I sat on the park bench, my stomach churning because I was nervous about the call I had to make. I was about to dial the credit card company that had been harassing me nonstop for nearly a year and a half. I had defaulted on one of my cards — well, actually, my parents had — and I was finally ready to put an end to the calls I was constantly diverting to voice mail.
That was May 2011, and in hindsight, I feel a bit silly to have been so scared. I thought the collection agency was going to threaten me with a lawsuit. But the call was civil: The agent politely explained my options, and then set me up with a payment plan. I'd transfer $400 every month from my checking account toward the card's balance for five months to pay off the settled amount of about $2,000.
For a few days after, I felt good about myself because I was finally taking control of my finances and finally acting like a responsible adult. But then I realized that it was just the tip of the iceberg: I still had about $68,000 of other debt on my shoulders.
A family (financial) affair
This may sound bratty, but I blame my parents for the massive amount of debt that I had incurred. We never discussed it officially, but we had an understanding that they'd pay for most of my living expenses while I was in college however they could. So, in addition to taking out student loans (most of which were in my name), they signed me up for multiple credit cards, which we used to pay for textbooks and other expenses. Although the cards were all in my name, my parents paid them.
Frankly, I had no idea how much I was spending at school. I'd never had a job, so I had no notion of how to draft a budget, the dollar value of a hard day's work, or the importance of saving and spending responsibly. To me, the loans "I" took out for my private Midwestern university seemed like "magic" money. It didn't dawn on me until I landed my first job that I was expected to pay it all back.
You see, my credit card charges went beyond paying for books to financing my wanderlust: Flights to study abroad, internships in Europe, and then graduate school in the Middle East for a master's degree in Islamic studies. (I got a full scholarship for my graduate tuition, but I still had to pay for all of my personal expenses.)
I know that I really shouldn't resent my mom and dad for my debt situation. After all, they were just funding my education and idealistic ambitions. But we were all in for a rude awakening.
While visiting me in the Middle East, my mom accidentally missed a payment on the aforementioned card, which carried a high interest rate. Afterward, she was inundated with penalty fees, and even though it was her first missed payment, the company refused to waive them.
My mom is a nursing assistant and my dad is an accountant — by no means rich — and she could no longer afford to pay off that card, especially since they were still paying a slew of other loans and cards in my name. So with finances tight, she defaulted and took to ignoring the daily collection calls.
She didn't seem overly concerned about the impact that this would have on my credit score. Her response? "You're only 24. It will come off your credit report in seven years." It wasn't the most sound advice, but she'd always had a blasé attitude about finances — an attitude that carried over to me.
After finishing grad school, I conducted my job hunt from abroad for about three months, so I was shielded from the collection calls. But when I returned to the U.S. after landing a position at a nonprofit on the East Coast, my phone started ringing. My mother encouraged me to ignore the calls too, so I did. Like mother, like daughter.
Out of college, deep in debt
But I hated living my life that way. Having a paycheck did help me to finally become more financially responsible: I created a monthly budget, picked the cheapest cell phone plan, walked everywhere instead of riding the subway, and frequently declined nights out with friends.
I also took over paying my student loans and most of my credit cards from my parents. Since I'd lived much of my life with zero concept of financial responsibility, I wasn't exactly thrilled about it — but I also knew that I had no choice. My parents were starting to pay for my sister's college expenses and debt, so they were eager to offload whatever they could. It was my debt, after all.
The problem was that I was only making $30,000 a year. I was able to cover my living expenses, but it wasn't enough to make a real dent in my debt — some $20,000 in credit cards and $50,000 in private and federal student loans. I could only pay the minimum balances due. I did have the good sense to max out my 403(b) — a retirement account for people who work at nonprofits that's similar to a 401(k) — but outside of that, my savings plan consisted of setting aside just $100 a month.
A good start, yes. But when I thought about my long-term goals — getting married, having kids, buying a house, and eventually investing — that amount felt like a measly drop in the bucket. To top it off, thanks to the defaulted card, my credit score had suffered and was in the low 600s, which I knew would affect my future. I felt like a loser, a failure, a fraud.
Opportunity knocks… overseas
Everything changed in the summer of 2011. I'd been applying for countless, higher-paying jobs when I ran into a former colleague who'd been following my career and was impressed with my work. So he offered me a teaching position at a university in the Persian Gulf.
It was my dream job. Not only would I be able to teach in my field of expertise but I was also returning to the Arab world. Plus, my base salary was more than double what I was earning. And that wasn't even including all of the additional benefits: Free rent, utilities and transportation, as well as a one-time relocation compensation in the five digits — not including the free flight for the move! I was absolutely floored.
Given my new financial situation, my top priority was to get out of debt. So I used the relocation allowance to pay off the majority of my credit cards. I then drafted a tight budget that would allow me to pay down the remainder of my loans and cards in one year. I cut back on dining out, shopping, and international travel. Thanks to my higher salary, rent-free existence, and controlled spending, I was able to put huge chunks of money toward my debt each month — sometimes as much as $4,000!
Two and a half years after moving to the Gulf, I'm debt-free — and my credit score has improved significantly.
In the end, I didn't achieve my one-year goal to pay off every penny of debt. Life came up, like weddings, travel (it's tough to break old habits), and the occasional medical expense. But I made sure that I didn't dig myself into a deeper financial hole by locking up my old credit cards in a safe and only using my debit card for purchases. If I was forced to use a credit card for any reason, I made sure to pay it off as soon as the charge appeared on my statement.
A clean (credit) slate
Today, just two and a half years after moving to the Gulf, I'm completely debt-free — and my credit score has improved significantly. It's now in the high 700s. And although that's not perfect, I at least won't dread the day that I apply for a mortgage or a car loan.
Many experts say that to keep a high credit score, you need to use your credit cards, which means maintaining a little bit of revolving debt. That may be true, but I don't care. I never want to put myself in a vulnerable position again. I haven't canceled my cards — at least not yet — because I know that would reduce my credit history and negatively impact my score, but I rarely use them.
Another thing that I'm focused on is building an emergency fund. In my zeal to pay off my debt — even "good" debt, such as the federal student loans that I probably didn't need to pay down as quickly — this fell to the wayside. I'm working on that now, with about $3,000 saved.
I feel very lucky that things worked out the way that they did. However, it did take hard work and strict budgeting on my end. Landing my current job also helped significantly, and I encourage others to explore expatriate job opportunities in the Gulf. Living in the region isn't perfect — there's a lot of inequality, but for college-educated Westerners, the job and salary opportunities are substantial. And many employers offer competitive benefits packages, including free housing and travel allowances.
I can honestly say that I don't regret all of the international study and internship opportunities that I had when I was a student. Without them, I would never be where I am today. Not only am I out of debt, I also invest in an employer-matched 401(k), and I've even started contributing $1,000 a month to a private mutual fund. So in addition to being debt free, I have $64,000 saved for retirement!
My new financial freedom has also allowed me to tackle some of my parents' debt, such as an $8,000 parental loan that my dad took out to help get me through college. I'm on track to hopefully have it completely paid off in eight months. It's only fair that I pay them back for all of the financial burdens that they took on for me.
*Name has been changed.
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