By: Dan Johnson, CFP®
What does “normal” look like in today’s culture?
More specifically, what does normal look like in the area of personal finance and the decisions that surround this area of our lives?
For most people they think of “normal” as a new car every few years, a bigger house every so often, various exotic vacations, and many more “things” or “experiences” to live a fulfilling lifestyle. One thing that has become a foundational component of today’s “normal” culture is the idea of instant gratification…whether the finances are there to back up the gratification or not.
You want a new car? Go ahead and get a loan!
You want that house that checks off everything on your wish list? You can get a longer loan with a higher interest rate!
You want to go on a trip with your significant other? That’s what credit cards are for!
NOTE: Not serious. Bad idea. All of those. ☺
Family experiences, cars, and bigger homes are not bad by any means, and are good things in the right time. That is the key: IN THE RIGHT TIME. With the thought process of instant gratification as a driving force behind many of these financial decisions, living a life in debt has become the “normal”.
This is what “normal” looks like in today’s culture. The average household has over $15,000 in credit card debt. An individual graduating college has an average of $46,000 of student loan debt. The average or “normal” amount of a car loan is over $27,000 - that carries a $500/month payment. That is $88,000 of household debt – with the accompanying monthly payments, not including if you have a mortgage!
Living this way can handcuff people financially for years; oftentimes delaying retirement and shrinking ongoing portfolio contributions.
So, how do we redefine what “normal” is?
The initial step is to change your mind-set and to no longer allow instant gratification to drive your decisions; especially the decisions in the area of personal finance. Think of how much more peaceful a paid-for car can be, or a mortgage with just eight years of payments remaining would feel, or a relaxing vacation that was paid-for and planned six months in advance.
You want to be the one that controls your financial future, and living in debt is a hindrance from this. I believe that everyone can live a life where they are financially free and they decide where their money goes. I encourage you to take an honest look at what is driving your financial decisions and how it is affecting your future.
The great thing about all of our debt decisions is that they are all choices, none of which are forced upon us. We can make any changes we want to. So, what do you want your financial life to look like, and are your decisions lined up with those goals?
Source for debt statistics: Nerd Wallet Study
Because The Wealth Group, Austin B. Colby & Associates is independent of Raymond James, the expressed written opinions above are our own and not necessarily reflective of Raymond James’ opinions.