There has been a lot of thought in my mind about debt lately. In fact, a few days ago I took a look at the debt load I carry, and it's quite scary. I still have a semester left as well and I have realized that I am going to be graduating with an insane amount of debt. I looked at a loan calculator through the website that displays my debt, and I was informed that I will need to make around $199,000 a year in order to service the debt over 30 years. First of all, I think that's a crock of bull, as I can live quite frugally. Second, I know that the information shown is just via a calculator that was not really built with such large debt numbers in mind. That being said, I am going to need a good salary or a public interest job in order to get rid of that debt in 30 years or less.
However, there is another debt that I don't carry with me, and that's credit card debt. Credit card debt is the scourge of debt. It is the cause of many a bankruptcy. With that thought, I do recognize that some people do carry credit card debt in order to survive. Sometimes one only has a credit card to turn to when a job is lost or when a medical bill comes due. However, there are many people who think that it is imperative that they "live the life" of the rich and spend, spend, spend!
I believe that it is important to always live below one's means. I found that at one time I, too, had horrible debt. I had no idea the importance of credit a few years ago, spending and not paying back. My credit was almost destroyed due to the fact that I did not care about the debts that I owed. However, one day I realized just how important it was to have good credit. Getting an apartment, credit for needed purchases, or even certain jobs can be almost impossible without good credit. I found that when I had bad credit, I was forced to take substandard apartments, and lines of credit with horrible interest rates. In fact, I found that bad credit is one thing that keeps the poor from climbing out of poverty. In essence, I found that good credit is essential in life.
I cleaned up my credit and began to slowly rebuild it. I found that I could improve my credit somewhat by getting a secured credit card through my bank. I found that I was good at paying it back on time and later was able to get another credit card. At the same time I also got a Best Buy card with a $2,000 credit limit. I used the Best Buy card to get a small netbook a few years ago (one that I still use for law school exams) and shortly after, noticing how horrible the interest on just $300 was, I paid it back and closed it. When closing the card, the people at the customer service department thought I was crazy. But, I knew that no purchase at Best Buy was worth the insane interest rate on that card.
The other card was a regular credit card through a bank. It has an alright interest rate, but I have not had to worry about it that much, as I keep the balance very low (less than $100) or at zero. In fact, I have oftentimes contemplated closing it, but do think it's important to have a credit card, at least for renting a car (I don't own one at the time).
I have seen credit cards destroy people's financial lives. An example that I can think of is Black Friday. When I was out for black Friday in 2012, I could not help but feel strange about partaking in a day that's celebrated for it's over-consumerism. I am not much of a consumer, but usually go out sometime in the day to get some clothing that's on sale at various stores. I noticed that many of the deals were not actually that great, so bought very little. I don't see the point in buying a new TV or other electronics devices on black Friday unless I need a replacement or will need a replacement later that year. I don't see myself really needing a television set, and I am fine on computers (the 3 year old netbook still gets me through law school exams). I also have a nice desktop at home that does more than serve it's purpose. In short, there is little for me out there that I really need.
As a student (law or otherwise), one should be VERY careful about the debt they carry. Credit cards should be used few and far between. After school you are going to have to find a job and an apartment most likely and it's going to be tough to find an apartment with bad credit. In certain cities, finding an apartment with bad credit is just hell. Further, you will find that having access to credit is important. If you want to start a business, having access to credit makes things a lot easier than not having it. With that being said, it is not impossible to start a business without credit, but it will be a lot smaller, and you will probably need to put in some extra money to get it started.
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A story about building wealth.
Building wealth is often a slow process that takes great restraint. It is often difficult for people to save up money for a variety of reasons. First, we like to "keep up with others." We see our peers with quasi-luxury goods and feel the want to match that. If our peers have nice clothing, nice homes, and nice furniture, we want to match that. This is especially true if it is a person that we consider ourselves in competition with, such as a sibling or ex-friend. Therefore, we feel the need to spend, spend, spend!
Another reason is that we feel that saving for the future is risky. Why work so much to put money away for a day you might not even live to? Many people are focused on the present and think far less about the future. As people look forward further, they pay less attention to it. That's why few people as a whole have a large retirement saved up.
And yet another reason for the lack of saving amongst many people is the fact that it seems that it takes too long to save up money. Well, the truth is, if a person puts some money away every month or so, they can build quite a bit of wealth. In fact, they can build more than they realize. I have recently started saving some money toward a future goal of mine: buying a sailboat. I want to buy a boat that I can travel in and live in. I figure that such a boat may cost me around $15,000. Once I have such a boat, I can live for a smaller cost in a live aboard marina instead of renting an apartment. This will allow me to put more of my income in savings as well as have great freedom to travel. So far I have $1,200 saved towards the boat. It's about 1/15th of the cost, and it took me a little over a year to save. However, currently I have decided to put $70-150 in savings each month towards my boat.
I also want to put some money towards buying property. I am thinking some rural property near the coast in the Pacific Northwest. Such a property may cost me around $150,000. I plan on saving up for this property after I purchase and live in my boat. In fact, I will use the money I don't put towards rent towards my future land purchase, instead.
I am confident that I will reach my goal. In fact, I will write about it as I move towards it. I will also write about more of my ideas in wealth building as the future progresses.
Thank you for reading.
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