Killing Millennials Financial Future – The Millennial Money Trap

The Millennial Money Trap will destroy your financial freedom. You do not deserve that new car.

The best way to start this post is by explaining what I mean by the millennial money trap. It’s actually pretty simple! Financing new cars. One of the most common bad “investments” made by Millennials.

Let’s get you thinking in the right mindset before we go in deep. It’s alarming how easy us millennials will finances items after college, do you not realize you just financed your entire college career? .

Here are some examples:

  1. New cars
  2. Leased cars
  3. Luxury cars
  4. New house you can’t afford
  5. Premium cable package
  6. Financed “Toys” – (Snowmobiles, Quads, Boats)
  7. Financed Appliances
  8. 0% APR financed furniture
  9. Anything you put on your credit card you can’t actually afford
  10. Taking more student loans than you need

Now that we are on the same page with what debt looks like, let’s discuss the millennial money trap.

I want to first preface this by saying T$C has very strong feelings about cars and we are not here to offend anyone reading this. At the same time, I will always be very transparent with my writing. This will be a completely honest opinion about cars and millennials.

Related Artiles:

 

Our Thoughts:

As T$C we are always trying to make the savviest decisions when it comes to big purchases. These big purchases can either kill your financial freedom or propel it to the next level.

Cars are most certainly one of the biggest purchases in your life. The average car price according to Kelly Blue Book is around $33,000! That statistic blew our mind! I could drive the next 30 years for that price.

Being that cars are such a big financial decision you should take the time to do your research and analysis. Our opinion is simple, cars are a depreciating asset no matter how you look at it, unlike homes that can increase value, cars will ALWAYS lose value! So I ask you what is the reason for owning a car? To get you from point A to point B. (unless your a car enthusiast)

So what is the cheapest way to own a car?

  • Always buy a used car (cars loose 75% of their value within the first 3-4 years)
  • Pay for it in cash
  • Buy a comfortable and reliable car

Run the car you had in college into the ground! Learn how to fix your own car issues. Youtube has all the answers you could ever need. Cars are just like student loans another millennial money trap.

We have never had to make a car payment in our life, we have always paid cash. Think about that for a second. WE HAVE NEVER HAD A CAR PAYMENT, and I honestly can’t imagine having one. Having a loan, with interest, on a depreciating asset seems crazy to me.

 

The Millennial Money Trap:

I love my social media, but there is one thing that makes me cringe a little. There is nothing I shake my head about more than scrolling through my feed and seeing another picture of a young millennial, with two thumbs up standing in front of their brand new car. Made even worse when they just graduated from college. The like button has been demolished by all of their friends and family. Comments are pouring all over them saying “congrats” and “you deserve it” and “so excited for you”.

I can’t wrap my head around millennials buying things with money they don’t have.

It’s crazy cars equal the same social status as landing your first job, getting married and starting a family. I try to never comment on these posts because I don’t want to feed into the lies marketers are targeting millennials with.

Without a doubt, I would upset my friends because my comments would sound like “Hope that car feels better than your freedom” or “Congrats on putting yourself in another Millennial Money Trap” or “I hope you like your job because you can’t leave now”. Do those sound rude? Sometimes the truth hurts right? To explain further I am not upset at them, I am upset for them.

 

Millennials I Tried To Warn You:

I have learned over the years no matter how much you try to teach and convince people how bad buying a new car is to their financial future they are going to do what they want anyway. I hope through our blog and future car posts that we educate millennials on not jumping into another millennial money trap.

Take a second and think about it. You are financing something that continues to loose value each and every day. That is not an “investment”. That’s like throwing money out the window driving down the highway.

Car’s lose close to 75% of their value within the first 3-4 years. Why on earth would you want to be a part of that? Buy a car that’s 3-4

Instead, buy a car that’s 3-4 years old with cash and drive it over the next 10 years. Put the thousands of dollars you saved from financing a new car into your investments accounts. What’s more important financial freedom or keeping up with the joneses?

