Average Debt by Age! (How Do You Compare Against Other Americans?)
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- Опубликовано: 13 сен 2024
- Debt is one of the biggest problems facing Americans. In this episode, we’ll break down exactly how much debt the average American has at different ages, what they’re doing wrong, and how to do it better.
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45 with 0 debt, paid off home and $ in the bank. I am blessed.🎉
Debt free and mortgage free for a long while now. It led us on a path to early retirement at 52 and 55.
What advice would you give a 20 year old starting with a clean slate? Meaning no debt
@CorneliusoftheYukon max out your Roth IRA, Get the match in your employer 401k (if you have a match)
Work for an employer with great benefits. Do your research in your area.
Marry the right person.
Our 20 year old son has an IRA, a pension and a 457. He is on the right track at a young age. You can too.
What did you do to get to debt free? About what percentile on the income scale would you say you were?
Congrats! :D
@@rhondavigil795 Wow. Good job raising your son! That's awesome. Wish more parents passed down financial wisdom like that.
I'm a Millennial and tbh I was surprised that the credit card debt is that low. I was expecting it to be much higher.
Great episode guys, I am 47 and feel lost financially at this point. Spent most of my life financially illiterate and started early with a family. Now I am trying to fix it and just feel like I can't get it together to the point I will ever be able to retire. I found your channel recently and am watching and trying to learn as I go. Thank you
How young if you dont mind me asking
@@DylanJo123 I was 16 when my son was born and 19 with my daughter :)
It's never too late to do the best you can to turn things around.
I'm in my late 30s, made a lot of mistakes in the past, now single on a low income so I won't ever get close to saving what would be needed to have a comfortable old day... But I did what I could to get out of debt and save up an emergency fund over the last few years, and now I'm spending every penny and all the skill and energy I can spare to do worthwhile renovations on my house while paying back the mortgage at a faster rate. In about 4 years from now I should be debt-free including mortgage and be able to save/invest most of what I'm now spending on my house every month. 20 to 25 years of compounding interest on a small amount of money may be not a lot compared to 40 to 45 years of compounding on more money, but it sure is better than nothing and it beats the hell out of being in debt later in life.
You got this!! Discipline and consistency will get to you to your end goal.
"not a credit card person" hmmm heard that somewhere before
TAQUITOS!!!!
still patting myself on the back for not falling for the 0% apr 30k purchase of a new car back during 2020 and instead buying a used corolla for like 10k cash. no debt, no car payment, money going into VTI and my mortgage instead. car still running like a champ on oil changes.
Yes! Bought my 2012 Camry 10 years ago and still runs great! We did take out a small low interest (back when they were doing 0.9% loans) and paid it off in a couple of years. It feels so good to not have a car payment. Will drive it until it dies.
Just paid off our 38k of student debt to be consumer debt free at 27! (minus the 235k mortgage). I would rather have the freedom to switch jobs or lose a job than only look to funding a retirement fund so aggressively (we have about 50k saved in Roth between us and do 10% total contribution with employer contributions).we wont be paying off our house early though, its already a 15 year 2.5% mortgage. Excited to have 0 debt at 40!
Your freedom to switch jobs is limited by that mortgage my friend.
Another incredible episode. It’s never too late to start making better decisions. My wife and are in our early 30’s and love following these tips.
I’m on my 3rd Honda civic since 1999…Brian suggested in early 20s getting a Honda civic over a fancy car. I thought a Honda Civic was a fancy car!
Lol
For me I started with the basic Toyota Camry and now my splurge was the top trim Camry. Doubt I will every upgrade from Camry.
I got a new 2024 Honda Civic and it feels fancy to me. I love it.
By excluding individuals with $0 in debt for student loans, the numbers get skewed. The 40's and 50's end up being people who either got their masters/doctorates OR people with awful money management.
I would love a deeper comparison that takes the 0s into consideration (the group that paid off the debt)
I agree...
You could do some kind of cluster analysis to categorise Gen Xers as either "good" or "bad" money managers, and present averages for each cluster.
We (Sue and I), thought having debt was normal and a part of life and being debt free was impossible. Then one day we got a financial scare. It turned out our scare fizzled out, nothing, but it got us to start a debt free journey. Seven years ago we have a ton of consumer debt and were still paying on our mortgage. Today we have no debt, paid for home, 9 months income in savings and are putting 30% of our income (plus match) into our 401Ks. Life is much gooder now!
If we can do this, anyone can do it. By our example and urging, our 2 kids are also debt free, both are millennials. Our daughter made payments on her student loan during the pandemic forbearance, she paid it off in full last month (5 years payoff). So proud of her! She has set herself up for success!
I'm a boomer BTW. Most of my friends are boomers and some of them still have serious debt. I know one couple that have a mortgage $240,000 balance, personal loans $280,000 and spending like crazy. This is over a half million dollars debt and looking at retirement. I think they could do a course correction, but I don't think they are going to do it just yet.
This is so amazing. I am still in mortgage debt and need to build savings and need to start putting money in retirement as i m still pay check to paycheck. Your post has inspired me. Thank you!
Kudos to your daughter and you!
I finished paying off my car and house last year. No CC or student loan debt, I think I'm doing OK.
