Cover illustration by Red Nose Studio.

I'm going to spend as much as I want, whenever I want, and wherever I want.

Cover illustration by Red Nose Studio.

Three months ago, I walked into my favorite store in the Otay Ranch mall to look for a jacket. I walked out two hours later with the jacket, two pairs of jeans, six tops, and an $850 credit-card bill. A week later, I went back to return two of the tops and ended up adding $300 more to that credit-card bill. Then, three days later, another $200. On the days in between, I got my hair cut, bought make-up, purchased a few things for the house at Ikea, went out to dinner several times, and bought gas and groceries. After two-and-a-half weeks, my card went from a zero balance to $2700 — at 19 percent interest.

My husband knew nothing about it. He thought that the credit card was hidden in a box in his office, because I’d already proven it’s best for me not to carry it in my wallet. In times previous, I’ve had what I like to call my Lucille Ball moments: about once a year, I must confess to an extra $500 or so in credit-card charges. My husband steps in as Ricky Ricardo, stomps his foot, wags his finger, and fixes the problem. And I promise to never, ever, ever do it again.

This time I kept spending and spending, despite no foreseeable way to hide it or to handle the growing balance on my own. After a week of waking up panicked in the middle of the night, I asked a friend for help in creating a budget. I also sucked it up and told my husband what I’d done.

Meanwhile, my friend Samira was dealing with her own set of money issues. Or rather, her husband’s issues, which had become her own.

Samira and Shoji filed taxes jointly for the first time this year. In the tax preparer’s office, Samira discovered that, rather than the $3000 she was expecting to get back from the federal government, she owed. The amount she owed was only $100, but the difference between what she expected and what she got was over $3000, so the loss seemed huge. It turned out that Shoji had withdrawn $15,000 from his IRA in order to pay credit-card debts he’d never mentioned to Samira.

When Samira, infuriated, told me what Shoji had done, I was appropriately appalled. At the same time, I sent out silent prayers of gratitude for my own financially responsible husband.

By the time I spoke to Shoji, it was a few weeks after his big blow-up with Samira. He’d had time to think about things. He was reading a book called Debt-Proof Living that his parents had given him a decade earlier, when he was 30.

“When I was growing up, my parents’ philosophy about money was to earn it and not spend it,” he said. “Save every penny. I ended up thinking there’s no point in working if you’re going to earn and not spend it. I thought, I’m going to spend as much as I want, whenever I want, and wherever I want. That’s the self-destructive philosophy I had.”

He spent his money on clothes, expensive dinners, wine-tastings, entertainment, trips to Las Vegas, and whatever else came up over the course of living and dating.

“I always wanted to give the impression that I was doing well,” he said. “Who wants to go out with a guy who’s not doing so well?”

He made it a point to inform me that, whether or not Samira likes what has come of it, while they were dating, she benefited from his spending.

“She knows,” he said. “She’d better know. I spent money on her, and we had a good time. But that comes at a cost.”

Before they married last June, Samira told Shoji she wanted to talk frankly about finances. He told her the total amount of his debt was around $2000, while the real figure was closer to $15,000. As soon as he told this lie, however, he went about making it true.

“That’s when I pulled out the IRA money,” he said. “I was, like, I gotta get rid of this [debt] fast.”

Shoji knew he could have had the taxes withheld from the distribution when he made the withdrawal, but he chose not to, because he wanted the amount of his debt to be as close to zero as possible at the time of his marriage.

“I’m not a bad guy,” he said. “I don’t drink a lot. I don’t do drugs. I don’t gamble. I don’t have someone on the side. I don’t have other kids. It’s just my stupid philosophy about money that got me where I was. I was trying to take care of it with what I had, and what I had was my retirement.”

As sympathetic as I was to Samira for having married a man with money issues, I also understood Shoji’s panic. If I’d had a retirement fund that could have saved me (if only in the short term) from having the “I’m in the hole for $3000” conversation with my husband, I might well have done the same thing.

