T Nation

Young people and Massive Debt

Cut and paste the link below to read an important article for all us " below thirty somethings"

Talks about cost of life, cost of college, earnings potential, and a lot of other financial issues relevant to those not born into wealth- in other words, most of us.

let me know what you think


And i thought i had a lot of debt! i graduated last july with fourteen thousands pounds of debt (U.S.$25000).
hopefully my degree will mean i will make enough money to one day pay that debt off (that is the plan anyway).

and they wonder why young ppl don’t want to vote…(I am excluded from this since its illegal for me to vote, otherwise I would)

sob weep sniffle

That just depressed the shit out of me! I’m just starting my college experience. At least now I know what I have to look forward to.

I’m going back to the Corps, f#@k this!

It doesn’t have to be that way!

Here is what I did.

Got a job at age 15, and start saving 30% of everything I made towards college expenses.

Got my generals out of the way while living at home ($ave) and attending a Community College ($ave) Paid cash for first half of college.
Transfer to a prestigious University and graduate from there. Paid half that in cash, exit college with ~8k debt

Bought a used car (paid cash) drove it into the ground and bought another used car because I was $aving for a downpayment on a house.

Paid off my school debt (2 years post graduation)

Got married to a girl I helped get out of debt, bought a nice house for $200k.

Continued to drive old cars/save money, and invest (and contribute to retirement IRA’s).

Crashed my old beater, which at the time was probably worth about $300.

Bought a BMW (528i) with cash.

Now I know you’re thinking you’d have to make a ton of money to do that - you don’t. It’s not how much you make, it’s how much you spend.

If you’re living within your means, you should be able to accumulate wealth. If you try and keep up with the Jones’, you’ll be beyond your means and never get ahead.

Today I live a far better life (financially speaking) than any of my friends who tried to keep up with the Jones’. I have no debt other than a very affordable mortgage, no CC debt, no car payments, nada.

I made my sacrifices (delayed gratification)and now I can enjoy life.

Excellent post Warhorse. I hope everybody pays serious attention to that, he outlined really imp’t fundamentals. I’ve started reading a lot of financial books since going into debt (and being flat ass broke) and not living beyond your means is huge! We americans tend to be too materialistic and want EVERYTHING when we can’t afford everything- or at least some of us anyway. This is closely related to adveritisng, TV and movies, but that’s an enormous topic I won’t go into.
Also always saving money, 10% of income as a minimum, is big.

Don’t know about investing in s&bonds anymore Warhorse-in another post I talked about the fetishization of stocks in this country. You telling me you didn’t lose money in '99? My parents did everything to the book, mutual funds run by a big brokerage, IRAs, not trying to play the market and ended up losing tens of thousands of dollars. Like miliions and millions of americans.

Not arguing with you, just a warning not to treat s&b as the only way to invest.

I love your examples: beat up car, affordable mortgage (I guess you don’t live in the NYC area!)…good stuff.

I also own a car that is on the brink of being old and beat up and I’m driving that puppy into the ground!

Too many kids, say from 16 yrs old on, want a nice car when they can’t afford it. Don’t work for your car kids!

I will buy my own place by the end of next year and I’m debating big time on how much to spend because I plan on moving to another city and refuse to live in certain areas.
So I took a Robert Allen course and am studying real estate so when the time comes to buy I’m prepared.


No, I didn’t “lose” money in the stock market, in my retirement accounts, etc. I made money. Loads of it. Those “losses” are just numbers on a piece of paper. I continued investing through the slump which (if you understand dollar cost averaging) means that in the end, I’ll come out way ahead.

If you have a long term view of the stock market, historically, you can expect 10-11% annual returns. Since I’m going to be in it for another 30 years, I’m not too concerned. For those who were about to retire and were being greedy by staying in when they should have diversified into less volatile investments, well, yeah, unfortunately they did lose money.

I do have other investments aside form the usual S&B, Mutual Funds, Cash Reserve(like real gold and silver you can hold in your hand - not some certificate) Real-Estate, etc. But let’s not cloud the issue, you can never get to that point without first learning to live within your means.

I like the point you made about what you can afford. Learn to distinguish between ‘Needs’, and ‘Wants’.

You need stuff that keeps you alive and want everything else. You may need a car if you can’t get to work any other way, but you sure as hell don’t ‘need’ a brand-spanking new one.

