Friday, February 22, 2013

How an 18 Year Old Can Be Better Off Than Most 40 Year Olds Today

When you cut wood (with a chainsaw) it's pretty much pointless to be trying to listen to an MP3 player.  You can't hear it and the wires just get in the way.  You want to be safe so unnecessary equipment (scarf, headphones, etc) is just something to "not do" when chainsawing.  This leaves your brain to think and just like hiking or long distance motorcycle rides, I have come up with the occasional epiphany cutting wood, and yesterday was just such an example.

I was thinking about "my generation" and realized that most us late 30/early 40 somethings:
  • Do not have a positive net worth
  • Are in debt
  • Are working jobs we were capable of back in our 20's
  • Do not have significant retirement savings
  • Have children we can't afford
  • And are simply treading water financially
The reason for this is the reason for all financial and economics problems - debt.

Despite going to college 15 years ago most 40 year olds still have student loans or are "just now" paying them off.  Most people in my generation also thought buying "cool cars" was a brilliant idea and insist on having new cars (a habit developed and held over from middle school where you piss away money on stupid sh!t).  And then most of my generation also has credit card debt.  Not the credit card debt you pay off every month.

Oh no no no.

No, we use those 24% interest rate credit cards for long term financing of the crap we don't need, but must have.  (But it's alright, learning compounding and exponential functions in the 5th grade was for "squares" and so what we don't know won't hurt us!)

Add it all up together and you have somebody who's technically been an "adult" for 2 decades, but is also worse off when they started at the age of 18.

So how can an 18 year old avoid this fate?

Simple.  You just don't go into debt.

The hurdle is so low (if you care to "beat" your 40 year old counterpart) that you just need to avoid borrowing money and you will be in better financial shape than your average 40 year old.

I know for the younger kids out there, this seems crazy, but it it's true.  Yes, you may view a 40 year old as "old" or "wise" or "experienced."  And yes you may say to yourself (as I did when I was 18),

"Wow, you know.  40 year olds sure have their act together!  They're REAL adults!  I better listen to them!"

But the truth is they no more intelligent or experience than you are, let alone when they were 18. 

So it is here you can do yourself a HUGE favor and learn from the mistakes of others.

First (BOYS!), don't be a moron and buy a car you can't afford.  Forget crippling your financial future by taking on student loans, a car is even worse.  It's not an investment, it goes down in value.  And the truth is at the age of 18 using a car as a means to "get chicks" is a losing proposition.  The reason why is if you are going to play that game, you are going up against men with REAL cars.  Brand new Beemers.  Brand new Mercedes.  And men with checkbooks that can buy and sell you.  Girls who also play this game KNOW THE DIFFERENCE BETWEEN A 2012 MERCEDES and a 2013 MERCEDES.  And will certainly not be impressed with your pimped out Honda Civic with "sweet" fins. 

Second, don't be a moron and go to college if the price is too high relative to the earnings potential you will have after you graduate.  In other words don't major in a stupid subject.  If you go to school, graduate at 22 and you STILL HAVEN'T PAID OFF YOUR LOANS 18 YEARS LATER, you majored in something stupid and something that could have been taught at the library for free.  It OBVIOUSLY didn't generate the earnings that would rationalize the $50,000 in tuition and 4 (or 6 or 8) years of your youth.  And if you say,

"You know, college isn't all about the money.  It's about becoming a well-rounded person"

please find a sledge hammer and hit yourself in the head repeatedly.

Third (GIRLS), do not buy trinkets and crap that have no functional value.  If you're going to get a credit card and buy things, buy things like gas, utility bills, electornics, etc.  Also, how many of your mother's dresses do you borrow over the course of a year from when she went to high school?  Oh "0?"  Oh, that's right, because fashion for women is nothing but a scam for you to blow away your money on something that is going to be "obsolete" or "out of style" next year.  Instead of trying to keep up with the fads, how about your have your wardrobe be "timeless?"  Notice the pictures and fashion below are not from the most recent issue of "Glamour"

Regardless, "shopping" is not an activity or a hobby you do for fun.  "Spending money" is not something you should "look forward to doing" or should call up your friends and participate in.  It should be practical and functional, serving your needs.  Merely acquiring crap on a credit card only serves to enslave you later in life.

Finally, eliminate your rent or mortgage as much as possible. 

10 years ago I would have said "independence" is the most important characteristic and trait of a young person, commanding younger people to move out of the house as quickly as possible.  Now, forget it. Stay at home as long as you can.  Live off of your parents as long as possible.  Save as much money as possible.  And then, when your parents finally kick you out, find the cheapest place to rent possible.  Realize the less stuff you have, the smaller an apartment you need.  And if you insist on buying a house, again, find only what you need.

If you do these four simple things (all of which fall under the umbrella of "avoiding debt" aka "spend less than you make") you will be in better financial shape than most 40 year olds.  And not only will you be in better financial shape, you'll not have suffered wasting 4-8 years of your youth on a worthless degree, "scrambling climb the corporate ladder," let alone suffer the humiliation of filing for bankruptcy. 

This has been a PSA from Cappy Cap.

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