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Here we go with the fourth and final millennial money blunder of our series: racking up debt. Now you might be saying, “Oh that’s not me, I always pay my credit card on time!” Kudos to you if you’re debt-free, but we’ve all had some credit card bills drag us down from time to time. You may even have some lingering from your college days, last Saturday’s splurge shopping spree, or that dream vacay you took over the summer.

It’s very important to get a handle on your debt as soon as you’re able. But don’t get down on yourself if you’re struggling to right now. You’re certainly not alone. According to a recent report, today’s Americans have the most credit card debt in U.S. history: a whopping $1.02 trillion and counting! If that number doesn’t show you how big of a problem debt is these days, perhaps the story of our next fictional millennial will. Meet Michael.

A little background:

Michael had been grinding it out since college, putting in long hours as a recruiter for one of Richmond’s agencies. Every morning he’d wake up early, stop by his local Starbucks for a venti latte, and arrive at work by 7:30 a.m. to start hitting the phones. He worked late into the night, and was on the road all the time. On the weekends, Michael liked to shop. He had credit cards for all his favorite clothing stores…Brooks Brothers, Macy’s, Saks. He couldn’t resist signing up to get the store savings, and always paid the cards off as soon as his next paycheck hit. Finally, soon after Michael’s 26th birthday, he got his first promotion. His work hours became more manageable, and he started spending more nights with his friends at the trendy bars around town. Not long after, he met Amie.

The next year:

Amie and Michael became very close very quickly. Even though Amie was making a great living as an engineer, Michael liked to treat her whenever they went out on the town. They went to lavish restaurants, spent the holidays with Amie’s family, and even took a short vacation in the south of Spain. Soon they were ready to take the leap and move in together. They decided to find a new place instead of cramming into one of their studio apartments. They found a great rental in the Museum District, and planned to start house hunting in the next couple years if all went well. Even though the rent was higher than his old apartment, Michael decided he’d just stop his 401(k) contributions for the time-being to cover the extra expense. He also surprised Amie by buying all new furniture. He purchased everything with a new store credit card, which offered 0% interest for the first year.

The reality check:

A few months later, Michael noticed that some of the account balances were getting high on his various credit cards. He was getting hit with fees on a couple of them too. Since his rent was higher than he was used to, and he’d been overspending on date nights, his paycheck was no longer enough to cover it all. He came up with a budget to keep his shopping habits in check. After one month of being disciplined, he found budgeting to be too complicated, scrapped it all together, and went right back to his old ways. Michael continued to live well above his means, and ended up racking up thousands of dollars in credit card debt. To make matters worse, he defaulted on payments to two of the credit card companies.

The end result:

Fast forward two years. Amie and Michael are ready to start house hunting. Amie had been diligently saving up for the down payment since they met, as owning a home was a very important goal for her. They go through the mortgage preapproval process, and it is bad news. Amie has excellent credit. Unfortunately, Michael’s is so lousy they can’t even get a loan. Amie is devastated that they can’t consider buying a house right now. Michael can’t believe his spending habits have finally caught up to him. They decide to keep renting and work at cutting down on Michael’s debt. He sets up automatic credit card payments to make sure he doesn’t get charged any more late fees. They only go out to eat on very special occasions and he completely stops making purchases on credit.

Unfortunately, it takes many, many years to improve your credit score. They are still a long way from being able to get approved for that mortgage. The important thing to remember is that they are moving in the right direction. Michael continues to struggle to keep control of his spending, as he was so used to his previous high standard of living. Little by little things are improving for the couple. Eventually their hard work and diligence at saving and paying down debt will allow them the opportunity to buy the house they’ve always wanted.


Well, that’s a wrap on our Money Mishaps blog series. We hope you’ve learned from these stories, and will continue to make strides toward improving your own financial situation, regardless of your mishaps of the past. It’s never too early – and it’s never too late.

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