Doing great, I would say. As long as you have been investing as well (or have a classic pension)
We are 47 and 48. We bought a Chevy Prizm/ Corolla twin!, new for $13K in 2002, paid it off in 2005. Its 21.5 years old now! Still driving it. Havent had a car payment since!
Our 91 Toyota Tercel was totalled in 2007.
In 2006 we bought a house on a bus line and started getting the employer 401k match for 17 years. Id read dont wake up in your late 40s with retirement around the corner and wish you had started saving earlier. Some of the best advice we took!
My husband took the bus for less than the cost of gas or biked to work for years. 17+ of our 25+ years married we chose to be a one car family. 2 years ago we bought a Camry, had the cash.
We only carry mortgage debt. It has been refinanced and we paid extra. We owe 100k less than the other gen Xers here. With escrow it is less than renting a 2 bedroom apartment. And cost of living is below average here! The mortgage is less than 10% of our gross income.
We just had to replace our water heater. We still have an emergency fund. Saving for a new roof and then another vehicle.
Keeping housing and transportation expenses down has made a huge difference! Some people who dont know us well assumed we couldnt afford more! No, it was and is a choice! I dont have a fancy car but I also didnt buy an overpriced $50k vehicle nor do I have $1k a month car payments. I have less debt and investments and savings!
I just started really tackling my student loans this year and was shocked to realize most of my loans have a higher balance than when they were pulled out 10 years ago. Made me sick but I was always a "pay the minimum" and forget about it.
Wow that is toxic making only minimum payments
Love this show! I'm a CPA and I made some financial missteps with my first house but I'm learning and taking it a day at a time.
Glad you're working it out!
I got my CPA about 2 years ago. Would you mind sharing what missteps happened?
@@thedudefromdgomx I did not realize how many expensive repairs could happen very quickly. I thought I could get another 2-3 years out of my furnace, but ended up having to replace it my first winter. Additionally, I had some bad contractors that ripped me off. I should have vetted them way. Thanks for asking!
I take my first test, FAR, next week.. ahhh
i am having a hard time finding a CPA
Good luck! I was not ready for FAR at all lol. But that's cause I was still learning the structure of the CPA exam @@Driving4bangers
I haven't watched a Money Guy Show for a long time, but knew that Bo would be excited about this episode!
I have a six figure net worth ($215k) without owning a home at 33 and I have only made about $40k/yr for the last 5-7 years. I have no debt.
Is that comprised of retirement savings, emergency fund, etc.?
Well is seems like you make 40K while the cost of living including any debts was below 40K. Not everyone will make an income equal to or less than the cost of living.
Break down some of your savings if you dont mind please. Vary impressive
Great job!🎉
Please I would love to hear the breakdown
My favorite series are the by age series! Love you guys! So inspiring
No debt for a decade and lovin it
Can I make a critical suggestion. Great content in a longer form, but..... Can you please add time stamps 🙏🏼
Millennial here, I could not fathom having a 25% house payment and 8% gross car payments and still having money to live and raise a family. So much income tied up in payments.
Millennial here and I own primary and investment real estate. My wife and I drive brand new cars and our net worth is closing in on $2m. We’re also both first generation immigrants before before people start imagining rich parents and other nonsense.
It is all absolutely possible and realistic.
I'm a young millennial, and I just bought a house for 10k down, with monthly payments of $470. If I earned $11 an hour my housing would cost 25%. It's definitely doable, just up to you if you want to live where it is doable.
@@parker9012 you’re not wrong about that. I was born in the wrong decade 😵
@@parker9012you really comparing a house you bought in the 60's to now??? Ookkkaay
@@Ryan-wx1bi the 60s were 30 years before I was born. I bought my house in 2019.
Definitely think that's comparable to now.
Comparison is the thief of joy, but i sure do love these videos!
😂 I was going to make a similar comment. Is it a sickness?
Lol, after this video I am feeling a lot better about my situation 😅😂 but also there's a difference between comparison vs reflection
I know this is terrible of me, but I usually feel much better after comparing myself to the folks in some of these videos!
Comparison can alert you that you can learn something from someone who is ahead of you.
Hey guys genuine question, why do we use the gross income as the gauge of affordability for cars and homes instead of net? The way I have always thought about it is gross income, unfortunately, is money I dont actually have
I really appreciate this! I am one of the youngest GenXers. After being so behind in my 20s after college (financed my whole private college education, car loan, credit card debt, etc.), I am now 43 with only a mortgage, paid off car, no student loans! What y'all said over and over again really is true: Just because you start out one way doesn't mean you're going to end up there! It does take determination, discipline and continual self-evaluation to get to where you want to be. Keep up the great work!!
I wish i found you guys or Caleb 5 years ago... I'd be in such a better place...
No debt. House paid off early. College ESA paid for our childs degree and has plenty left over for her to use ( yes will pay 10% penalty- whoppdddi do, it's made 250% over it's lifetime ). We like to earn interest, not pay it. We buy cars and write a check for them, then keep them for 15 years or more.
Do you live in a low cost of living area?
@@IrisP989 No. Upper medium to high cost of living area. Just did not spend what we did not have. Budgeted to take trips and all that while putting every extra dollar away as we could.
