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Credit Card Debt Calculator”

When your debt feels like your arm

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“I’ve been in debt so long that it really doesn’t matter whether I pay it off in October vs. March.”

— A friend of mine who was talking about going on an international trip despite having $6,000+ in credit card debt. When I suggested NOT GOING BECAUSE THAT’S RIDICULOUS and putting the money towards the debt, my friend pointed out that it didn’t really matter when the debt was paid off since it had been around so long. I had never heard this perspective before and found it fascinating.

More stories from iwillteachyoutoberich readers about their debt.

[Update]: The New York Times asks, What is your biggest extravagance? and gets 400+ responses.

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  1. I too struggle with long timescales. I’m not paying extra on my new mortgage, because frankly paying it off 4 months early after more than 29 years is not exactly filling me with joy and excitement.
    Fortunately for me, I have a very over-developed fear of being without money that means that I’m not in any sort of consumer debt – otherwise I too could be in the same situation as your friend.

  2. I completely understand this mentality. I disagree with it and find myself fighting the same battle, so I can relate. The factor that nobody ever takes into consideration is the unpredictability of life. To say “October is fine to pay off my debt”. is fine if you know what will happen between now and October. Nobody knows what will happen or what life will bring.

    I have forced myself to pay off what I can, because there are always situations that come up which will make me wish I hadn’t done that six thousand dollar “thing”. A great financial counselor once said “Play with snakes and one day you’re gonna’ get bit”.

  3. I have seen many people with this same idea of procrastinating on taking care of debt and personal finance. For example, I had a friend that purchase a home in early 2005 with a 3/1 ARM. The ARM is about to adjust its rate with a much higher one and my friend is very passive on refinancing. I have mentioned, as well as many other friends, that he could be facing some much higher monthly payments if he does not refinance to a fixed rate very soon. It is amazing how some in this 20-something generation have more of a sense of urgency for a sale at Best Buy or Fry’s expiring, than they do with something as large as their home loan.

  4. Paying off debt can be hard. It is important to be diligent about paying it off, but it is also important not to be too hard on yourself. If Ramit’s friend has been paying off his old debt for several years and the international trip is a unique opportunity now and the question is over completely paying off the debt this fall or next spring then I agree with the friend. If paying off the debt has not made significant progress in the recent years, the international trip could be taken later with a similar opportunity, or the time frame for paying off the debt is years away then I agree with Ramit that it is time to knuckle down and start thinking more about the future.

    plonkee — I guess it depends on what paying off your mortgage early would mean to you when you accomplish it, what you are doing with your money instead, and what kind of rate you have on your mortgage. With a lack of consumer debt I imagine your credit (and interest rate) are pretty good, so their may be better investments than paying off the mortgage early for you.

    Personally my thing with paying off debt right now is that although I have some money to pay down debt, I don’t have enough to pay it off and the interest rate I am paying is lower than my ING savings account interest rate. We have a few thousand dollars that we took from a promotional cash advance on a credit card to buy a used car from a friend – we’re playing the promotional balance transfer game with that making a balloon payment just before it’s time to apply for a new card. We also have a few thousand dollars on a credit card that we transfered my wife’s pre-marriage debt to with a promotional rate that doesn’t expire. Our remaining debt is my wife’s hospital bills from an accident we were in before we got married and my student loans (they’re subsidized while I am still in school) – once the student loans enter repayment, extra debt payment will most likely be focused there unless they can be consolidated at a lower rate because we have excellent credit.

  5. I kind of did this same thing, but I was also moving into a house that my parents own (no rent/mortgage), so I had a plan to start paying off the debt very quickly.

    I felt very guilty about it before we left, but honestly, after going, I don’t regret it one single bit. I’ll be debt-free in two months, and it was 100% worth it. At the end of my life, I get to say, “I was in Italy.” It was my biggest dream, and now all I can think about is going back (BUT, when I do go back in two years, I’ll be debt-free, with a healthy savings, and the trip will be paid for in advance).

    Financially smart? Not at all. But if I had cancelled, I think I would have continually found excuses about why I couldn’t go, which is what I had been doing for almost 6 years.

  6. amazing; In reading the responses to others actually being understanding of Ramit’s friend’s comment, I think I’ve had an epiphany in understanding, or at least just seeing why people are ok with debt.
    I just bought my first house and am more than excited to pay every month because of the awesome affect it has on my balance sheet. If I have one suggestion for all; it is to keep a balance sheet with your assets,liabilities,and owner’s equity and update it at least every week (I do it when I’m bored (so every day)).

  7. I find this attitude toward debt common in the U.S. It’s one of, “Everyone is in debt, so yours is no surprise. Get used to it. And since everyone will always be in debt, what’s another $X?” It’s almost as if it’s a fait eaccompli.

    I have found in my journey to becoming debt-free that being frugal, being prudent actually angers some folks and makes others outright hostile. The reason: it makes them confront the reality of those attitudes, which is never very comfortable or fun. You mean I actually have to pay attention to what I’m doing, delay gratification, and sometimes deny myself various desires and wants in order to satisfy real needs? That’s not the American way. (HAH!)

  8. Being from the Netherlands, I have had some trouble getting used to the ease with which a lot of Americans just pile up debt without appearing to realize the repercussions. A few simple calculations will make it obvious very quickly how having to pay interest on a continuous basis affects your quality of life. While I agree that it is sometimes beneficial, if not necessary, to take out a loan or to carry a balance on a credit card, I don’t think it should ever become a habit. It is quite possible that there are immediate benefits to that trip to Italy, but if you go just because you might think it’s the opportunity of a lifetime, think again. Going to Italy on a vacation is a lot more enjoyable and a lot cheaper once you’re debt-free, and as long as you set your mind to it, you can always find a way to get to Italy, even an inexpensive one.

  9. Yeah, Italy would have always been there (well, maybe not Venice, since it’s sinking), but I would have always regretted not taking that trip. I had talked about going for years, and, considering the timing, I would have had to go then, or wait for at least 2-3 years. But, if I was barely making ends meet, I would have cancelled. I was living rent-free with a low-interest loan, I knew exactly when I’d have the debt paid, and I didn’t charge anything from the trip. So with that in mind, I enjoyed my trip just fine.

    By the way, my debt was from trying a business venture that I found wasn’t a good fit for me after I’d gotten into it, so I wasn’t just in debt because of bad spending habits.

    Would love to know more about the inexpensive ways to get to Italy…

  10. I agree with all the sentiment about not spending what you don’t have; it is typically the best decision. But the amount of debt you have (unless it is extreme, which I don’t think it is in this case) needs to be balanced against living your life. So, in that vein Ramit and commenters, assume the following:

    First, the trip is an isolated opportunity (he cannot put it off for a year)

    Second, going on the trip will not increase his current debt

    With this in mind, would you go in his situation? I probably would.