Do you have car loans? Credit card debt? Student loans? Then you are officially following your broke friends to broke-town. I’m dead serious about this. If you’re going along with the crowd these days, then you’re likely headed for a broke future.
Do you know what some of the most popular personal finance titles are today?
- How to buy a house with no money down
- How to retire with little money
- Can you buy a car with no money down?
Without having to strain too much to read in between the lines, these people are saying, “Okay, so I’m not smart enough to hold onto my money, but I still want to own an expensive house, drive a brand new car, and retire like a king.”
…Somehow, this has become the norm in this world, and tons more are signing up for this ridiculous journey each and every day…
Stop Following Your Broke Friends
- the average household owes $7,529 on their credit cards
- the average mortgage debt is $155,361
- the average car loan is $27,430
- and the average student loan debt is $31,946
This means that the average person has taken out loans for nearly $225,000! And on what kind of income? $53,657 per year – that’s the average family income for a U.S. household.
After deducting taxes of 35%, the average person is left with $34,887 a year, or $2,906 per month.
And what are the monthly payments of the house, the car, the student loans, and the credit cards? $2,144 ($162 for the credit card, $411 for the car, $1,200 for the mortgage, and $371 for that outrageous student loan bill). That leaves you with only $762 for food, clothing, utilities, car insurance, fuel, and your cell phone. Good luck! No wonder the average person doesn’t put any money into savings!
There’s a Better Way
So many people just assume they need debt to survive in this world. That’s the biggest myth I’ve ever heard. The banks love it, car dealerships love it, and the government is certainly giddy as they keep feeding kids student loan after student loan. The only ones hurt by this mentality of debt are the people – millions of them.
Instead of having no money and acting rich, why not live humbly and actually be rich? It is possible, no matter what your broke friends tell you.
Here’s the simple method:
- Pay for your car with cash – there are plenty of solid cars out there for less than $3,000 (can you say Honda? Toyota? Maybe Buick?)
- Buy a house that you can pay off in less than 5 years (do not fall prey to the 30 year mortgage…please…)
- Never carry a balance on your credit card – if you don’t have the money in your bank account, then don’t buy the stuff
- Work your tail off to keep your student loans to a minimum and pay them off immediately after graduation
If you choose to stop following your broke friends, your life will be dramatically different.
Instead of having $2,144 in payments each month (like the average person we described above), after 10 years or less you could earn yourself a life of no payments. How? Keep paying cash for your cars, pay off your house, pay off your student loans, and never have credit card debt.
While your friends are trying to figure out how to live off of $762 a month, your total becomes much different: $2,906 (nearly 4x the amount!!). At this point, you can choose to invest your additional money, thereby multiplying your wealth, while your friends will be stuck in their broke cycle for decades, never accumulating more than a few hundred bucks in their bank accounts.
So what life will you choose? Are you following your broke friends, or will you choose to live life with purpose toward wealth?
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.