Yeah, got a new 2017 and payment was about $420 a month. Got a part time job just to help pay off the car faster without touching my normal job take home pay. Only worked at the part time job for about 8 months, but I knocked off the payments about 2.5 years early. Never again buying a new car, unless it's cash.
40 & 44, no consumer debt, only mortgage, we got it 5 years ago with about 200k left, should have another 3 years to go. Can’t wait.
I'm 48 years old and I've never used a credit card in my life, never had a car loan, never paid a dollar of interest on a non-business loan. Avoiding debt is one of the easiest ways of building wealth, because it's passive. Every single month that passes by my peers are paying interest, while I pay none. And that savings accumulates over time. I've probably saved six figures in interest so far just from passively avoiding debt.
You have to have an income that can at least break you even to avoid debt. I always tell people for the vast majority of people life has a price tag and it changes all the time.
@@donaldlyons17 Well, it's about living below your means. In my 20's and 30's my means were quite meager. But, I got by because I'm very frugal. I had 1 or 2 housemates until I was 38. Always drove old cars. Never went on vacations. No designer clothes. Never had an iPhone. A person can save a ton of money if they don't care about impressing others.
@@gordongekko2781 If you had a housemate or two you don't think that saved you a ton vs. all that frugal stuff? Ok from my observations frugal behaviors only saved me about 6% a year. SO no a housemate with $2,400 is worth almost 2 1/2 times my $1,000 behavior saves me. Plus without an income that put me in the position all the other stuff does not matter at all.
Wow you are ignorant about the real world and credit cards. Sound like a spoiled brat
Thank you for specifying that the averages (except for the total) are for people that have each specific type of debt (i.e.. the average student loan debt excludes the people that don't have any student loan debt). People usually cite "average" statistics without mentioning that.
I agree with all the except I assume the way credit karma "caculates" credit card debit. All the time my score drops 5-10 points because "my balances increased" when in fact I pay off my statement balance 100% of the time. The issue is a score is pulled mid month and my balances may be 4-5k when pulled but 5 days later its $0.
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I've been making over six figures passively investing with Joseph Sylvan Anderson, who showed me the right community to join and grow my finances, and I don't have to do much work. I will always make money, even if the market is crashing.
He does seem to know a lot about this topic. I Googled his full name and found his web page. His qualifications, educational background, and resume were all very impressive to me as I read them. I called him on the phone number I had left him and left him a note.
Working with a financial advisor who has long worked in a solid financial firm, such as Joseph, will actually set you up for life success. I'm glad I was able to reach out to "Joseph Sylvan Anderson" earlier this year because, while others were complaining about the market's downturn due to the state of the economy, I was busy learning from him and eventually made over seven figures in the first quarter alone, which is why it's always a good idea to join the right community.
I love that I am above average on the income and savings side and below average on the debt side. Debt wise I only have a mortgage and a 0% interest card.
I am definitely NOT paying off my mortgage early. I have a 2.625% loan, and I invest all the money that I could use to pay off the house early (approximately 40% going to investments)
And I know that on this show you have talked about it multiple times. For a financially disciplined person that already is taking care of everything else with no negative checkmarks anywhere, using very-low-interest mortgage debt is a wealth increasing tool. I can buy a tbill paying double what the debt costs me (after deduction for mortgage interest from income for taxes)
Yeah ideally the last thing you would do is pay off a low interest mortgage. Everything else comes before that. And if you have no debt except mortgage and are under 50 years old theres no need to even worry about paying it off
@@nobeliefisok9174I think what most people don’t take into account is the total return on their investment when paying off a home early. I paid my mortgage off in 11 years. My average mortgage interest rate was around 3.5% (I’m in Canada, so mortgages are typically renewed at current rates every 5 years). Over the same time period, the value of my home increased at roughly 3.5% year over year as well. The way I look at it, any additional money I put down towards my house represents approximately a 7% overall return on that money as a factor of my net worth.
S&P 500 returns over the long term are only slightly higher than that. Now yes, they were higher during the time that I paid down my mortgage…but that wasn’t the case when I made the decision to focus on paying off the house instead. And while you can’t touch the money in your home unless you sell, or use it as collateral… I maintained an emergency fund off to the side to avoid having to do that in the first place. A 7% annual return on my money as a portion of my net worth isn’t a bad thing…especially considering that the way I did was virtually risk free. I valued the freedom and security of being mortgage free over trying to build as much wealth as possible.
Like they say…personal finance is personal. Do what works best for you.
We have a low interest loan as well and have I've been fighting my husband about investing rather than paying off early for years. He was having none of it and it was always a source of contention between us. I chose to pick my battles. Paying it off at the end of this year.
@@bunacat1 Don't sweat it. Living mortgage-free is a helluva "Silver medal".
We paid off the low rate mortgage on our primary residence 12 years early and we have zero regrets. It opened up the door to numerous other investment opportunities that have paid us back 5x and more... plus it just feels good.
Congrats!
Being 27 and having a paid for house and having 6 figures in retirement makes me feel ahead of the game!
19:30 - Damn... That really is devastating. I don't mean to gloat but in Sweden we have (no tuition fees and) possibly the best student loans in the world.
