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Stop Following Your Friends to Broketown

stop following your broke friendsDo 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

According to Nerd Wallet:

  • 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

stop following your broke friendsInstead of following your broke friends by living paycheck to paycheck each month, why not be radical and actually choose to have money at the end of each month? That’s right, I said choose…

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?

Battle of the Mind Money

AUTHOR Derek

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.

9 Comments

  1. I LOVE this! I’m at the point in my life where I bought a home almost 2 years ago and my peers are also buying homes and moving out from their parents. One friend asked me which type of loan I got and whether I thought they could get away with no money down (on a home more expensive than mine even). I thought this was crazy because I never would’ve thought about buying a home with no money down!

    I’m glad to see I am below average…the only “average debt” I have is a mortgage and im proud to say that it is well below average and will have already paid 20% of the loan within the first 2 years!

    • Great job, Ryan! Just wait until you pay your house off! You’ll feel completely weird and your friends won’t understand at all. But…your pile of cash at the end of your life will help them understand in the end. 😉

  2. Awesome post Derek! I am choosing to do something different.

    I have been working two jobs for most of this year and pushing myself to try and sell things I make online before year end. I wrote you earlier this year and you were so helpful. A goal of mine is to pay off my house within another 5 years. Wow.. what an achievement that would be. Take care!

    • Hi Nicole. There is a HUGE market for home-made items in the online world. It’s not always easy to get your name out there, but if you’re successful in that, it can be pretty simple to continue your successful business.

      I’m glad I was able to help when you reached out. Always happy to help my readers. Best of luck paying off your house! Wouldn’t that just be awesome?!?!?!

  3. Wonderful post, Derek. I can just hear my mother’s voice ‘If your friends jumped off a bridge would YOU do it too?’.

    We’re close to retiring a bit early (55 and 57) and our friends and family know we’ve put a lot of effort into our finances and money habits. Yet a few of them are broke and they won’t look to us for guidance. We’ve tried to have discussions but stopped. And it’s not like our approach was hard-hitting or we rubbed their noses in our successes. They just don’t want to hear it. They’re in debt and they’re broke but they know best.

    • That would definitely be tough, MG. My mother’s voice comes to mind now – “You can’t change someone else, only yourself.” Some people just don’t want to change. They look at you and probably see sacrifice and reduced fun, and they’d rather live in debt with a bunch of stuff. For those types of people, you just have to let them go. If they truly need help, I’m sure they know they can come to you.

      Thanks for the comment!

  4. The student loan debt is “understandable” in the sense that we’re told from the time that we’re little kids that we must go to college or endure a life of being a failure and living in squalor, and therefore it’s understandable why so many people would foolishly take on massive amounts of debt for a potentially useless college degree.

    My rant aside… that average car loan is just mind blowing. I’ve never been able to get my head around the idea of getting a car that you can’t buy outright, but I would think that if you’re still dead set on getting a car loan you’d opt for a car that’s like $10k? $15k maybe? But people are getting $30k+ cars on credit? How foolish can you be? They literally just look at the monthly payment and say “I can afford that!” without looking at the time frame, or the interest rate or… anything at all… I just… sigh…

    • I love the rant – both of them! The fact that these people aren’t paying for their cars outright is exactly why the average loan amount is so high. They find that they can make the payment for a pretty sweet ride, so they sign up for the 7 year loan immediately. It’s pretty sad, because they’re keeping their net worth stagnant for many years, just for that shiny ride.


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