Who David Bach, 50
Where: New York City
Job: Author, The Automatic Millionaire, Expanded and Updated: A Powerful One-Step Plan to Live and Finish Rich, and eight other New York Times Best-Sellers.
I first met David Bach at the S.H.E. Summit at the 92nd Street Y this fall. I had signed on as a moderator for a panel: The Imperative for Women to Own Their Financial Security . It was an all star lineup including #FinancialGrownup Role Model Sallie Krawcheck, and an author I admired but had never met: David Bach. What a thrill. He had no idea that his philosophy of watching the little everyday spending, which he dubbed "The Latte Factor" had such a significant impact on my own financial thinking, that I had included it in my book "How to Be a Financial Grownup: Proven Advice from High Achievers on How to Live Your Dreams and Have Financial Freedom" .
Naturally, I had to get the scoop on his big moment.
David's Financial Grownup moment:
When I was in college freshman year, lined up in front of my dorms were a bunch of companies giving out t-shirts, clock radio’s and bike locks. And I think a dictionary too believe it or not. And what they were really doing was getting you signed up for credit cards. And when the credit cards came in and i used them. So I told myself that I was just going to use these credit cards for emergency purposes and by the time I was a sophomore I had $5,000 in credit card debt for "emergency purposes”. That was the beginning of my grownup moment because that meant I had to go to work to get those cards paid off. I brought those cards to my father to discuss my problem and my dad said son we don’t have a problem. Those credit cards are in your name. You have the problem. So I started working really really hard as an entrepreneur in college to get those cards paid off. Then I was really proud of myself for getting out of debt. And then all of those cards that got paid off they all came back and gave me new cards with new credit card limits. Well what did I do?
Did I learn? No! All of a sudden I had over $10,000 in credit card debt. Now I’m a senior. It was at the point where I’m opening up these credit cards and I’ll never forget this. I’m literally it is so stupid because it was my grownup moment because I can remember it like it was yesterday. I remember the apartment. I remember sitting at the table and I would open up the credit card bills. And I would get that - if you have ever had this you know what I am talking about. It is like a hot flash. And I remember. I opened up the bill. I got the hot flash and the room started spinning and I remember thinking how did I do this to myself? Because all the things I spent money on- none of them were emergency purposes. None were things I had to go and do . They were all things I wanted to go and do. And now I was a senior with nearly $15,000 in credit card debt so that was my grownup moment because there was a point in which the pain was so bad that I cut up all those cards, went to a debit card. When I got out of college I think it took me a year and a half to pay those cards off. I have never carried credit card debt since then. Ever. Literally since those days. I must have been 20, 22, since I graduated college and got the credit card paid off I have never carried credit card debt month to month since then. And in fact I used a debit card and an American Express card all the way until like 5 years ago when now I took some of these credit cards with a lot of points on them. But I still pay them off every single month and that was my grownup moment and that was a hard grownup moment to have but it changed my life.
David's lesson to share:
Credit cards? Those things sneak up on you. You know you are spending a little bit of money here a little bit of money there and you are making minimum payments and you are like well I am fine because I an make a minimum payment here and a minimum payment there and then the next thing you know you are not fine and also the low interest rate that starts out low, sometimes zero, next thing you know two or three years have gone by, you’ve got $10,000 in credit card debt now the rate is 20, or 25 or 30 and by the way those teaser rates? As soon as you make one late payment they bump those rates up and the late payment lesson? don’t make late payments because guess what? Late payments just went to $38 the other day, per late payment. Bobbi’s eyes just went “What!” over $11 billion in late payments late year alone on credit cards so guys those credit cards, they are a great tool but if you can’t pay the credit card off every single month then stop using them.