Quote:
Originally Posted by gustavo
This advice is good for someone who wants a predictable, stable, financially uneventful life.
However, it is not the ONLY way to get ahead. I venture to say, if I'm in a room with 100 random people, I would be in the top 5% as related to net worth and I have always had and continue to have debt.
Most famous success stories I've heard of or read about involved a bit to a lot of risk taking, some making and losing fortunes more than once. Most wealthy people and 99% of all successful companies use debt as a tool. Like any tool, it can hurt you if you don't know what you're doing. But for those who can manage it, debt, as a tool in your financial tool box, will help you get to where you want to be.
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To have zero debt ever would likely mean:
- You'll never have a reliable vehicle
- You'll never buy a house.
- If you own a business, it is unlikely you can do more than scrape by.
That said, the reason to avoid debt is not that you are avoiding debt itself, it is that paying interest should be avoided whenever possible. My advice is a bit opposite of some here, which is to say, build your credit history. Go to the FICO website, study strategies to build credit. I would go as far as to suggest using credit you don't need, AS LONG AS YOU PAY IT OFF EVERY MONTH BEFORE YOU OWE INTEREST. I can say that because I know you are a temperate and frugal young man.
Be aware of the seasons of the economy. We are in a season of extremely low interest. It's likely that at some point interest rates and home prices will go far higher.
An example of using the seasons of the economy to your advantage:
If you are renting instead of paying a mortgage, this is an excellent time to buy a house because renting is the opposite of investing, as you are paying for something you will never own.
Even though you would be paying interest on the home, you are also paying for the house itself.
Regarding investing in a IRA or 401K, the funds can be invested in many different things, and most of the choices are risky for losing money.
If I were you, the first thing I would do is build a nest egg. Ask the bank how much is required to put money a CD, which is safe, and gives you a smidgin of interest paid to you. I give this advice knowing you and your situation. Everyone needs an emergency cushion of cash in case of a vehicle loss or breakdown, being temporarily unable to work, and so on.
When these funds have built up, then you are in a position to leave an emergency fund and use the extra to start paying off the truck early to save that interest.
Still reading? Finally, make sure you don't scrimp on "investing" in insurance. Make sure your vehicle is covered for collision, and that you have medical insurance. This is a gigantic risk that many young people take without ever thinking about what would happen if....