These numbers assume a 5% interest rate on all the debts. I had some trouble making the numbers work because Jacob had to put at least 40% of his income to debt, or he would NEVER pay it off!
Things are getting more expensive over time. That’s inflation. It’s wild to look back at 1973 prices and think you could buy a car, 4 years college tuition, and home for these prices. But in addition to stuff getting more expensive, the cost of this American Dream is actually outpacing inflation relative to increases in median income!
That’s rough. Not only does it take almost 4x as long to pay this stuff back today compared to 50 years ago, that ALSO means young borrowers are delayed from investing for an additional 32 years! That, as fans of the page know, is catastrophic.
It sucks. I hate that we burden our 17 year olds with this blindfolded death march toward a life of debt. As a country we should strive to fix it. But as individuals, we need to understand what we’re up against and do our best to combat it to improve our own situation. We don’t have to sign up for 43 years of debt! Here’s some ideas that would help mitigate the debt:
• Go to a cheaper college or community college
• Spend extra time and effort seeking scholarships
• Work during college and summers (this correlates to BETTER grades, FYI)
• Buy a dramatically cheaper used car in cash
• Rent a cheap apartment until all your debt is paid off
• Buy a smaller house
In the 1970s new homes averaged 1500 square feet, but today they’re over 2,600! So we do need to take some accountability for wanting to “keep up with the Jones'”. If you can make some tough choices regarding these three big expenses (tuition, transportation, housing) you can save BIG money and avoid this trap of a lifetime of debt!
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