"For those who were about to retire and were being greedy by staying in when they should have diversified into less volatile investments, well, yeah, unfortunately they did lose money. "

Can you explain this more in depth? Because it sounds like you’re criticizing everyone who has ever invested in the stock market and was close to retirement.
I think you’re talking about people trying to play the market rather than invest in mutual funds-which were also devastated,btw, as I’m sure you know.

And from what I understand, the theory of a mutual fund is to protect oneself by investing in a variety of companies so if one stock falls, its not a huge loss because toehr stocks in the fund will rise or stay the same. Turns out they don’t work well either.

Let me know.

Excellent posts, Warhorse! I am quickly coming to the conclusion that what you did (old car, no non-mortgage debt, etc) is definitely the way to go. I started out ok, with 2 years at community college and no car payment. Then I decided to transfer to a private college that cost a ton. Graduated and bought a new car. Those are really my only forms of debt, but ones that could have been reduced/avoided had I thought different a few years ago. Now that Ive realized I dont need $75+ dinners, toys, and other frivilous crap, I can really work on paying off my debt over the next 2-3 years.

For me, most of this was learned from a guy named Dave Ramsey. He has a few books out (Total Money Makeover) and also a radio show. Hes very sensible and advocates much of what Warhorse mentioned. Dont buy anything (car, tv, etc), other than a house, unless you can pay cash.

For those interested, here are some of the books I’ve read:

Retire Young, Retire Rich
Rich Dad, Poor Dad
Millionaire Secrets (or something like that)
Robert Allen RE seminar (huge amounts of info on RE investing and all related subjects, I’m about to start reading everything cover to cover and listening to all 16 CDs)
Have More Money Now

Here are some I own and are skimming through and haven’t gotten around to reading cover-to-cover

-Understanding Wall St
-The Wealthy Barber
-Investing in Fixer-Uppers
-If you want guarantees buy a toaster

The last book techn. is not financial advice but how to navigate and deal w/ office politics. But I guess that office politics deals directly w/ your income, right? In my case, even though I will be a full-time HS teacher in the near future, I can always use good knowledge of office politics when dealing w/supervisors, colleagues, principals and annoying parents.

FUture readings:

Think and Grow Rich

THat’s about it, because I have to work on my RE investing and not just read about doing it

I managed to survive undergrad with no debt, however; after four years of medical school and three years of residency with a wife and three kids, I now have about $250,000 in student loans to pay off. Whooo hoo.

Lol! thanks for the tips Warhorse.

The reality for me though is:

  1. A BA is useless

  2. I have been working full time for the past two years paying off my BA and saving to go back to school.

  3. Law school is going to cost me at least 18K per year, meaning that even with the money I have saved, I will over 35K+ in debt when I’m done (Law school is much cheaper in Canada).

To pay it off in 5 yrs., I would have to pay over $660 a month.

That may not seem like the end of the world, but I can promise you it will be difficult to do while trying to make a life for myself at the same time!!

I think

Yes but at least you will, at some point down the road, make good money and if you become a surgeon, lots and lots of money!

My close friend is a PT and graduated with 60gs in student loans but is making a lot of $ in his job, 60k+ this year, maybe more since he gets 125 an hour for home visits alone (which he does on the side) !

ANd he can do as much work on the isde as he wants to…

SO in a few years he’ll be ahead of the game, no doubt.

Meanwhile lil ol’ me will be making 40-45k teaching, depending on whether I have my Master’s by then. (Sniff)

Good thing teachers only work 186 days a year, leaves a lot of free time for a part-time job!

