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:
- New cars
- Leased cars
- Luxury cars
- New house you can’t afford
- Premium cable package
- Financed “Toys” – (Snowmobiles, Quads, Boats)
- Financed Appliances
- 0% APR financed furniture
- Anything you put on your credit card you can’t actually afford
- 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$C has very strong feelings about cars and we are not here to offend anyone reading this. At the same time, I will always be very transparent with my writing. This will be a completely honest opinion about cars and millennials.
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As T$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.
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?