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What is the true cost of borrowing money?

I grew up in a household where I was taught to serve others and always do the right thing. Get good grades to get into a good college. Find a great job so I could support a family.

All sounds good, but there is a flaw — I was never taught how to manage my money, the pitfalls of credit cards and debt, and how they could potentially ruin my life. 

“I was cash rich but asset poor, and my life as a waiter created this mythical world in which I lived.”

Todd Emerson, CEO – Credit & Debt

I started living on borrowed money — and I regret it.

I moved to California in 1999, well-educated with a degree in economics. I was single, had eight credit cards in my possession, $23,000 dollars in debt (not including student loans), and $1,600 dollars in cash. I met my wife within four months, and my financial perspective changed forever. 

I vowed never to be in that situation again, and I have kept my promise ever since. 

But why did I get into debt? 

Now that you have the back story, let’s talk about how I got here. I grew up in a competitive world, always involved in sports and an average childhood. I’m not sure why my competitiveness crossed over to personal relationships in my early childhood, but I never really felt good enough, and I was more concerned with what my friends had, and I didn’t

And to be honest, I’m not 100% sure I didn’t have those things, but that is how I felt. I was more concerned about what others thought of me than I was at becoming the best version of me, and it followed me through college.

1. I was young and an “easy target”

The first day of college was a blur, but what was clear on that August day in 1987, was the opportunity to level the playing field.

There were no less than 15 credit card representees eager to give me an application, and a free t-shirt or large pizza coupon, all in an effort to bet on my successful future and my ability to make payments.

Or so I thought.

I was an easy target, and they could see it in my eyes across campus. I signed up for every card that I was eligible for, took my free t-shirt and pizza coupon, and headed off to class like someone who just won the lottery. 

If I could change any single thing in my life or do it again differently, this would rank pretty high.

2. I wasn’t educated on how to use credit cards wisely

It didn’t take long for the cards to arrive, but I had no clue how the next few years and my lack of understanding around personal finance would wreak havoc on my life. I wish my parents would have taught me the fundamentals of credit and debt, and not just tell me to stay away from credit cards. 

They can be good in the hands of the right people, at the right time, and with an understanding of the wise use of credit — but I wasn’t that person at the time. My experience was completely negative and my high was short lived.

Sure, I could try to impress my friends and pick up the tab, hit the upscale stores and buy clothes when I wanted, it was unlimited cash flow in mind!

3. I paid the true cost for borrowing money — compounding interest

And then the bills came, and they didn’t stop. But wait — you mean I can pay $25.00 minimum payment and continue my bad habits? Sign me up! 

That’s what I did, for many years. And who cares? I was cash rich but asset poor, and my life as a waiter created this mythical world in which I lived. That’s a whole different story for another time, place and economic principle. Let’s stay on point.

“First and foremost, he with the most cards loses, he doesn’t win.”

Todd Emerson, CEO – Credit & Debt

Here’s the main lesson I learned about borrowing money:

First and foremost, he with the most cards loses, he doesn’t win. 

Multiple cards only gave me greater exposure and risk to interest charged on multiple cards. The temptation or urge to use them at will, makes it way too easy to spend. With credit cards so readily available, all my “wants” were within reach – they were unlimited. I never thought about late fees because I had minimum payments. 

To put this in perspective — to pay off that $23,000, it would have taken me over 30 years and $63,995.11, using an interest rate of 18.9%, and assuming a 2.0% minimum payment. And ladies and gentlemen, that is the negative impact of compounding interest. This is an easy calculation, and most personal finance reputable sites have these, so I used the one from 

Don’t become a victim of debt.

Again, in the right hands, credit cards have plenty of upside and benefits. From building credit for the first time or earning points based upon which card you have. It’s typically never the card that gets you into trouble, but more the person’s lack of understanding the wise use of credit.

In terms of our personal financial planning, we need to be absolute in our understanding of personal finance at all times despite the ever-changing economic landscape. Learn as much as you can, benefit from the knowledge and begin to accumulate wealth. 

The economy will always change, and maybe even where you are in life, but that doesn’t mean you will become a victim of debt. Always stay in front and continue to learn everything you can. In the end, you will win, and win big.

Todd Emerson

Todd Emerson is the Chairman & CEO of Credit & Debt.

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