Pay Us and We’ll Make the Payments for You

I read a 2010 article entitled “Do You Live in a High-Debt City?” on USNews.com, which stated that between 2007 and 2010 San Diego residents “reduced their overall debt load by ten percent, bringing it down to an average of $23,822.” This contrasted with Denver, which ranked as “the most indebted city in America, according to data collected by Experian.” At the time, Denver’s residents had an average debt of $26,636.

San Diego ranked in neither the top ten nor the bottom ten. Still, the article got me thinking: If the average debt in San Diego is almost $24,000, what are people doing to get rid of it?

According to Barry Lander, clerk at the U.S. Bankruptcy Court for the Southern District of California, 2009 saw the breaking of an all-time record high for bankruptcies filed in San Diego and Imperial counties. And at 23,069 filings, 2010 broke the 2009 record. Although Lander’s numbers do not separate the two counties in his district, he says the percentage that reflects Imperial County would be “a single digit.”

In 2011, the number of bankruptcies filed went down to 21,061. Of those, 18,454 were Chapter 7 bankruptcies, in which, Lander tells me, “the vast majority [of filers] will get a discharge [of their unsecured debt].” This, as opposed to Chapter 11 and Chapter 13 bankruptcies, where filers end up with payment plans to address the debt.

So, bankruptcy is one way to eliminate debt. Emptying out your retirement fund is another (though in a sense, this is trading one kind of debt for another).

A guy named Chad B. gives me the scoop on another option: debt management.

Chad B.

Photo by Howie Rosen

I meet Chad at his condo in Point Loma, at 2:00 on a Saturday afternoon in April. Chad’s two-year-old daughter is asleep in her bedroom upstairs; his wife is out with her girlfriends. Chad and I sit on the living-room couch and talk over the low sound of baseball on the television, while MacNaughton, his 65-pound golden doodle (a full-size poodle and golden retriever mix), plays with a stuffed hedgehog at our feet.

In 1998, when he was 28, Chad divorced his first wife and moved to San Diego from Indiana.

“I moved into an apartment by myself and tried to figure out how to live in San Diego on one income,” he says. “Back in Indiana, our mortgage was $400 a month. Here, I was living in a one-bedroom apartment in Mission Beach for $800.”

Had he stayed in Indiana, he believes he wouldn’t have needed to use his credit cards to extend his paychecks — even after his divorce. The cost of living was much lower, and he could have moved in with his parents if he’d needed to. Plus, in Indiana, he’d been at the same civil-engineering job for almost ten years. When he left that job to come to San Diego, he started over.

“I was using my cards to buy groceries, and then stupid stuff every once in a while — going out to dinner and paying with my card and saving my cash for later,” he says. “It just kind of snowballed.”

At first, Chad made the minimum payments on his cards. Then he started missing payments, but still kept using the cards. Even when he did make the payments, the high interest rates increased the balances.

He tried personal loans from American General Finance (now Springleaf Financial), a company that offered loans to people with poor credit. Several times he applied for (and received) signature loans to pay off his credit cards. But then he was stuck paying back the loans at what he says were “super-high” interest rates.

“It was hard to make those payments,” he says. “I wouldn’t have the cash for anything else, so I’d use my credit card again.”

The baseball game briefly catches his attention. The dog approaches and puts his giant head on my lap. Chad warns that, if I pet him, he’ll never leave me alone.

As his debt continued to build, Chad became more uncomfortable. He felt as if he’d never get out from under it without winning the lottery or coming into some other (unlikely) windfall.

Chad played on a softball team at the time, along with a guy named Jory, who worked for DebtWave, a local nonprofit that specializes in credit counseling, debt management, and loan consolidation. Not knowing what else to do, Chad approached Jory and asked what his options were.

By this point, in 2005, his debt (spread across a couple of Visa cards, as well as store cards from Firestone, Best Buy, and Sears) totaled approximately $10,000. After his meeting with Jory, Chad applied — and qualified — for DebtWave’s debt-management program.

“To start the program, I had to send all the credit-card companies that I had cards with a letter saying that I’m going into debt counseling and that we need to freeze the cards so I can’t use them.”