 

Think About The Future:

Young people, millennials especially, stink at thinking about the future. We all have the same mindset of living in the here and now, enjoying life to the fullest, living it up while we’re young. Well keep thinking like that and you will be 100% correct because you will still be slowing climbing out of your debt. Making smart decisions at a young age and planning for the future WILL have a HUGE impact on your financial freedom for the rest of your life. Listen to me now or listen to me later. STOP FINANCING YOUR FUTURE AND FREEDOM AWAY!!!

Well keep thinking like that and you will be 100% correct because you will still be slowing climbing out of your debt. Making smart decisions at a young age and planning for the future WILL have a HUGE impact on your financial freedom for the rest of your life. Listen to me now or listen to me later. STOP FINANCING YOUR FUTURE AND FREEDOM AWAY!!!

Listen to me now or listen to me later. STOP FINANCING YOUR FUTURE AND FREEDOM AWAY!!!

 

Millennials Ask Yourself:

Things we finance are great! A new car, sofa, appliances, etc. They are all sparkling, shiny, and have that “new” smell. Financing this stuff keeps you restrained the same way a mouse trap would.

If you are planning on financing a new car WAIT! Why finance more when you are already drowning in student loan debt? Why buy a huge house when you have a negative net worth? Do you really need the $100 a month cable package when Netflix is $8?

If you want to be financially free and have as much freedom as possible, you to need to start thinking about decisions you make.

 

Final Thoughts:

Every time you make a financed purchase (a purchase you can’t pay cash for) you are giving away a part of your ability to make change in your life. You are giving away your freedom and giving it to someone else. You are forcing yourself to keep that job that you hate just to make your payments. Trust me from my own experience that is NOT fun!

Most millennials leaving college have tens of thousands of dollars in debt already. I am sick about how many refuse to realize they don’t “deserve” a new car after graduating from college. We need to stop using social media to congratulate young adults in blindly throwing their financed money around and giving up their freedom, happiness, and financial future.

Stop “investing” in a depreciating asset. Be thankful for your car that runs and gets you to where you need to go, instead start actually investing in your future. As we always say “Experiences > Material Things” go on a vacation and make lifelong memories, I can appreciate that far more!

Lastly, if you are struggling with student loan debt we want to help. Have you considered refinancing to receive a much lower interest rate? LendEDU is a student loan refinancing marketplace helping thousands of millennials see if refinancing is right for them. They are 100% free and it only takes 3 minutes to see what rates you qualify for. Stop wasting any more time drowning in your student loan debt, see if refinancing is right for you today.

Do you agree or disagree?

What car do you currently drive?

 

 

Kelan

Kelan is a born entrepreneur! While in college studying business and finance Kelan was able to grow his e-commerce business to over $50,000 a year. After being an Insurance Salesman, UPS Driver, and Jail Deputy Kelan has come full circle with his burning desire to be 100% self-employed. Kelan currently runs The Savvy Couple full time with a passion for helping others get money $avvy.

14 Replies to “Killing Millennials Financial Future – The Millennial Money Trap

  1. Great post! My dad knew a guy who was literally a millionaire, owned a car dealership. He ONLY sold used cars, REFUSED to sell new. NEVER bought brand new himself. Why? Because of how much it depreciates in the first year alone! His belief was he could usually save $10,000-20,000 by buying even one year old. He’s right! Even if I win $85 million in the lottery I will STILL buy used!

    I love the concept of no extra monthly payments over what you already have – ALWAYS ask yourself “what else could I be doing with this $xxx per month instead of paying for this car?” (Saving for a wedding, saving for the next car “upgrade,” paying down a debt, saving for a house purchase or a new baby coming!)

    Awesome post guys – you’re a voice of reason in an age of “want!” 🙂

    1. Roxanne! Someone who agrees =). This is a huge issue for millennials. We just want to help out the struggling millennials as much as we can. Thanks for your comments thoughtful comments!

      We drive a 2005 Toyota Camry and a 2005 Chrysler Town and Country. Savings $X,000 every year with no car payments. Growing up on a farm by dad always said Drive Them Into The Ground.

      What car are you driving if you don’t mind me asking?