For example,
I graduated last year with around $60k in student loans,
The interest rate in 2022 was 0.00% (!!!), this year it's 0.59%.
They give you up to 25 years to pay off your loan. (It must be paid off by age 65, so you get 25 years if you graduate before you're 40).
For me this works out at $150 monthly payments right now, but my payments will increase when I earn more.
And I pay around $350 in interest per year ($30 monthly).
Now 24, paid off 128k of student debt in 2 years. Interest rate was 8.89%. Now just trying to prep to buy house and stashing cash. Just so expensive
The Biggest problem I see in my circle right now are people buying/financing new houses in their late 40s and early 50s.
Financing a dream house for 30 years when you are 53 means you will have to work well into your 80s. 😱
Insanity
Its weird that all this advice you are giving at the various ages matches the choices I made for myself. I am not bragging, more surprised I did not hit the pitfalls you describe.
Its ok to brag a bit! Ya did good! enjoy it! Encourage others to follow suit!
58 and totally debt free including the home that I own, but have to pay the county rent on once a year. 😜
Being debt free gives a person opportunity. I was furloughed for 8 weeks. It was scary but I had no debt. I actually saved money while being out of work.
I looked for work but everything paid less than I'm making now and has less benefits. My coworkers with debt, quit to have a 40 hour a week job. While I was out of work, my employer mailed me a letter to tell me I got a raise. I'm due for another raise in Oct. So I don't want to give up my pay, vacation, bonuses, holidays, 401k match, INS contributions including free life ins, and other benefits.
I'm training because so many people quit. It's so bad my boss told me that he might have to change my hours to be where someone can train me. But then they quit too. So I see lots of overtime in my future. But none of it would be possible if I had to quit because I couldn't go a few weeks without pay.
How?I can be debt free with a few clicks on my phone. Doesn't make any sense to throw away free money.
I get not having debt you can't cover, but I have plenty emergency funds and enough on savings to cover all my debt. Besides my house note is 475 a month. I can make that doing snand we have VA in that more than covers all necessary expenses.
Like I said, being debt free, gives a person opportunity. When the stock market crashed and the housing market plummeted, I bought homes for pennies on the dollar. Not only am I debt free without a mortgage, so are my children. The home I just gave my son is a brick ranch with a detached garage on 8 acres. The home I gave my daughter is a ranch on a full basement with one acre. My baby is only 19 but she will get a free home too when she is ready.
I haven't paid off one home..... I've paid off multiple homes. I have 401ks and after tax brokerage accounts too....but when shtf, that isn't the time to click lol.
My son work for the same company. I'm at work right now but he is off tonight due to lack of work. He will get 36 hours. He can handle it.... cause his mom paid off his house.
@@anniealexander9616 if the SHTF money means nothing. So no need to click. I seen the money in piles on the streets in Venezuela. Have a friend that the Venezuelan government took everything he owned and kicked him out the country. In any other situation just let the money sit. If the money in my savings account is gone paying off a loan will be the least of my worries.
Thank you for making me feel better. I never realized so many ppl were also in debt
Im 31. Had twins when we were 28 and we bought our house when we were 29. 0 auto debt, 0 credit card debt. 70k in out 401ks and 18k in our savings and about 20% equity in our home.
I am paying almost 800$ per month on credit card interest each month 😢😢😢😢
30 years old married with 1 kid and only debt we have is the mortgage which is at a rocking 2.9%. Have retirements set up and just wondering about our next steps lol
35, use my credit card for the points and safety. Never paid a lick of interest in my life on a card. Paying off my vacation home this year and will be down to 1 debt, my primary residence. 30% of income goes to 401k/roth. Hoping to be retired at 50/55.
Great advice guys.
Assuming average is a C grade.
Student Loans: 27.4k (C+)
Car Loans: 0 (A+)
Mortgage 94.3k on a starter home (B)
Credit Card: 0 (A+)
I'm a young millennial (27. Born in May) but I'm a father of one with another on the way. So I'm counting myself in the messy middle with a little more potential on an army of dollars once the high interest debt is gone (I have no employer match)
29 and zero debt
Probably the best effort yet to really try to understand what is going on. Comments are:1. Because the overall average debt is so much lower than the sum of the individual debts, a different approach to the analysis needs to take place. For example, total average debt for those with and those without mortgages. 2. Credit card debt may not be real figures. I think this data is statement balance data not unpaid balance data - because we need to consider the source. I put 90% of my monthly expenses on a credit card (mortgage free) and my balance ranges from $4,000 in a low month to $8,000 in a high month (where annual insurance, residential taxes, etc. payments are due). I ALWAYS pay my balances off every month but I expect my “data” would show an average of $6,000 in debt over a year. This in no way represents my debt free position. 3. mortgage debt is on relevant when considering overall net worth (age dependent) and perhaps income but I would want to focus on remaining amortization, so I like that you continue to focus on smart home debt rather than the average number. 4. Great if you could add the percent of the category with this debt (2% of gen X still have student loan debt?).
