History of a Bad Spender Part 2 of 5

In the summer of 2004, I owed so much in credit card debt that we had to refinance our house and liquidate equity to gain control of it. THAT was supposed to be the LAST time I made any financial mistakes. But because the credit card balances were so high, not everything was paid off. A few cards still remained that still needed to get paid. My husband, however, thought that all of our debt was gone. Yet, at the time, I still owed about $28,000.

Later that year, I applied (and was approved) for a consolidation loan through Bank of America (B of A) for a grand total of $30,000. The payments were to be around $600 per month, which was manageable. Overtime was common at the company where I worked, so I used that money to make the payments and hid the account from my husband.

Shortly after that, we bought our first new vehicle: A shiny, full-size truck complete with a tow package and DVD player for our son. That purchase resulted in a $500 per month auto loan payment (which almost didn’t get approved after taking out that $30K B of A loan).

Feeling the burden of both the B of A loan and the truck payment, I kept my charging and other spending to a minimum. There were actually credit cards in our possession with zero balances, and for once I was feeling like a responsible adult.

Then, in the spring of 2005, something happened to me that would change my financial life forever: I was introduced into the big bad world of direct sales.

Without discussing a word of it with my husband, I became a consultant with a direct sales company. I eventually told him that it would only be for fun, but that soon gave way to a full-on desire to quit my job and become a consultant full time. It’s a mantra that is preached in nearly EVERY direct sales company: Work hard, and you can make as much (or even more) than you do at your regular job, and set your own hours to boot!

So, I began to use some of our “zero balance” cards to fund my new business venture. Then, I obtained an American Express Gold Card (AmEx) for business purposes, which I used almost daily to buy inventory, tools, props, and anything else that resembled a business expense.

When I couldn’t make my first AmEx payment of $1,800, I transferred the balance to one of our personal bank cards. The following month, the balance was $2,300. I was able to make that payment, though, since I was selling inventory like crazy. But I never gained control of my spending, and soon found myself using our personal cards to fund bad spending habits, unnecessary inventory purchases, and a direct sales business that wasn’t really going anywhere.

In August of 2005, my husband granted me permission to quit my job for six months and try to make a full-time go of my direct sales business. I attended conventions, meetings, recruited women, bought inventory, and did everything I could to make it work. With that, though, came a dependency on credit cards, since the money I was making didn’t even come close to what I was spending.

When I left my job, I cashed out a pension that provided some much-needed padding to our checking account. I used the money to make the house payment and take care of other household bills while on a quest to be the next direct sales queen.

In November 2005, just as the money began to run out and the credit card balances were getting higher and higher, I took a one-time payment of $50,000 out of my retirement fund (which, after taxes, was more like $32,000.) After all, I wasn’t really employed, direct sales wasn’t working, and we needed the money.

Two weeks later I conceded defeat and began to look for a full-time job. My business was not going to provide my household with the income and security of a regular paycheck, but it did give me something to do until I found another job. It also provided justification for the continued use of credit cards.

In the mean time, my husband was beginning to get suspicious of my financial activity. He’d ask questions about signing up for a credit monitoring service or pulling our credit score to see if we could qualify for a lower mortgage interest rate. I always encouraged him to move forward with his inquiries, but I always knew he was doing it just to see how I’d react.

I eventually returned to the ranks of the full-time employed in February 2006. And, while the job was fantastic and the benefits amazing, my mind was focused on the insurmountable debt that I had accumulated and how I was going to hide it all from my husband. I’d broken the $80,000 threshold, which included that $30K loan that never seemed to reduce in size. (What happened to the retirement money? I used it to pay the mortgage, household bills, paid down some of the credit card debt, purchased more unnecessary inventory, and pretended that the rest was income from my direct sales business and used it for Christmas.)

Note: When I say that I used money to “buy inventory,” I was mostly doing it to maintain a badge title, not because I had shows to do or product to sell. While I did have business to conduct, it was not sufficient to warrant the inventory purchases that I’d accumulated. I had become addicted to spending.

Suffice it to say that the money was gone. I had gotten us into thousands upon thousands of dollars in debt, and was now having a hard time paying it back. Credit card payments were going to be late, but the mortgage, for the time, was safe.

In the mean time, I knew that my husband knew that something was wrong, but I was always able to say that “things were fine” and he would leave me alone. Sometimes he would press the issue, and I’d fudge an excel spreadsheet for him to get him off my back. Plus, I always felt that I was going to finally make my direct sales business successful and pay everything off.

When it came time to file our taxes, I maximized every business deduction that I could, and “conveniently” forgot to report the pension and retirement withdraws so that our return would be in the high thousands. THAT, was part of the beginning of the end.