Oh, don't the happy 20-somethings (buried in debt) look blissful?
In my quest to become the capitalist sensai to my 23 year old nephew I have engaged him in more than one discussion about the power of debt to undermine his future. (Yeah, sure, you can make the payment, but what is it REALLY COSTING you?)
Ultimately, I would like to see my nephew in a home some day (if purchased wisely, this is one of the only 'good debts' we can have.). So, I have taken it on myself to make sure he can get there some day.
I shared this simple formula with my nephew: "If you are paying 15% for money you borrow, 9 minutes of EVERY HOUR you work is going straight to INTEREST on your visa bill." (Or, to really get to the heart of this generation: "The MAN".) And I continued, "Sheesh, that does not even TOUCH the principle you have to pay back." (Get a 20-something to envision a FAT CORPORATE MAN in an expensive suit and sweet car...then get him to understand that HE is actually paying for it. Next have him take a good hard look at his own Goodwill wardrobe and 1987 Stanza...and you will get him to see how STUPID debt truly is, unless, of course, you ARE 'The Fat Man in the Expensive Suit and Sweet Car'!)
To take the lesson a little further, I had my nephew do some math to see what the sum total of INTEREST payments cost him by the week, month and year. I had him look at BOTH the time and the $$ he was throwing away every day so he could have what he wanted RIGHT NOW. I also had him do some math to check out how quickly he could SAVE the same $$ to get what he wanted, if only he was not paying interest to "The Man".
Surprisingly, my pleadings with him to live frugally (and differently than 99.9% of the people his age) has not fallen on deaf ears. To my great pleasure he lets me know regularly how he is attacking the debt he has accumulated with a fierceness rarely seen in his generation. (He can almost snatch the pebble from my hand and will soon be able to walk across the proverbial rice-paper on his way to a successful, debt-free, future. Whew, one nephew down...5 more and a daughter to go.)
Along the way, I have shared with him a series of books that was life altering for me. They made an impact on him as well. I figure if these books could change the way a 23-year old can see his future...well, heck, maybe I should share this resource of wisdom with everyone I come in contact with.
For those interested, the books are by Dave Ramsey, titled; Financial Peace, Total Money Makeover and More Than Enough
In these times where "Easy Street" has evaporated into "Bankrupt Boulevard", it is wise to look to some solid financial advisor's and to remember what those interest payments REALLY mean. Dave Ramsey, with his no-nonsense approach to debt-reduction is a great place to start.
My wish for each of us is a prosperous, healthy, debt-free 2008!
DEBT IS A THIEF.
Live good. Be happy. Live debt-free.
-Mimi
Happy New Year
Mimi Osterdahl, Bellingham Washington Realtor — Live good. Be happy...a FRESH approach to Real Estate.
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Dave Ramsey also has a mighty fine website with lots of good stuff.
Check it out on www.DaveRamsey.com
-Mimi