40 with 18k in student loan (since I didn't get my degree till I was 35), and 46k in a personal loan since I underestimated how much work my home needed when I bought it last year. No credit card or auto loan debt though. Hope to pay that all off in about 3-4 years assuming the house doesn't throw any more curveball
Turned 40 this year... can confirm. The house is on fire, work is on fire, I make more money than ever and have a smaller take-home pay than when I was 25, and I have no idea what is going on half the time. It is managed chaos, and I'm just thankful that the debts are paid off and staying that way, and that my take-home pay is bad because so much is auto-paid out to retirement, commitments, and investments. So I guess the plus side is that what little does make it into the bank account is mostly spendable... but it doesn't feel very good. Can't wait for the commitments to calm down and I can do what I want to do instead of what everyone else wants me to do all day every day. Not that everything that others want me to do is entirely awful or bad... it is just the lack of agency that hurts.
Also... we need a version of the beer cozy that says 'this $10 beer cost me $888' because I overheard what someone paid for a drink at a ball game the other day and damn... I just don't get it. No beer is that good. Maybe a hard cider, or something sweet and hard... but beer is too gross to spend that kind of money on!
Beer is Stockholm Syndrome of the mouth. I've never met anyone who thought it tasted amazing the first time they had it
"Debt is chainsaw dangerous." 😄 Love it!
Debt free since October 2021. I followed Dave Ramsey's debt small method. Fully funded emergency fund, 20% in Roth and Traditional 401K rest is going to brokerage accounts and save cash for further investments. I live way below my means. Thanks Money Guys for your knowledge!
One of the reasons they are bigger than started is because most people in college don’t have to pay their loans but they still acure interest.
I get that frivolous spending is bad, but we all work hard and buying something should be ok. For instance I hate going out to eat, I hate buying expensive clothes, I shop Ross and Marshalls and I am ok with. However I do like cars, I've always liked cars and I feel that buying a car that I can financially afford is something I would do rather than outings or clothing. Some people have other preferences. Now, because I like cars doesn't mean I am going to go all out on a Ferrari even though I could afford one monthly, but then I won't have money for anything else.
Just buy one thing you truly like and enjoy, without losing focus on retirement and financial goals.
Retired at 52 now 74, have traveled just about everywhere, drive a 10 year old toyota that was purchased with cash. Toured America in a motorhome, purchased with cash. Have lived in the same modest home that was purchased with cash 18 years ago. Live within your means but live well. Must forget about what other people have, concentrate on what you have, what you want and what you need. I am always amazed at the amount of money people waste. We have friends nearly our age and they are constantly burdened with debt. They just cashed out 30,000 from their retirement to pay off a car and other acumulated debt on cards. Now that they have paid that off they said they can now afford a new pickup truck. ??????????? I do not feel sorry for poor people who have caused their own demise because they have a poor mans mentality. You must learn how to use money not spend money, there is a big difference.
Just be aware....less than 20% down puts you in PMI territory which may eat up the purchasing power than putting down less creates.
Gotta do the math
46 here, not planning to pay extra on my mortgage just yet, as I was late to the game and have only 10 years of saving into retirement. So I plan to do another 10, saving what I can, then start to see how I can pay off the mortgage early. With any luck, in a couple of years, wife can return to work and maybe we can do both. On the plus side, 3.75% and its below 15% of my gross income in a bad year. On the minus side, 26yr left. :( But on the plus side… I think I am beating what I would pay in rent.
Stuck on a car though. Last one we could do cash for (couple years ago), but then I wrecked a car, and… used market is rough. Long distance commuter and moving is not an option. I could pay cash for a new Corolla, but thinking I might not, I want to hold onto that money and use towards kids college. Son did not qualify for much, and his Stafford loan is unsubsidized, so… cash for that.
At least I got rid of credit card debt years ago, along with student debt, and have a healthy net worth, with six months income in cash (until the first college bill, lol).
What is not talked about is the average American will struggle with staying out of debt their entire lives. If you aren’t good any budgeting and bargain hunting you will always have a hard time. You also will be living oaycheck to paycheck to save in a 401k. We are average middle class. We had a car loan and a mortgage with 3 kids. We never had credit card debt but most months I was lucky to have 50.00 left at the end of the month
I have a question.
I'm 35. I have a 3.0% mortgage with 28 years remaining.
We heavily invest (close to 50%) and for now pay only minimum payment on the mortgage as this makes the most sense mathematically.
Is there a way to thread the needle that makes sense to invest heavily now, and paying off the house early later with earned income? Say in like 10-15 years?
You need to pull up a mortgage calculator and see how much even an extra $1000 a year paid toward the principal on your mortgage will save you so much interest during the life of your loan. That is 3% per year.
Funnily enough i had managed to avoid 2 of the major pitfalls by accident despite not being financially literate until the start of this year. I had graduated in 2017 with $30k student loans and because i didnt know what i wanted to do for my masters, i decided against graduated school and went straight into a job. $30k was more than enough for me and im glad i made that decision. And then my car, i was just trying to find a used car that would have been an upgrade from my 2002 mazda 626. I settled on a used 2014 beetle (bought late 2018) and paid it off by 2020. Im getting ready to pay off the last half of my student loans at age 28 and i feel like im really in a good position financially for now. Jsut need to remember not to set myself on fire when i eventually buy a house whenever i will.
What about credit cards with 0% interest?
Phew, still below average!
