A cautionary tale about credit card debt

I'm generally quite good at maths. Yet somehow when it comes to money, basic multiplication skills go out the window. That was how I found myself $46,000 in unsecured debt at the age of 24.

It all started when I was 17. I got an offer for a credit card and thought "What the hell? Everyone has one." In the beginning, it was pretty innocuous. The card was there as my safety net when I went overseas. I didn't actually use it but it was nice to know I had some extra cash available if I needed it. Then when I got back, I bought myself a road bike I really wanted and paid the card off a month later. All very functional - nothing to be concerned about.

Things started to go downhill quickly when I began to use the card for business purposes. I became interested in stock market investment and after spotting a promising Geothermal company and sinking $25k of my own cash into it, I used a cash advance to take part in a special share offering the company had. A few months later, the company tanked and I crawled away with 30% of what I'd invested and $5k of credit card debt.

I'd mostly paid it back when I came across an "amazing" opportunity to do Chris Howard's "Billionaire Bootcamp", a 7 day large group awareness training program that would teach me to think and act like a billionaire. Billionaires aren't afraid to invest in their own growth apparently so the event was held at a fancy hotel on the Gold Coast. $7k later...(all on the credit card)

Then I heard about an even better personal development program. Revved up by the music, the hyped atmosphere and the many cups of coffee I'd consumed, I signed up for the $30k lifetime membership.

Needless to say, my parents were a little concerned at this point. I wasn't worried because I'd discovered the joys of 0% balance transfers. I didn't need to worry about paying the money back - I'd just keep on shunting the debt around. Sooner or later I'd be a billionaire and these petty credit card debts would be swatted away by my stylishly fat wallet.

To become a billionaire, I'd need not just to do training programs but also to actually start a business because everyone knows you can only get wealthy if you run your own business. To start off with, I flung myself into multi level marketing. I sunk around $2k into training tapes to improve my mindset and bought the largest product packs possible because these products were going to sell themselves!

MLM didn't work out too well for me so after finishing uni, I started a series of well meaning and unprofitable businesses: a ridesharing website, an Ethical Outsourcing company, a CRM consultancy. Lacking fundamental accounting skills, I burnt through cash (that of course was the bank's not mine) like it was sweet smelling sandalwood.

My rock bottom happened when I was 23 travelling through Europe using my credit cards. I was in Lithuania with $100 left on my card before I was completely maxed out. The banks weren't giving me those 0% balance transfers anymore. My clients weren't paying me, I had no cash and I was terrified I would end up stranded in Eastern Europe with no way to get to the airport.

Somehow I made it through, taking a deep sigh of relief as I got on the plane. When I got home, I cut up all my credit cards and joined a support group for people who...lack common sense around money. Over the last three years since joining that program, I've had a few false starts (e.g. signed up for another credit card last year after a keystone client went bankrupt and didn't pay my invoices) but am now in a much better financial situation.

I've paid off all of my unsecured debt, have three months of living expenses in my emergency fund and most importantly, am not living in a pit of anxiety worrying about how I'll be able to make the payments this month. I've come to realise that credit cards are not a good fit for my personality. I've cut them all up and mentally barred myself from getting into debt again.

Living life without credit cards is sometimes tough. I can't necessarily buy things at a whim anymore (though I do have my 'fun fund' for impulse purchases). On the whole, it's a lot more relaxing though!

I don't regret my decisions. I've learnt some hard, hard lessons that have sunk deep into my subconscious. I now know the importance of monitoring cashflow and have been able to translate those learnings into (moderate) business success.

Nonetheless I wouldn't recommend other people go down this path. Being in financial crisis is deeply distressing and some research suggests that it can even lower your IQ.

I find it somewhat concerning that credit card debt is almost eulogised in the startup community. Phrases like "Visa is better than VC" give the impression that to be a successful entrepreneur, you need to go "balls to the wall" and put yourself at risk of bankruptcy to make your startup succeed. I've found the opposite - when I used my credit cards, I didn't bother looking for customers because I had the cash advance option as a cushion. I do acknowledge that there have been many successful businesses that have started using debt (e.g. Atlassian) but it's important to question whether it's right for you. Growing a business from revenue alone takes longer but makes it stronger in my opinion.