, I have money in a Roth and an emergency fund at this point. We will be able to put at least 5% down on our house and with a 15 year mortgage have enough income outside of putting towards those items to pay up to 1.5 times the mortgage and insurance. Yes I have read your articles as well as many others, including articles from patrick.net You asked for the horror story, not the happy ending. Here is the happy ending.… Read more »
Jen Leigh
4 years 10 months ago
Not to turn this into an MLM thread, but I currently participate in one that does home parties (like Tupperware, but with a bit more buzz!) and can definitely see both the danger and the benefits in them. As a Ramit subscriber, I did tons of research before joining and found one that does not require inventory or recruiting and gives straight 50% commission on all sales. I do pay $30/mo membership fees, but I believe the benefits (CC processing, order/shipping handling, etc) the company provides are worth it. Where I got into trouble with it was the novelty factor.… Read more »
Danielle
Danielle
4 years 10 months ago
Almost horror story: my husband and I decided that we wanted a puppy. so naturally, we googled “puppies, san diego california”. we found a website where breaders can post their puppes- a golden retriever puppy ranged anywhere from $200 to $2,000, so we looked around the middle to avoid a scam. We emailed the seller. A few minutes later, we got a reply from a guy named John- who supposedly lived in san diego, but the puppes were actually in North Dakota because they were his mothers pups, and she recently died (sob). He was not a pet breader himself,… Read more »
Pam
Pam
4 years 10 months ago
I’ve had multiple friends in serious credit card debt for various reasons ranging from graduate school debt, extremely terrible finance management, or complete lack of desire to search for a well paying job. I suggested to several of them that they call the credit card company and set up a payment plan that included a significantly lower APR. NONE of them followed up. Only one of them is seemingly in less debt (because she got a higher paying job). I don’t understand why! Side note – I also read your MLM article. I met a woman in an autobody shop… Read more »
getagrip
getagrip
4 years 10 months ago

They don’t take the advice because to do so would:

a. Involve effort in actually doing something, complaining is easier
b. Force them to admit they’ve made dumb decisions in the past
c. Force them to admit they can’t live the kind of life they want with the income they are currently generating and they will have to *gasp* change one or the other, which involves a. above. Circle complete.

JC
JC
4 years 10 months ago

My friend has over $100K in student loan debt for an arts degree and has not pursued any work related to this degree (and she’s not sure she even wants to, but mostly feels that she can’t pursue this kind of work BECAUSE of the debt). The interest is high, and the huge minimums that she pays each month do not even cover the monthly interest charges. I wish I had advice for her, but I just want to run and hide.

Angel
Angel
4 years 10 months ago
There’s a 3 year old who paints pictures, and is making a small fortune doing it…. We should all take a lesson from the Chinese. They don’t give their kids a sense of entitlement. It’s very easy as Americans to forget there’s a bigger picture. Tell your friend (& do yourself): to have some drinks, watch “What the bleep do we know?” & YouTube the 3 year old painter. Then get to work on her masterpieces, because only when you follow your heart will happiness follow. Money loves company. Laugh, and the world laughs with you… Cry & you’ll cry… Read more »
aelle
4 years 10 months ago
My mother is in the middle of her own financial nightmare. After 30+ years of marital bliss, during most of which she was a stay at home mother, my father left for his secretary. Now my mom is in her 50s with outdated skills, no pension contributions since she didn’t work full time for most of her life, no savings or assets, and – since they were married without a prenup – responsible for half the debt of what my father spent on his mistress. Luckily she has finally gotten her first full time job in decades and is very… Read more »
Lisa
Lisa
4 years 10 months ago
About two years ago, while out having coffee with one my close friends, she admitted to me that she had about $12,000 in credit card debt – in addition to having a car loan and student loans, and struggling to make ends meet with two part-time jobs. I tried to convince her to meet with a financial advisor, but she refused. Instead, she asked if I could help her. Figuring that my help would be better than nothing, we got to work right there. I pulled a pen out of my purse and grabbed a paper napkin from the coffee… Read more »
David
4 years 10 months ago

Hey Ramit!

I was curious if you knew of a place where we can report grungy MLM’s that may be illegal. I had a friend get caught up with a company that sold travel (plane tickets, packages, etc.) and their main pitch was that you got paid for every person you signed up. She was also used in a lot of their propaganda since she was good-looking. I told her it sounded like a pyramid but she’s still sinking money into it.

