Life lessons often come when you least expect them. And they can carry such a wallop that your invincible post-grad ass hits the ground faster than you can regret not taking a victory lap. I don’t know about you, but the life lessons I value most didn’t come from a classroom or a textbook.
See, my former boss was an avid drinker. I’m convinced he only hired me so he wouldn’t be the only one hungover in our 9 am Thursday staff meetings (RIP Corner Bar $5 bucket Wednesdays). Fast forward through a few company-funded lunches, even more expensed happy hours, and a small period of time where everyone who I reported to left the company. I had a questionable internship under my belt and was ready to graduate. What better way to send me off into the adult world than a liquid dinner?
Like most red-blooded Americans, I’m a sucker for free alcohol. And so, when your boss orders a round of literally anything, you smile and drink up. The limit does not exist.
Zombie Dust? Sure, it’s an acquired taste (so why not work on acquiring it?).
Jager bombs? Smells like my freshman year and regret, but sure, I’m game.
That final “wait, wait… OK, one more round”? It’s fine, everything’s fine. The hangover is tomorrow’s problem.
Several hours — and a tab I’d rather not know the total of later — I found myself and the other intern blacked out in a Target, buying cheap champagne. Because graduation was tomorrow and you need mimosas before your ceremony or it’s not a proper graduation. Trust me.
I don’t blame the cashier, I really don’t. She asked if I wanted to save 15% off my first purchase and open up a Target REDCard, and my frugal self said yes. Why would I not want 15% off my $4 bottle of champagne? I’m awesome at credit cards. I’ve never made a late payment, never have paid a cent of interest, never over utilized.
Long story short, I had a few mimosas, graduated, and left for a month-long European adventure. I’ll assume Target sent me the card in the mail and I shredded the envelope because I had no memory of ever opening the card. I’ll also take responsibility for screening all my calls and straight up avoiding those unknown 800-numbers (pro-tip: they aren’t always spam calls).
As a result of this, it took Target about six months to find me. And once they got ahold of my irresponsible ass, they made me pay my bill and then some.
My general rule of thumb is to ignore the interest rate when you open up a new card because you shouldn’t be paying interest or late fees anyway. Well lol at my life. My interest rate was around 25%, not unlike most credit cards issued to 22-year-olds. How much do you think my $4 bottle of champagne cost after six months? Roughly $300.
You read that right: I wound up paying $300 for a cheap bottle of champagne because I was an idiot. That’s not even mentioning the damage it did to my credit score, but that’s a different story for a different day.
Why? Late fees and compounding interest.
Much like the Jager bombs, compounding interest can sneak up on you like a bitch. Sometimes, it can work very much in your favor or knock you flat on your ass. Say you put $1,000 in a savings account. At the end of each month, you earn interest on that money. At 20%, your $1,000 would be $1,219.39 at the end of a 12-month span. You’re making money on the money you just made.
So, reverse that and let’s talk about how I fucked up.
I put $4 on a credit card. Charging $4 to a credit card is dumb enough, but that’s not the point. I was charged a late fee and my first month of interest (at around 25% APR). Then when I failed to pay that bill, I was charged 25% and another late fee. So at the end of month two, I had accumulated a $63 bill that I would continue to ignore until month six. You can see how this spirals downward and could end up in hella credit card debt.
Please, learn from my mistakes. Don’t black out and open up credit cards. And even if you do, please pay them off. Thankfully my original purchase was only $4 but imagine if it were even $100. Credit card debt is a slippery slope and it’s easy to bust your ass on late fees and interest if you’re not paying attention. As much as that may hurt, the damage to your credit score is even worse.
Have I mentioned how wonderful Zack Mathis is? Thanks for putting up with my shit.
Originally published at www.talkfiscaltome.com on February 13, 2018.