A tweet from @theficouple inspired this post! They pointed out that so many elements of “The American Dream” involve burying yourself in crippling debt early in your life, just to spend the rest of your life trying to claw your way out of it.
But there are options! Let’s break it down:
• College: If you look at the numbers, college is still a good deal. Those who get degrees earn WELL MORE than the cost of school over the course of their career. Yet still, that doesn’t mean we should look at student loans as a blank check. Some options to reduce student loan debt include attending a cheaper school, transferring credits from a community college, aggressively seeking out scholarships, working part time and during summers, minimizing living costs through frugality, etc.
• Wedding: The average cost of a wedding in the US is about $30K. However, there’s a correlation between wedding cost (and engagement ring cost) and divorce rates. The more you spend on the symbols, the more likely the marriage to fail. Go the frugal route. Less party, more marriage.
• Homeownership: Just because someone will loan you the money, doesn’t mean you should bury yourself in debt. Consider renting frugally for a bit longer to save up a bigger down payment. Start with a more modest home so you can invest more and/or more aggressively pay off the mortgage. Consider the opportunity cost of investing that down payment vs dumping into a house. Don’t be house poor.
• Car: Your car will probably be the most expensive thing you ever buy that will plummet in value. Why would you want to INCREASE that amount? Buy frugally. Buy used. Buy in cash. Keep the debt out of your life so your car can take you places and isn’t a financial anchor preventing you from doing the things you love.
As always, reminding you to build wealth by following the two PFC rules: 1.) Live below your means and 2.) Invest early and often.
-Jeremy