In my thirties, no student loans, no credit card debt, mortgage is under $200k, and one small car loan of $14k that we plan on paying off in under a year. I hate having a car loan but we needed a minivan to fit a third carseat. It's crunch time.
All debt comes with risk, even homes.
It’s all ok until your life goes a smidge sideways. Funny part is, with the shame that comes from debt, you’ll never hear folks who advocate for debt after the shit hits the fan
Unsecured debt such as college loans and credit cards or not having substantial cash reserves as a Gen Xer is not acceptable. As a Gen Xer paying cash for a car instead of investing those dollars is a mistake. Choosing and leasing a vehicle that you can afford with a higher residual value is the key. I get money back on my leases and use that toward my next purchase. I will not pay cash for a depreciating item. Do the math! The only thing worse than buying a depreciating item like a vehicle is also losing the compound interest by paying cash on top of that. Using other people's money responsibly is a beautiful way to maximize returns on appreciating assets. Net worth is the key not debt during working years.
26 with a little over 2k in federal student loans with a 3.51 interest rate. Paid off my car fully three years ago. I use my credit cards like they’re debit cards so they don’t carry a balance every month. I already match my 401k, have Roth IRA that I focus on monthly, and if I have any additional funds it goes to a brokerage account. I have 15k in my checking and will transfer 10k into a high yield. Should I just pay off my student loans or pay the minimum? I’ve been paying a little over the minimum and only $1.53 has accrued from interest. On average for investments is about 8%, so to me it makes more logical sense to pay the minimum and invest more into my Roth IRA and brokerage. I do max my HSA contributions as well
Brian has said repeatedly that a monthly car payment should not be more than the monthly investment amount.
What I’ve never heard is if and or when does that begin to not apply?
For luxury brands he’s said 12 months of payments.
So a retired 60 yo with 5 mil and a $95k pension and no debts who buys a $120k Tesla and per the Money Guy should make $10k payments should also be investing $10k per month?
I get the retiree could just pay cash but the payment/investment option seems burdensome in some cases.
At some point one starts spending and forgoes more saving/investing.
All cars the ideal is to pay cash- 20/3/8 is to help those that need a bridge to reliable transportation- luxury is always cash with a little grace with 12 months being the same as cash (just in case you have a lump sum or cash flow timing issue)
I love your channel and agree with the majority of your advice but the 20/3/8 or pay cash for a car I can't get behind. I purchased my current car on January 1st 2017 at just under $38,000 and 1.9% apr with $0 down. Over the 5 year duration of the loan I made a substantially higher return on my investments than 1.9%. I get the want to not have a car payment but if I was offered a 5 year loan at 1.9% for straight cash I would take it every single time.
You are special. Most people take a loan for cars they cant afford and do not invest the to offset the loan interest. The advice is for them.
@@krisrap3828 I see your point but I was speaking to the "or pay cash" part and not the 20/3/8. I would never pay cash for anything that I could get a very low interest rate on. I get that most people finance a vehicle that they really can't afford. However, for the small percentage of people that save up enough money to pay for the vehicle in full at time of purchase I would advise they invest the money instead if they can get a very low interest rate on a car loan.
Debt has been the best thing to ever happen to me (besides family). But that's business/investment grade debt, and not consumer debt which should be looked at like the devil
I spy a Caleb Hammer quote lol "you are not a credit card person" 17:12
Have to go back to the Corolla 🥴 I drive an Altima and love it.
A very important metric is missing, and that would be what percent of each genertaion has each type of debt. I understand that was not something credit karma has acces to, but I think it's less people with more debt as age advances.
Pay the car you get for 3 years off. Spend next 3 years + making same payment (or more) into a HYS. In 6 years minimum you can purchase a new car with cash. Repeat process with new car for 6 years, now you can upgrade to a better car in just 12 years. Thats no time at all.
Example
You purchase car for 12k and accumulate 1k in interest. (3y)
Next 3 years you put 13k away plus HYS intesrest of say another 1k (6y)
Purchase car for 14k
Now pay yourself back over next 6y (12y). Now you have just under 30k cash due to HYS account interest accumulating to purchase your next car. Nothing beats paying yourself vs paying the bank every month.
Can’t find a decent Honda or Toyota with low ish miles under 12k anymore. My daughter had cash to buy a used car and all the good Japanese cars either had really high miles, major body damage or if it was a decent car the price was inflated by 4 or 5k. We had to settle for 10k American car my neighbor was selling with 40k miles. It was a fluke we even found that. It’s really challenging to find a safe used Japanese 4 door right now under 15k.
Millennial here. I don't have any debt except a 7 figure mortgage debt, which is about 4x my household income. It was scary at first, but I got used to it fairly quickly. More affordable housing (anything less than 800k) was not available for the intersection of good public schools and location to work. I know th last statement might be shocking for anyone who doesn't live in a very high cost of living area. The debt is somewhat offset by the fact that we bought this house right before prices went up about 20%.
My wife and I are approaching 30 and running into the same situation. There aren't any homes for
Idk how I feel about the average stat for the gen-z college. I am gen-z and many of us are still in college. We don’t have all our debt taken out yet, so I feel that number is a little low just by the nature of the age range.