The next step was for the DebtWave counselors to contact the companies directly and negotiate lower interest rates. Once the negotiations were completed, Chad was responsible for one $350 monthly payment to DebtWave, from which the nonprofit took a small monthly fee and before disbursing the rest to the credit-card companies. The number the counselors came up with was based on calculations that included Chad’s income and living expenses, as well as what the banks were willing to accept.

“I was able to make the payments and still have money for rent,” Chad says, “but I wasn’t able to travel or anything like that.”

Chad’s wife walks in the door, and the dog leaps up to greet her. Heather is a bright-eyed brunette with a sweet smile. She shakes my hand, kisses her bearded husband, and rubs the dog’s head. Just then, as if sensing her mother’s presence, their two-year-old sounds the alarm, letting them know she’s awake and ready to party.

Heather excuses herself, and Chad continues his story.

Around the time he started the debt-management program, he changed companies. He got himself a roommate, which cut his rent and utilities in half. But he still lived paycheck-to-paycheck and had to keep to a tight (though not impossible) budget.

“When I went into debt counseling,” he says, “I would still go out and have drinks with my buddies every once in a while, but I’d make my own lunches every day.”

Each month, the statements that came in the mail from his credit-card companies reflected the payments DebtWave had disbursed for him. They paid a little more on his card with the lowest balance than they did on the others, but it still took a couple of years to pay off. Once that first balance was paid, however, the others fell away quickly.

“I think we paid that first one off at the beginning of 2008,” he says. “By the beginning of 2009, it was done.”

Legally, in the state of California, the maximum amount a nonprofit debt management company can take as a monthly service fee is 8 percent of the monthly payment — not to exceed $35. Chad doesn’t remember the exact amount they took from his payment, but he guesses it was between $10 and $20.

Together we calculate $20 times the three years it took him to pay off the total and come up with $720. When I ask if he’d have been willing to pay that amount up front to get the same results, Chad says, “I don’t think I could have. I didn’t have any savings at all, so I don’t know that I would have been able to. But maybe…if they let me do it in a couple of payments.”

That said, was the $720 worth it?

“Absolutely,” Chad says. “I remember what it was like [thinking], I can pay this credit card, but not this one. Or I can pay my rent, but then I won’t be able to pay my credit cards. Or I’d be able to pay the minimums on one [card], but then I’d have to let another one slide, and I’d have people calling me at all hours of the day.”

He takes a deep breath and again turns his attention to the game. Then he says, “I’m so glad it’s over.”

In early 2009, just before he married Heather, Chad made his final payment. Today, three years later, he still fixes his own lunches. He does use a credit card for most purchases because he receives airline miles. But he pays it off in full every month. His credit score, which he says was “trashed” when he started the program, is now around 700. The condo, which Heather owned before they met, is in her name. Because her credit score is as high as they come (and because a higher credit score gets a lower interest rate), the car they’ve just bought is also in her name. Heather makes her lunch every day, too.

“It’s a huge relief not having that debt over my head,” Chad says. “We don’t spend a lot, but we can go out to dinner and have a fun date night and not worry about it. I’ll probably put it on my credit card, to get the miles, but we’ll pay it off.”

The baby comes walking down the stairs, holding onto the wall. Heather is right behind her.

“Sorry,” Heather says when they reach the bottom. “I tried to keep her upstairs, but she insisted on coming down.”

I laugh and tell her we’ll be done as soon as she answers one question.

She stands next to Chad.

“Shoot,” she says.

Would she have married Chad before his debts were paid off?

“Oh, hell, no,” she says.

She laughs, slaps his knee, and bends to kiss his face.

I Can Do It by Myself

My friend Bud was $20,000 in debt when he called to inquire about a debt-consolidation program advertised on the radio. He’d been supplementing his income as a writer with some photojournalism, racking up credit-card bills on equipment and travel, when in 2008 the “big crunch” happened and “things just died.”

“People with modest skills like mine weren’t getting paid at all,” he says. “We weren’t getting assignments. That was the long and short of it. Half my income fell off.”

