I stopped using my personal credit cards, for the most part, a couple of years ago. I say “for the most part” because I did use a personal credit card once in February of 2018 to pay for a medical procedure (a uterine fibroid embolization) and during 2 months in early 2019 during which the business didn’t bring in enough to pay my little, inconsistent salary (I’m a W-2 employee of my business). I spent just over $7,000 on the procedure and about $1,800 as the money I needed to help float me to the next month.
What I didn’t stop doing, though, was using the business credit card. I got the business card about 4 years ago when my banker encouraged me to get the card to contribute to the business building its own credit. I got the card, with both my name and the name of the business on it. As almost every small business owner must, I personally guaranteed the payment of any charges incurred by the business on the card. The credit limit was somewhere around $3,000 when I first got the card. Over the years, the bank saw that I consistently used the card and made timely payments. As my use of the card continued to grow, so did my credit limit. I think I asked for an increase in the limit one time – when the card still had a limit below $7,000. The bank would, however, periodically increase my limit without me having to ask. This happened whenever my balance was at or near the credit limit. Today, the card has a credit limit of $25,000.
So, the problem here is obvious, right? Though I almost eliminated my use of credit cards on the personal side, I continued to maintain my same old bad habits. I simply narrowed the playing field of stupidity. Instead of being stupid with the credit cards in both my personal and business lives, I just limited the credit card use to the business side.
Ah . . . but when you work for yourself and you are the key producer in the business, the business is integrally linked to the person. I make all of the decisions about what money will be spent, when and on what things. I control the credit card. Though I knew I couldn’t use a personal credit card to get certain things, I could find a way to make it a business expense. I could justify going to Capital Grill for a meeting on the business side. I could justify traveling to another state, staying in a nice hotel, and eating fine food for a business conference. Could the business afford it? No! Could the business pay for it? Absolutely. I had the business credit card.
As I’ve admitted, part of the reason I’m in this situation is that – prior to my reformation – I’d spent too much time not paying attention. I hadn’t been tracking my income, hadn’t been closely monitoring expenses, and had not been intentional and disciplined when it comes to the handling of the business’s or my personal finances. When I started to tighten up on the personal side of things, I put the business piece in the background, with the intention of getting to it later. “Later” has turned into about a year and a half. So, up until July 31, I was living under the delusion that I was actually changing my habits for the future. I wasn’t. I was just doing a better job of masking my problem.
What I Did
(1) Committed to a Different Mindset – Credit Sobriety
I knew I had to stop thinking of the use of credit is an option. I had to adopt a credit-exclusive mindset. I had to get credit sober. In the same way that no man around here has the option of dating me without actually taking me on dates, I had to make it so that the use of credit was not an option for me. I gave myself a deadline of August 1. Before August 1, I had to make the commitment to totally stop using credit – for personal or business reasons. “You’re going to have to stop using the credit card,” I told myself. “Until you can get to the point where you’ve got clear processes and financial systems in place, you cannot use the card at all – ever. Fuck the cash back ‘rewards.’”
(2) Evaluated and Analyzed Expenses and Income
In July, I began the process of organizing and evaluating all of the business expenditures and income over the prior year. I poured over bank and credit card statements, trying to figure out what services could be cancelled and where most of the money was going. I also looked closely at the revenues the business was generating.
Through the process, I found that there were some random services and subscriptions that the business was paying for, but that weren’t necessary. I questioned whether we really needed to keep the higher-priced office address, or whether we could reduce that cost in some manner. I questioned every expense that appeared on statements over the most recent months. How many stock photos do we really use? How effective has this advertising campaign been? Has So-and-So Staff Member really been using this subscription? With the services and expenses that I thought we should continue (e.g., Quickbooks, Adobe, our firm management software), I looked to see if there were ways that the subscription costs could be reduced. I canceled what needed to be canceled, and made the adjustments that I thought were smart. I know these won’t be long-term adjustments. I just did what needed to be done in the short-term until I get clarity on the direction of the business and where the money should be going.
(3) Put an End to It All
How dramatic – put an end to it all. Ultimately, this is what I had to do. I did the best that I could in making decisions about expenses, but as my July 31 deadline approached, I was still struggling with what to cut and what to keep. To remain faithful to my commitment to no longer use credit as of August 1, I put myself in the position where it was not possible for me to use credit beyond the August 1 date.
I reported the business credit card lost and told the bank to shut down the use of the card. With this method, no more charges could be incurred on the card. If I hadn’t decided on whether to keep or let go of an expense by then, I’d be forced to evaluate that and make a decision once the company reached out to me the following month to state that the card on file had been declined. One by one, I’d have to determine if the continued payment of that particular service was necessary for the business or not. If it was, I’d start paying it through the operating checking account. If not, I simply would not continue with the particular service or expense.
The Result?
Hi. My name is Tanya and I’m 31 days credit sober. August 2019 was the first month in many years during which I did not use any credit card. That’s a big deal for me!