22 Y/O. I spent a little more on a car at 22k, but bought a car used which is expected to go for another 400k miles. (Literally looked up top 3 most reliable cars)
I’m a gen Z and have 9k car debt and 9k on credit card. Car is at 4% and card is at 0% til march. I made some bad financial decisions (trip) that led to the card debt and I said future me could stress about it. Don’t regret that vacation but I’m pissed at myself 40% of my take home is gonna go to that dmn card to avoid 29% interest. Most definitely never gonna do that dumb sht again unless I actually have the money
This is one area in which I excel. $0 in debts of any type, plus a paid-for home worth about $500k. I also save and invest, but I am most proud of the no debts
I definitely paid too much for my truck but I make the payment with the side hustles every month. And even without the side hustles my normal job pays it fine.
No student loan debt, no cc debt, and my mortgage is under 25%.
All debt is bad and I'll never go into debt again. THIS, is the Dave Ramsey show...
A 3% mortgage isn’t bad and you’re literally throwing away free money by paying something like that off before choosing to invest. There are exceptions to your statement.
@@justthebrttrkDave still recommends investing while paying off the mortgage.
@@JillRuckman no, Dave recommends only putting 15% into retirement and then paying off your house early with any extra. That is entirely backwards. If you have a mortgage that has a 3% interest rate, you should be making bare minimum payments for 30 years while maximizing every other possible place for your money to go.
@@justthebrttrk that's your opinion. 🤷🏼♀️
@@JillRuckman it’s not an opinion. It’s mathematically suboptimal to pay off a low interest rate mortgage and is easily calculated. It’s numbers and math. It can’t be wrong.
41 years old. My wife and I have Zero Debt. Paid off our home in 2021. I read the book the millionaire next door and listen to the money guy show and Dave Ramsey for years.
I’am the millionaire next door but no one would suspect. We live in a modest home and own 1 car. We buy our clothes at Costco. Max out of 401(k)’s and IRA every year. We save first then spend what’s left over.
Remember people own things don’t have things own you.
My employer offers both Traditional and Roth contributions to my 401(k). I'm currently in the 24% (Fed) and 12.83% (State and local) tax brackets, making the total marginal bracket tax rate 36.83%. For this reason, I make sure to contribute to my traditional 401(k). My question is, how does this decision change as I get older? When I get to 50, is it less beneficial to contribute to the traditional over getting the tax free growth of the Roth? How does age affect the traditional or Roth decision?
The usual response is "how much are you making now vs. how much will you be making in retirement?" - thus, technically, there only real metric to pay attention to is how much you're being taxed in the momement. So if you're making a lot (and being taxed a lot)? Then the 401k is probably a better bet. If you're making not as much, then the Roth is probably a better idea.
HOWEVER - there are lots of caveats and nuances involved - mainly that a 401k has RMD's associated with it, so once you start getting on in years you may be hitting an issue with those. Most folks don't need as much money in retirement (house paid off, not saving for retirement, kids are out of college, move to an area with lower taxes), so they will PROBABLY have a lower tax bracket. That's the general benefit of a 401k.
At the least, having some money in a 401k is fine - your standard deduction will cover at least 11k a year (as of this year), and if we assume a 4% withdrawl rate, that means you can have 250k in your 401k and be fine and not pay any taxes (assuming that's your only outside source of income.)
So the question is - how much do you put in your Roth, how much do you have in your brokerage, and how much do you have in your 401k?
As you get older, you will likely be making MORE money, not less - peak earning years are usually around 45 (for women) and 55 (for men), with only a slight drop-off after that. Thus, it's more likely for you to be in higher tax brackets later on in life, which in turn means that you are more likely to see the benefits of using a 401k then, as opposed to earlier. So the general recommendation is "Roth early in life, then 401k as you earn more." But that's dependent on how much you make to start - you're already in the "yeah, I should use a 401k" level of taxes, at least according to the Money Guy metrics.
the additional nuance is "when do I start doing Roth conversions?" - because that's the usual way to deal with having a lot of money in a 401k. And because you can time when you do THAT, it's a useful tool for tax planning. The usual response is "do Roth conversions in years that you don't make as much money as you usually do - and do enough to fill out your existing tax bracket without going into the next one". (Assuming you're in a lower tax bracket that year, of course.)
Of course, if you're in your peak earning years, you simply may not have this opportunity. But you might be able to retire a few years early, and then do a few years of Roth conversions before going on Social Security. And if you're retirered, you can do something like move to a no-income-tax state (such as Washington or Florida), and do the conversions THERE, and then move when you're ready to settle down.
(Also note that if your 401k is still in your employer's plan, you can withdraw from it with no penalties, if you're at least 55 years old; so if you've got a lot in your 401k, you can use that to live off of if your retire early.)
@@kevinschultz6091damn bruh wrote a book
11:37 Nice to know I'm not Most People. I bought my 'mid-life crisis' car (Honda S2000) at 23. Paid it off in 4 years and kept up on regular maintenance. Still my daily driver 18 years later 😊
bruh mid life crisis is not at 23. youre at least a divorce away from qualifying for that
Great episode as always!
