My Dumbest Debt Decision Ever

A while ago, I told you about my dumbest investment decision ever – now, I’m going to open the vault of stupidity and tell you about my worst debt decision ever. After all, what better place to talk about dumb money moves than on a blog that’s about how to intelligently manage your money?

The Facts About Debt

You know that cliched saying about how misery loves company? It’s true – and that’s why I’m going to show you that I’m not alone with making dumb decisions when it comes to debt. Did you know…

  • Americans hold more than 600 million credit cards? That equals out to about two credit cards for every man, woman, and child in the country… and yes, you can open a credit card for a minor. When used responsibly, it can help build a strong credit history. Factor in debit cards and in-store cards, and that number balloons to 1.3 billion cards.
  • Americans had $2.5 trillion dollars in outstanding consumer debt as of March? That equates to roughly one-sixth of the federal deficit.
  • The average credit card debt is in the United States is over $8,400? Now, consider that more than half of Americans have less than $10,000 saved for retirement.

It’s a fact, America: we’re a country that makes a lot of stupid money moves.

It Started Innocently Enough…

I’ll start by admitting that I was hormonal. I was three months pregnant, and as anxious as all get-out. Ever since we’d purchased our home two years earlier, my husband had been dead set on redoing our master bathroom. We finally had enough money in the bank to make it happen, so gave him the green light; he responded with such enthusiasm I thought it would only be a matter of time before I had a luxurious new soaker tub to relax my aching, swollen feet.

But, like just about everything my husband does, his motivation for this project ran out of steam about midway through my second trimester. He couldn’t decide on a contractor; then, when he did, he didn’t like the price he’d been quoted. Quite frankly, I didn’t like it either. That’s when I came up with an alternative – instead of paying $10,000 to redo a fully-functional (if unpretty) bathroom, why don’t we just put that money to adding on a sunroom?

So, we shifted gears, deciding to expand our square footage rather than update the bathroom. This time, I spearheaded the project, fearing the baby would be in college by the time my husband got everything nailed down. I interviewed four contractors – some local, some with national companies – and finally settled on one of them.

Footing The Bill

Ultimately, I chose to go with a contractor who worked through a national home improvement chain. Why? I felt this contractor – and the company that backed him – gave me not only the most bang for my buck, but also the most protection should something to wrong down the road. I was especially thrilled when he offered me financing through the store. I took advantage of the 12 months no-interest option, fully floating the $18,000 tab – despite the fact that we had a baby on the way, and I was about to go on maternity leave for five months, leaving me with only a partial paycheck.

By the time my baby girl arrived a few months later, I had a beautiful new sunroom. I also had a looming bill, but I wasn’t worried about that… yet.

The Debt Dilemma Grows

Just six months after my daughter’s birth, the clutch on my husband’s car went… for the second time in three months. The garage that had fixed it (poorly) the first time around had closed down in the interim, leaving us without any recourse. Rather than sink another $1,000 into a 10-year-old car, we opted to trade it in for a larger, more family-friendly vehicle.

That’s how we ended up financing another $15,000. You read right – in the span of just nine months, I’d managed to rack up $33,000 in debt.

The Lesson Learned

This story has a happy ending. My husband and I really buckled down on our spending, learning how to basically bank my entire paycheck while living off his. This allowed us to save up the $18,000 to pay for the sunroom, which we did a full month before the 12-month no interest period expired. We also paid off the car loan on that new vehicle ahead of time; I wrote the check to our lender a few months ago.

Despite our ability to overcome the debt, I still wish I’d done things differently. First of all, pregnancy is NOT the time to embark on a major construction project on your home. I was far too emotional to really make smart financial decisions at the time. I actually wish I’d never put the sunroom on in the first place; sure, our house has an extra room now, which is great, but… well, that’s $18,000 we’ll never see back. Our house is currently on the market, and we anticipate we’ll only see – at best – a 60% return on that investment.

In some ways, I’m not as frustrated about the car loan – I actually think getting rid of the old money pit in favor of a new vehicle was a smart money move for us. The issue was the timing. Because we had that $18,000 mark on our credit because of the construction bill, we didn’t get a great interest rate on our car loan. We probably should have waited – borrowing a car from a family friend or doing a short-term lease – until we paid off the construction bill before taking out the car loan.

Reader, what’s your dumbest debt decision ever?

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