We’re in the immaculate living room of his new La Mesa home. Bud sits in a chair with its wooden legs wrapped in plastic, because his chubby cat King Jacob is not satisfied with the scratch post in the corner.

“I started buying books, you know?” Bud says. “I bought Suze Orman. I bought Larry Winget. I started to read all the books about how to manage debt. I called the credit-card companies, like Suze Orman said. I said, ‘I’ve been a good customer for ten years. I’ve got great credit.’”

But the credit-card companies wouldn’t negotiate with him.

“They pretty much said, ‘Up yours, pal.’”

So Bud called a debt consolidator he’d heard advertised on The John and Ken Show on KFI AM 640. He emphasizes that it wasn’t just any advertisement; it was the kind where the radio personality makes it…personal.

“It was John [Chester Kobylt] talking. ‘Stop. Listen to me. Put down whatever you’re doing and write this number down.’ So I did.”

Bud was paying about $500 per month in credit-card bills, and the debt consolidator told him to stop paying the credit-card companies and to send the $500 a month to them. They’d negotiate payment amounts on his behalf.

“It seemed like I was doing the right thing,” Bud says. “As it turns out, they didn’t pay, or they folded, or something bad happened. Or they were a scam. I’m not exactly sure.”

He found out what happened when a collection agency called looking for money. Eventually, he was notified of a class-action lawsuit that had been filed against the company.

“I took the radio advertisement as ‘John’s’ stamp of endorsement, you know?” He sits back heavily in his chair and throws his arms up, letting them fall back into his lap. “For Christ’s sake, he’s a famous talk-show guy. He’s changed legislature.”

He reaches down to pet King Jacob, who winds back and forth, leaning into Bud’s ankles.

“I’m not blaming John,” he says. “I should have taken more responsibility.”

After that, Bud sent letters and good-faith checks, worked out payment plans with creditors, and resumed making payments. Two of his four debts had been sent to collections agencies; the other two stayed in-house. Unfortunately, although the consolidator had negotiated with the credit-card companies, all deals were off, and Bud’s interest was reset at higher rates.

By this time, he’d already given up his health insurance and taken to walking everywhere, which, since he was living downtown, was easy enough. In the two-and-a-half years since he began the process, Bud has paid off about half of the $20,000.

When I ask if he still uses credit cards, he says, “No, I won’t ever. They were so vile.”

He goes on a rant about the unscrupulous nature of credit-card companies. The rant ends with “They do anything they can to screw you.”

Bud says his new philosophy is “Trust no one. Keep your own counsel.” He went so far as to request his bank records all the way back to 2009, so that any time he has to speak to a bank or a credit-card company, he can look at the records himself, rather than relying on someone else to tell him what happened when.

“I know exactly what bills I have and when they come. There is a household budget. I know what everything costs, and there’s no surprises. I’m a cash-and-carry guy. If I can’t afford it, I don’t get it.”

I’m Not a Stupid Idiot

The Wednesday-evening Debtors Anonymous meeting, one of nine weekly meetings that take place in San Diego County, begins at 5:30 p.m. Tonight, 14 people crowd into a small windowless office on Camino del Rio South that’s used for family therapy during the day. (The meeting has since moved to a larger, more accommodating space on Kearny Villa Road.) This evening’s participants fill the existing seating (one sofa, two loveseats, and two upholstered chairs); there are also folding chairs shoved into corners and squeezed behind the door. One man sits on top of the therapy desk. A woman sits on the floor.

It’s in this room that I meet Claudia, a well-dressed woman with flawless hair and an edge of sarcasm to her humor. She’s tonight’s facilitator, a role taken on by a different member each week. A pair of glasses perched at the end of her nose, Claudia reads from a clipboard, then passes it to her right: one at a time, members read aloud from a list of “12 Signs of Compulsive Debting” then continue to pass the clipboard counterclockwise.

The list ranges from the obvious — compulsive shopping and poor saving habits — to ones I find more surprising, such as not knowing account balances and interest rates on loans, and denying the cost of basic needs.