Was really debating if I will need to take out $10k as a loan to buy a new car. Unfortunately, I’ve only managed to save $15k specifically for a car (my current one cannot be fixed and I need a new one asap), since I wanted a hefty emergency fund 1st. I haven’t been in debt in about a decade. I think I’ll skip the debt and try my best to find one in my price range. I just can’t allow $10k + interest slip away when that can go towards my future home.
So a question for I guess a financial mutant here. Are these credit card debt figures factoring those that actually pay their cards off monthly or are these totals actual balances that are having interest applied to?
I say this because I feel as people get older I’m assuming their spending goes up and this is what triggered my question
"Outstanding balance". Meaning balance accruing interest. Meaning credit that is not paid off at the end of the month.
@@maxinoume I appreciate the definition! Thank you
2:13 unironically that's almost the exact amount of debt I have T.T (federal student loans
I bought my house at 23 and now I am 43 still in the house
A 3-year-old car costs about 50% of a new car. So if you don't mind not having all the latest bells and whistles, and you can find one in good shape (of which there are many), you can save a lot of money. Over your lifetime, you can easily save $50K and probably over $100K. For a 2-car family, it will be $100K to $200K.
Looking at average numbers it looks like a tutorial on how to dig a deeper and wider hole so you make sure you never climb out of it.
I've got a pre-payment penalty on my mortgage - but it's only if I fully pay it off (I think I can pay something like 20% of it early with no penalty), and it's a 2.65%, 30-year fixed.
...yeah, I didn't really understand why that clause was in there either, as I have NO inclination to pay this off early. I'm certainly saving up so IF I want to pay it off I could, but I'm really not going to pay it off unless I really have to.
We actually start forming our financial habits between the ages of 7 and 9. If this is true we need to start educating and empowering our children starting around 6 or 7 years old. I decided to write a series of basic finance books for children as young as 6 years old. Children are so much smarter than we think. Children can be taught about compound interest, needs versus wants and so much more. Lucy's Kids and Money
I'd like comparisons age of financially literat vs Illiterate
Im 25 and about 550K in debt lol. 2 mortgages on duplexes
Love the show! I found your podcast a few months ago from Caleb Hammers page. Love the FOO and the rule of thumb guidance for house payment/car payments.
I was wondering for 401K how can you assess if you are on track if you are making substantially more than i was 3-4 years ago?? I feel behind
The most accurate way to find out is to determine what you need in retirement, then work backward. You can get their Know Your Number course and then you can find out how you are doing compared to your target amount. :)
Exactly like Tamara said. Determine how much you need yearly to survive (or to live comfortably). You might need to track your expenses to be able to do this reliably without surprises ("measure twice cut once" kind of deal)
If it's 60k, it means you need minimum 1.5M in retirement (you should have more to be safe).
Now, open a retirement calculator. Enter what you've already invested and the year you want to retire. It'll tell you how much to invest each month.
So, if we follow this example... Let's say I'm 35, want 60k at retirement, want to retire at 60, I have 50k saved up already; Then, I need to invest 1k per month (this is assuming 0 SS income).
If I was 25 instead of 35, with 10k invested, I would need to invest 450/month. That's why starting early is important.
Great discussion gentlemen. I think one of the tough parts of this for many Americans is they want to own a home and maybe the local HS football teacher who doesn’t have a “big shovel” really wants to drive brand new pickup or BMW. Following the prudent suggest by Dave or more realistical auto financing guidance you guys offer he’s gonna need a metric ton of cash on hand for someone making 50k a year. They basically need need to kill that desire to have a nice home or luxury vehicle. Start saving for home and car in their 20’s that they finally afford in their 40’s and 50’s. Just tough for them to crush their dreams when bankers will enable those poor decisions.
People will all not be lucky enough to be able to afford everything. But cost for many things rises over time while incomes rise much slower. The outcome has to be debt if those expensive items are to be afforded because where else is the money going to come from.
I get not wanting debt, but I still believe if you can get zero percent interest it is smarter to use their money. But you should have the money to pay it off in a savings account. For example, I only owe on my house 2.5% and I can pay it off at any moment. I am about to have to buy a new lawn mower cost will be about 21K. (big property). I can pay cash, but I can also finance for 60 months at zero interest. My cash sitting in my savings account will make 4K in interest in 60 months. I just don't see an advantage to paying cash. BTW I am 50. But I will pay it off before I retire at 54.
In the past decade, this strategy didn't make sense due to savings accounts making 0.1% interest. It just makes more sense to not have the risk that debt brings. Now, with savings accounts making close to 5%, it now makes sense again if you are diligent. So I agree with you.
@@mtucker5131 yes, I didn't do this before. Before I took more risk in the market, but will always take advantage of zero interest.
You miss one payment on one of these 60 month, no interest loans and BAM, 26% interest. They're banking on something happening in that 60 month window. For 95% of people, it's a bad idea. You sound like you're in the 5% that can handle this level of debt, but it's bad advice for the majority of people.
@phillipsouthard8285 yes I have never missed a payment and I have had a credit card since 1990.
Hi Money Guys team, I was wondering for the car rule of 20/3/8, if you have a rate that is below inflation/can be beat with HYSA's, is it okay to extend the term provided you've done the 20 & 8 part and are investing more than putting towards the car?
“Haven’t had enough time to screw it up…” Oh don’t worry I had plenty of time in that 18-26 range. 😂