Earlier this month, I wrote about the decision that transformed my financial life for the better. It was mostly ignorance that saved my tail in that story, but not this time.
It was 2006. I was living in D.C. and had managed to live rent-free for more than a year (it was awesome!). I felt flush because I was working and wasn’t paying much in living expenses. I felt like I had plenty of opportunities to make more money. Sure, I had a little credit card debt, but what 20-something didn’t? (We tell ourselves little lies to keep us feeling normal even when we’re acting abnormally.)
I was on top of the world, and I felt like nothing could stop me. It was this attitude, this dangerous attitude, that set the stage for what followed.
A friend of a friend was in a business pickle. He had this intellectual property, but it was tied up in England. If he could get it back, he could start a business that would make millions.
What was the business?
A rat poison that was totally lethal for rats yet safe for humans.
I’ve seen that movie, too.
All he needed, truly, was $40,000. And in six months, he’d pay it back, in spades. My friend and I decided together that we would each give this guy $20,000. We split it evenly. We wrote up the papers — how we’d split the profits we’d inevitably see — and we each wrote a check.
Back in those days, my credit limit was high. Too high, it turns out. And, though it pains me to write this, because the memory of it is so painful in its stupidity, I wrote a check from my credit card.
So, just like that, I was swimming in credit card debt.
The friend of a friend? I don’t know what happened to him or his intellectual property. I’ve long since forgiven myself for being so stupid. I’m way past expecting a return on my investment.
It was, by far, my worst financial decision. I was nearly drowning. The credit card’s interest rate was 25%. It took me years (years!) to climb out of it.
But I did. Payment by payment, month by month.
Six years later, the credit card debt was gone.
“Congratulations!” they say, when you get out of debt. But really, the congratulations wasn’t earned. I mean, it’s a better financial play to stay out of credit card debt.
The lessons I learned have paved the way for a lifetime of financial literacy.
But goodness gracious, I learned those lessons the hard way.
The Moral of This Story
Do not, under any circumstances, use those little checks that come with your bills! If you can’t afford to write the check from your checking account, you can’t afford to make that purchase.
Also, for the love of Pete, don’t give money to friends of friends.
What was your worst financial decision?
Photo by Kathleen O’Malley