(A few weeks from now, I’ll be drinking tea with Claudia in her Del Mar home, and she’ll tell me that the first time she went to a Debtors Anonymous meeting and read those 12 signs, she thought, Holy mackerel, it’s me. “I identified with every one of them,” she’ll say, “and I was, like, ‘I’m one sick puppy.’”)

Next, Claudia instructs the group to go around the room again, this time stating their names and one action they’ve taken this week to support their recovery.

“I’m Fred, compulsive debtor, and I had an honest conversation with my wife about our financial situation.”

“I’m Jamie, compulsive spender, and I made it to the meeting tonight.”

A few people say, “I kept my numbers this week,” which Claudia later explains means that they kept detailed records of their expenses and income. Just as there are 12 signs, there are also 12 tools. Meetings are at the top of that list. Record maintenance is second.

As the evening goes on, individuals share frustrations, fears, and triumphs with the group. Claudia, who claims Ralphs and Trader Joe’s as her “drugs of choice,” tells a story about walking out of a grocery store earlier in the week, having spent only $50 or $60 instead of the $300 of past visits.

Later, we have a handful of coffee dates and conversations, and Claudia tells me an on-the-record version of her story. It begins with the fact that, when she went to her first Debtors Anonymous meeting in 2010, she had already declared business bankruptcy twice. Worse, her current business was $258,000 in debt.

When she mentioned this number at that first meeting, the gasps of other members were audible. She later found a group in Laguna Beach where no one was shocked by her numbers.

“One guy was a CEO of a major corporation,” she says. “These are people where [having] $4 million in debt was nothing. My $300,000 [in debt], including $100,000 [per month] in payroll, was nothing. So I was easily able to talk, and easily able to get insight from people in recovery, people who had been in the program for years. I’d always known there was a glitch in my hard drive, and here I was at a place where somebody was able to label it, [to tell me that] I’m not a fuck-up, I’m not a stupid idiot, I’m not this piece of shit.”

Debtors Anonymous is a 12-step program, begun as an offshoot by members of Alcoholics Anonymous in 1968, and established permanently in 1976. In the same way that members of AA are encouraged to not only stop drinking but also to “do the steps,” members of Debtors Anonymous are encouraged to do the same, using the exact same steps but substituting the words “compulsive debt” for “alcohol.”

“From a business perspective, it’s like doing a business review,” Claudia says. “Taking a detailed look and systematically going through every aspect and dimension of who you are.”

Today, two years after that first meeting, Claudia is down to $8000 in debt. This is due to negotiations, payments made, and what she calls “miracles.” Her downsizing process included trading in her Infiniti for an Accord, negotiating her mortgage down from $5000 a month to $1900, and getting rid of all credit cards. She creates a spending plan each month and pays cash for everything.

As impressive as the reduction may be, Claudia says that what most people realize when they come into the program is that “It’s not about the money.”

At the meeting where we met, Claudia laughed often as she spoke. When others took their turns, she laughed when they laughed and clapped when they mentioned becoming solvent for the first time in their adult lives, or finally taking a first step in contacting creditors. Others were equally supportive, but I was drawn to Claudia in a way I couldn’t explain. During our later conversation at her home, she put it into words for me.

“This is going to sound horribly egotistical,” she says, “but when somebody comes into one of those rooms and they see me — as opposed to somebody who looks like a bag lady — they’re going to think twice about getting up and leaving, because they’re probably going to be able to relate more.”

The other members of the Wednesday-night meeting are hardly bag people, but Claudia’s right. Although I didn’t know any of the details of her life or her recovery, her laughter was compelling. I found myself looking at her, thinking, You mean I can still buy nice shoes for myself and get my hair done? I’d always believed keeping a budget meant doing without those things.

When I later mention this to Claudia, she says, “It’s not a program of deprivation. If you like shoes, you can buy a hundred pairs, as long as you don’t have to go into debt yourself or [through] anyone else to get them.”

My brain lights up at the idea of buying 100 pairs of shoes.

Claudia looks into my eyes. Self-debt, she says, includes taking from your prudent reserve.