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WHAT I WISH

SOMEONE WOULD HAVE TOLD ME 

Now you’ve probably heard the saying money doesn’t grow on trees, but humor me for a minute. Imagine it did. You wake up every morning shower, run out the door with your coffee and making your daily stop by your money tree before you venture out for the day. That’d be pretty sweet.

OK back to reality. Money trees don’t grow in your backyard. Instead that saying means that money doesn’t come for free. This is sort of true. While we rarely get money for free there are definitely times we can get money for little to no work. When we were little and had an allowance our parents gave us money for little to no work #moneytree. As an adult most parents cut that tree down but then another one sprouts up in its place: debt. When we take on debt we get money with little to no work. Apply here, sign there, and your done #moneytree. While that may seem amazing, unlike your allowance in your former years debt has some pretty annoying consequences and thus should be avoided if at all possible. Here’s why and what you should do instead.

Why Avoid Debt?

Well for the obvious reason that repaying it sucks. We all know that when we take on loans or take out debt that we’ll eventually have to repay it. That’s no surprise. The shocker, however, is how painful it is to do that even though we knew it was coming. Imagine you graduated. You were one of the lucky ones that got a job right out of school. You set your loan repayment on an automatic payments so you don’t have to worry about it but then the payments start hitting. $264 for the first student loan, $60 for the next, $372 for the car payments. You total that up after the first month and realize a quarter of your monthly salary is going to pay down debt. You you accept it but then in month 2 and 3 you realize that you need a vacation because you don’t get spring break off anymore. You look at the budget and realize there’s no room cuz all your extra money is making the minimum payments on your debt. This is particularly annoying when you become somewhat of a hermit because you did the math and realized that you could either go out each weekend or go home for Christmas and you chose the the latter. You claw for extra hours at work so you can squeeze a few more dollars into your paycheck and try to rise above your caveman existence back to normalcy. You start thinking to yourself did I really need the money I borrowed? I could have gotten a cheaper car or maybe gone to a state school. I didn’t have to stay on campus.  

This is the story of your future self was a bit lacking when you signed those loan documents. And unfortunately it’s too late to do anything other than repay it after you’ve taken out the loan and spent the money.

So What’s The Alternative? 

  1. Avoid debt at all cost. If you already have debt try not to take on any more. If you’re in a position where you need to take on debt and it’s unavoidable, evaluate the cheapest option to accomplish your goals and try to limit how much you take out. If you need to buy a car, buy used. If you need to pay for schooling, see what scholarships are available and what opportunities are there to work while you’re at school. 
  2. Make a solid plan for repaying the debt and try to pay it off as soon as possible. The more you let your debt drag out the more money you’re throwing away to interest. This is particularly true if you have any credit card debt. As such you should focus on paying off your debt with the highest interest first while making minimum payments on your other debts. Then use the debt snowball method to work your way through the remaining debts after that first one is paid off. Remember failing to plan is planning to fail. It’s true for all areas of life especially debt. 
  3. Save money. The reason most of us get into debt is because we were in a situation where we needed money but we didn’t have it. So we went to our local money tree and borrowed it. If we’d had the money saved already we wouldn’t be in this predicament.Now saving money is very broad advice so let’s break it down so it’s a little more actionable. When it comes to saving you’re saving for two things:  Emergencies
    First, you want to save for emergencies. What classified as an emergency is you losing your job and needing money interim to keep a roof over your head, your ending up in the hospital and needing to cover your medical co-pays, your totaling your car and needing to pay for a new one. An emergency is anything unexpected that might happen that will require a sizable sum of money to keep things together. The rule of thumb is that you want to have 3-6 months of emergency savings saved up.  Large Expenses
    The second thing you want to save for is large expenses. Although you may not total your car you’re eventually going to drive that sucker into the ground and need to get another one. And cars aren’t cheap so unless you make bank on your bonus checks you’re going to need to save for it over time so you have the money when you need it. Same goes for paying for schooling, a wedding, a house, etc. 

Now of course personal finance has a lot more steps than that but avoiding debt and saving money is definitely a good way to start.

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