Howdy folks and welcome to another months post. Thanks for joining me here as I try to guide myself as well as other readers on the path that is financial freedom. In today's post, I thought we should look at some key financial decisions that I see many people make that could potentially haunt them all of their lives. Then of course I will look at some of those decisions in my life and how to avoid them or at least shed some light on them so you can make an informed decision.
I will say this. I understand that everyone has a different situation and that things change over the course of people's lives. As always I will be talking from my own experience, and hey... I'm only 28.
The default formula
The default formula for most developed countries are. Got to school, go to college or university and then work. The default formula works, but for who? If you take a step back and think about who wins in this scenario, you might look at things slightly differently. Alright, tinfoil hats on everybody. In this scenario, the government wins. And to be honest it makes sense. The government has created a great consumer of its products. Now stay with me, and let's quickly explore just how deep the rabbit hole goes Alice.
You might be sitting there, a bit confused and wondering what this crazy guy is writing about. Let me explain a bit. I just sat back one day and saw that the majority of people I knew were doing the same thing. That included me. We went from high school and immediately went to university. I studied something that was in demand and that I found interesting. So the wheels were set in motion and I graduated from university and started working in the industry. You could certainly make the argument that I am better off now because of my university degree and I would have never landed my internship if I hadn't studied.
The other side of this however is, I left with around 35k in student debt, I am still paying this off today. (I should be done around June of next year). What if I hadn't studied? What if instead, I asked some industry professionals who I knew, how I could fast track my way into the industry? No instead I blindly committed to three years of studying without any industry knowledge. I am actually fortunate enough to still be working in the industry that I studied for. However, the stats back up the fact the majority of people aren't.
The long-winded point I am trying to make is that as a young naive almost teenager, I was able to make a financial decision that is impacting my life, 5 years down the track. Why is that?
Stop making the bad choices
That's very interesting Milan, you are paying student debt. What has that to do with me? Glad you asked. I was extremely fortunate to stumble across some key books and blogs that put me on to financial independence and ultimately lead me to start this blog. My goal is to pull as many people as I can with me. So with that in mind, I think it's time we changed the narrative a bit for younger people. Don't worry golden oldies, read a bit further to see what you can do. I do still consider myself a younger person thank you very much.
Stop the money bleeding
See after you've accumulated a bunch of student debt, you are introduced to the world of credit cards, car loans and every other form of credit. There is a lot of opinions on the internet regarding debt and its uses. Long time readers know that we've had a mortgage before and we sold our house. I believe that you should try to live as close to debt-free as possible. I say as possible because most people aren't able to afford a home and will have to service a mortgage. To buy or not to buy a home, that is definitely a post for another day. Trying to stay as debt-free as possible should be the goal. Yes, you might have to sacrifice the new fancy car and buy second-hand card cash, however, it will save you thousands in repayments. Stop making long term decisions impulsively. Just because your uncle told you to buy a new car 'because you deserve' does not mean you need to go out and make an enormous financial blunder. Stop the bleeding early in your life and really ask yourself if this debt is worth it? Lucky for me, my student debt is accumulating any interest, however, that is one of a very few select debts that isn't accumulating interest. Debt in my eyes needs to be avoided as much as possible.
What if I am up to my eyeballs in debt?
A lot of people I know has debt. Some people have massive amounts and others have smaller amounts. What should you do if you find yourself in this situation? I personally love Dave Ramsey's approach to this. The premise of it is, you list off all of your debts, from smallest to largest. Then you pay the smallest one and you keep going as you gain momentum. The feeling of knocking off debt is something that keeps people motivated. Dave has helped a lot of people become debt-free by using this method. If I had a lot of debt, this is how I would do it.
What if I'm a bit older?
Its not all doom and gloom for someone that is in their golden years. Oh quite the opposite really. It's like the age-old saying,
The best time to plant a tree was 20 years ago. The second best time is now.
Chances are, that if you are in your golden years, you are probably making the most money you ever have. So the time to get out of debt is right now. Put down the sirloin steaks and pay off your debt as quickly as possible. Then take all of that extra money you no longer have to spend on debt repayments and invest it!
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