Is there a place this kind of thing can be reported and shut down?

Thanks for the article! Good stuff!

Claire
Claire
4 years 10 months ago
Re: the $180K medical bills horror story She should not feel bad about negotiating a lot off the full retail price. Having compared the full charged prices to the actual prices paid by my health insurance for many medical bills, the amount actually paid by health insurance for items runs anywhere from 5% to 80% of the full price. For example, at one extreme, a lab test that costs $300 might only get paid $15 from the health insurance company. So if you are uninsured and paying the full price, you are practically subsidizing everyone else including people with health… Read more »
J
J
4 years 10 months ago
Claire, the shocking thing isn’t the “bring their own coffee to work” (I bring my own, too. I’m picky!) part but the reasoning of “…to save money for house payments” part. How much coffee can these people be drinking that this is an important part of their house payment strategy? Speaking of bringing coffee to work, a couple of my more clever coworkers would sometimes buy $4 coffees at a cafe across from the office, when our job provided free coffee, simply as an excuse to get out of the office, and because the treat brought enjoyment to their workday.… Read more »
Claire
Claire
4 years 10 months ago

J – Re: “How much coffee can these people be drinking that this is an important part of their house payment strategy?”

If I save an extra $10/day, that would translate to an extra $100,000 in house, assuming 4% interest, ~1% property tax, and tax deductions.

One person’s crazy is another person’s no brainer. I don’t think skipping coffee is as crazy as Ramit’s suggestion to eat before going out to dinner and just ordering appetizers or skip a dinner invitation entirely.

J
J
4 years 10 months ago
I don’t disagree that saving $10 every single day, assuming you do it consistently for 30 years, adds up to a lot of money. Nor do I think skipping coffee is “crazy”. I just think it’s a bit of a silly focus for a saving strategy for buying a house. Most people will make their neat little plan, then turn around and accidentally spend that $10 elsewhere. Or even go right back to their old habit, if it was something they enjoyed doing. To be fair, we only have one side of the story – maybe the couple already sets… Read more »
Claire
Claire
4 years 10 months ago
J – As you allude to, the story is a one liner and we have no idea of the context. I don’t know how most people behave but as someone who would cut coffee (or pearl milk tea) over other things, it’s definitely not “hinging” house payments on a thin margin. I may not be like most people but I might think more similarly to other people who would cut coffee to good effect, and it is being able to afford everything else anyway but wanting the extra savings by cutting something you don’t really care about. Some people love… Read more »
Adrienne O.
4 years 10 months ago

LOL, that picture of you in costume is excellent

MikeyMike
4 years 10 months ago

I was dumb enough to accumulate $30K in credit card debt in college somehow with bars, emergencies, and toys. Now my student loans, house, utilities, and etc are 97% of my income. If I took an income hit or don’t develop cash flow, I’m screwed. Tried doing multiple online businesses and made some money doing that but then I always let them die on the vine, whatever that means. This feels like a diary entry, lol.

Frank
4 years 10 months ago

… i gotta say i don’t really get the costume. that’s not the craigslist penis effect, is it…

asrai
asrai
4 years 10 months ago

Someone in my family won a million dollars in the lottery last December. In Canada you aren’t taxed on lottery winnings. I think they actually found out New Year’s Eve. Her husband quit his job on the spot. He didn’t work for 10 months. They did some smart things and some dumb thing, 10 months later, it’s all gone and they are in debt again.

It’s true that when you win the lottery you quickly go back to the way you are used to living.

getagrip
getagrip
4 years 10 months ago

I think it really depends on who you are and where you are at in life before you won the lottery with respect to how you are after you win. Saw one of those lottery shows and a separated couple demonstrated it very well. She won $20 million, he sued for half since they were still technically married. She was going to fight him for it, then decided 10 million was more than enough for her, and split it. Two years later he’s broke and she’s doing just fine.

Natalie
4 years 10 months ago

Ramit, a little birdie told me that you were looking for a turban for your costume (Twitter.) Looks like you found one– very nice! Happy (late) Halloween!

Matt
4 years 10 months ago

LOL at your Halloween costume.

roberts
roberts
4 months 15 days ago

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