  2. Thanks for your post! I’ve never had a car payment and am so grateful to have avoided them! Never calculated it, but probably saved $3-$4k in loan fees over the last 15 years. Invest that money into a good mutual fund at age 25, let it sit for 30 years and you just earned nearly $100k. Such a huge opportunity cost there, IMHO.

    Used cars are still very reliable, IF you get the right model and do proper maintenance. I think that’s also an important point.

    1. Thanks for your comments Mike! We totally agree. Not having a car payment frees up a lot of extra money you can spend in other ways, investing being one of the best.

      Research in buying a reliable car is also very important in making a good financial decision. More articles to come on that, stay tuned!

  3. I couldn’t agree more! I’m still driving a 17 year old car that I’ve had since college, and I plan to keep driving it as long as I can. My husband’s transmission in his car went out (again), so we decided to sell it and we paid cash for a $4k used car. I agree that it’s crazy to take out a loan and pay interest on a depreciating asset!

    1. Frugal Millennial! Glad you enjoyed the article. Sounds like you are quite Savvy when it comes to cars as well. Congrats on not falling into the trap! Thanks for your input!

  4. Sorry guys. I disagree. To get a used car that actually runs consistently, you’re going to spend $5,000 of cash. Cash that could be in investments working for you. You won’t have a warranty most likely so any problems you’ll have to pay for yourself.
    Leasing a cheap new car is the way to go. Especially if you can keep the payments under $300. No maintenance risk and you’re also building car credit.

    1. Thanks for sharing your thoughts Brian, we appreciate different points of view.

      We will have to agree to disagree as well. It’s been proven time and time again that leasing is by FAR the most expensive way to own a car. Let’s do some quick math….

      You said “payments under $300” so let’s use $250 monthly payments for your example. That would come out to $3,000 a year in just car payments, not to mention the much higher insurance premium.

      We bought our 2005 Toyota Camry for $6,000 cash. We have owned it for 4 years now and have had $1,000 in repairs over that 4 years. So our total cost for 4 years is $7,000. We plan on keeping the car for another 3-4 years. If we stay the course $250 in repairs each year we are now at $8,000 total cost for 8 years of owning the car. That’s $1,000 a year.

      Now for your example. We won’t include the higher monthly insurance premiums. At $250 a month for 96 months (8 years) we are at a whopping $24,000. That’s $3,000 a year, 3X more expensive than buying a used car.

      Your best bet is to always buy a used reliable car, plain and simple. Buy a car 3-4 years old that has already lost all its depreciation (75%) and run it into the ground. We have been paying $1,000 a year to own our cars over the last decade.

  5. Frugality is awesome. But it is important to know the difference between price and value. For me car is a means of transportation, period! But for someone it could mean a lot more! I would spend my money on theatre 🎭 and drama. Others may find it a waste of money. If a new car adds “value” to your well being, you should get a new one. There is no right or wrong answer. Price is what you pay, value is what you get.

    Finally if everyone tries to be frugal about “everything”, eventually innovation will die and we will move back in time. Also most people who save money talk about investing and getting 5-10% return. Now just imagine everyone talks about buying used everything because all consumer goods are depreciating assets. If this happens there will be less need of new, less will be produced, less workers will be needed, less jobs, less pay, more employment, more recession, etc etc. Forget 5-10% return, if you can hold on to your money you will be happy.

    The key is to have a balance of what is important and what is of value to you.

    1. Totally agree everyone has different things that make them happy. It’s great that everyone is so different! The fact that there are people out there buying new cars allows us to not have to and always buy used.

      If you take the emotions out of purchasing a new car and look at it from a straight “investment” or “money” standpoint, buying new is a bad decision. They loose 75% of their value within the first 3-4 years that you are taking the hit on when you purchase new.

      The definition of frugality according to dictionary.com “the quality of being economical with money or food; thriftiness.” Being frugal is not all about being “cheap”. It’s about getting the most value out of your money. We often times buy new and spend more for quality.

      Thanks for your comments! It’s always great to hear different perspectives.

Let the discusion begin!