This is a great subject. I learned the hard way that most people live up to their means. The 1st house my ex and I had was a small farm house on a christmas tree farm in NC which we rented for $350 per month (the good 'ol days). I was making 18k per year as a collector/repo man. Started moving up in the company and was promoted with a move to Richmond VA where I bought a house for 95k (wish I kept that one) and added a new car to the list. Was making 35k at the time. Was once again promoted and moved to Roanoke VA to make more money (about 80k) and bought a house for about 185K. Then traded that car in and bought an even better one. Got a 2nd mtg on the house for “furnishings” and such. Hell, everybody has to have a 6 person hot tub, home theater, and the biggest baddest grill on the block,right? Kept chasing the dollar to move back to Richmond for a solid six figure job and took a BIG bite this time. Bought a 300k house, a new Tahoe, and liquidated my 401k to put $24k down on it (the house). Got another 2nd mortgage for even more furnishings 'cause hey, I had more space to fill. Less than a year later I’m divorced, selling my house and coming to the closing table with $10k to close so both mortgages will be paid off. The only thing I have to show for it are the clothes on my back and I’m still making those Tahoe pmts while my ex drives around in it. Some lessons can only be learned the hard way but I definately feel this is the only way I COULD have learned it.
To all the younger guys and girls out there please don’t max out your credit lines, buy things to just say you have them b/c you are trying to fill an empty void that will always be empty. Nothing wrong with chasing the dollar as long as there is balance in your life and you are happy doing what you do. I make half of what I used to make but am a hell of a lot happier. Hmm, maybe because she’s not around to spend it. Hahaha!
Just learn from my experience what not to do and save yourselves a lot of grief.

I tend to agree with warhorse. I honestly can’t complain too much, but I’ll join in anyhow.

Yes, I am disappointed… I graduated with a degree in computer engineering, which isn’t an easy major. While I was doing my undergrad, the average starting salary was supposed to be around 50K… and very, very few employers would insult even a B-C student with much less. And then the market dropped out. So I find that I’m working in my field (thankfully I did get a decent job), but at a salary much lower than I expected. I have a no-interest loan from some friends (for a grad class and expenses when I was in Italy) which I have to pay off before I can move out on my own. That’s also pretty frustrating… it’ll cost so much to live alone that I won’t be able to save a huge amount. God I hope I get a raise…

Now I know you’re thinking you’d have to make a ton of money to do that - you don’t. It’s not how much you make, it’s how much you spend.

Another way to say it:

Yealy Lifestyle Cost = Net Income - Yearly Investments

In other words, 50K$ net salary, no savings = 50K$ lifestyle.


Its not what you earn. Its what`s left (net) at the end of the year. Trust me, in Canada, Net and Gross are really different, specially if you are in the 52% combined tax bracket, and add 15% sales taxes…humm…67% tax rate…BOO-F***ING-HOO!

Also, mutual funds are not the be-all-and-end-all of investments. Try looking at Hedge Funds for a change. Contrarily to MF, HFs can make (and also lose) money regardless of the market`s direction.

If I recall well, the average Bond Stat-Arbritrage Hedge Fund has 10% annual average rate of return and 4.5% standard deviation. Not Bad!

Just my too-taxed 2 cents!

"For those who were about to retire and were being greedy by staying in when they should have diversified into less volatile investments, well, yeah, unfortunately they did lose money. "

Can you explain this more in depth? Because it sounds like you’re criticizing everyone who has ever invested in the stock market and was close to retirement.

Sure. In the most general of terms, when you’re young you should be aggressive, and as you near retirement you want to move more and more money into ‘secure’ investments to lock in your gains.

Unfortunately, a lot of people became accustomed to superheated performance from Tech stocks (and Dot-Coms) and couldn’t bring themselves to get out of these “high-risk, high-return” investments even though many should have known better.

To make things worse, many investment advisors and economists were talking about “The New Economy” and thought the boom could last forever.

I shouldn’t have implied everyone staying in stocks was greedy, some didn’t know any better, but many did know better.

I don’t mean to imply (in any way) that investing in education is bad. You just have to ask yourself whether that investment is going to pay off - and how many years it will take to get back out of debt. For a doctor, $250k in debt, while burdensome, is not the end of the world.

Sad article.

Just another of these Boomers-could-afford-it-but-GenX-and-the-next-gang-mathematically-never-will-be-able-to-afford-it stories that`s going to parasite future generations income.

Another Boomer-dream that Boomers will never fully pay for.

If I recall well, the Boomers children is the first generation where children can actually expect, large-scale, to be/die poorer than their parents. Bad sign.

But I wonder why I care. Pay-as-you-go seems to be the new Religion. In this 1-year-at-a-time financial view, there can be no creation of reserves (instead profits go to shareholders) and one can expect, when s**t happens, to see prices go up. It sucks.

Where`s common sense when you need it most? Seems short-term-thinking rules everything. SAD.

could someone please explain to me how much it costs to study for a degree in the U.S. i understand that the system is quite different from what we have in the U.K.