I'm 29 Years Old With Nearly $1,000,000 In Debt!

[Scot]

I’m about $750k in debt.

My wife’s degree cost us $300k, but she gets to follow her dream and be a veterinarian.

And we have a home mortgage, because that’s what houses cost where we live.

It’s not stupid, it’s leveraging OPM.

Besides, I’m building a business and an exit that will make this all irrelevant in 5 years.

It’s all about perspective. $1M in debt if you make $40k a year? Stupid. But we can afford our debt right now and we’re working on making it disappear soon.

 

[GPM]

I know a few doctors in their early to mid 30's. They are all in the same situation.

Their entire time in school they are shoved unlimited credit down their throats, all the while idolizing the doctors who all drive brand new Audi's and BMW who live in the million dollar homes that are full of the consumer goods.

They don't stand a chance. The system sets them up to live in a perpetual debt cycle of living beyond their means, and it starts well before they even hit their residency.

A good friend of mine says this about vehicles "Let the doctors and lawyers pay the depreciation on vehicles. I'll buy them a couple of years old for 50% off".

 

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[Andy Black]

HOW THE F$*& CAN SOMEONE SO SMART BE SO STUPID!

This is slowlane mentality taken to extreme.

This is what happens when huge student loans numb you into thinking that debt doesn't really matter, until it escalates to a point where you come out of your cosy coma and realise you are in deep doo doo...

And this is DEEEEEP DOO DOO...

Ladies and gentlemen here we have a newly married couple. She is 29 years old and he is 32.

Their combined debt consists of:

335k student loan debt
136k credit card debt
44k personal loans
35k car loans
Plus the mortgage.

I think this should be made required viewing in every university and school in the land. There are some serious lessons to be learned here:

View: https://www.youtube.com/watch?v=rMk7CKwJ8OM

I saw the thread a few days ago but wasn’t fussed about watching the video. Was stuck in a garage for a while so went through it and am glad I did.

My takeaways (paraphrasing):

You’ve been living 10x the lifestyle you can afford.

But this isn’t a Maths problem. The Maths is a symptom of something else.

You’re going to live on beans and rice for 3 years. It will help your relationship and spiritually. It will crush those things inside that are causing you to live 10x beyond your means.

You’re going to have to get to the point where you're at the lights in a shitty car and someone pulls up with a shiny new thing, who’s on 25% your income. And it doesn’t bother you.

...

I liked the emphasis on it not being a Maths problem, and that the Maths was a symptom.

 

[NaPal]

I saw the thread a few days ago but wasn’t fussed about watching the video. Was stuck in a garage for a while so went through it and am glad I did.

My takeaways (paraphrasing):

You’ve been living 10x the lifestyle you can afford.

But this isn’t a Maths problem. The Maths is a symptom of something else.

You’re going to live on beans and rice for 3 years. It will help your relationship and spiritually. It will crush those things inside that are causing you to live 10x beyond your means.

You’re going to have to get to the point where you're at the lights in a sh*tty car and someone pulls up with a shiny new thing, who’s on 25% your income. And it doesn’t bother you.

...

I liked the emphasis on it not being a Maths problem, and that the Maths was a symptom.

I continuously LOL when all my family members have brand new cars. In the meantime I bring in double their yearly salary and drive a $3,000 car that is paid off.

new car + new car insurance = ~$300/mo car payment + $100/mo full coverage insurance
vs.
used card + used car insurance = $0/mo car payment + $20/mo liabilty insurance + $300/YR repairs maybe

 

[RazorCut]

HOW THE F$*& CAN SOMEONE SO SMART BE SO STUPID!

This is slowlane mentality taken to extreme.

This is what happens when huge student loans numb you into thinking that debt doesn't really matter, until it escalates to a point where you come out of your cosy coma and realise you are in deep doo doo...

And this is DEEEEEP DOO DOO...

Ladies and gentlemen here we have a newly married couple. She is 29 years old and he is 32.

Their combined debt consists of:

335k student loan debt
136k credit card debt
44k personal loans
35k car loans
Plus the mortgage.

I think this should be made required viewing in every university and school in the land. There are some serious lessons to be learned here:

View: https://www.youtube.com/watch?v=rMk7CKwJ8OM

 

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[RazorCut]

Why did they spend so much money if they had 335k student loans?

Probably because the sheer scale of the debt made them comfortable with more.

MJ posted this thread a week or two ago:

NOTABLE! - My 600lb Life: Addiction, Enabling, More (RANT)

How does someone get to 600lbs in weight? They become comfortable with their environment and their lifestyle, and just like any habit it is much easier to go with what makes you comfortable rather than uncomfortable.

You stay in that comfort zone and stay in denial until you can procrastinate no longer. In fact procrastination is probably a major factor here. We avoid doing something unappealing by substituting it for something we find more appealing instead.

In these cases spending more money then they have or consuming more calories then they use up. A situation like that given sufficient time will always create an explosion point (or sadly a dead body, either from heart attack as in the case of the 600lb man or suicide).

Hopefully they will manage to get themselves out of debt. It's a valuable lesson for others though.

 

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[SquatchMan]

I know Dave Ramsey gets a lot of hate here...

but people with a household income of $230k/year and about $600k in debt (not including mortgage) need Dave Ramsey. They're mentality is so far from The Fastlane that it just won't work.

I can literally hear the anxiety on her voice when he tells that they will need to live below their means. Wow.

 

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[Kak]

Pardon my ignorance, but I've never really understood why this happens.
Hopefully someone can clear this up for me.

How does any institution lend such a huge amount of money (say upper 6 figures) to people who may never be able to pay the loans back?

Is there any consideration of the risk on the lending institution's part?

This!

I don't know the inner workings of the student loan beast that lends frivolously, but what I do know is that this is the kind of thing that happens when a market is over regulated.

Under a strictly free market capitalistic lending system, the lender would be in the business of making money and would examine the strength of the client, their likelihood of paying it back and set the interest rate accordingly.

Obviously competition of lenders, the clients history with money, and choice of a more solid career path should be what keeps those rates down. It isn't.

You could probably get a 3 percent loan for 300 grand to learn about gender and you would end up knowing less about gender when you graduate.

 

[ZCP]

if he kicks a$$ and does something w/ his degree, he is just investing in his future.

 

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[biophase]

The home is a rental, they can sell a collect about $70k if I remember correctly. $230k a year means about $160k after taxes. So if they live on $30k a year, they can pay down $130k a year. So after 1 year, the CC debt is gone. After year 2, the car and personal loan and some of the student loan. I guess after year 4 they should be in the clear.

I think they should sell the cars, get 2 beaters at $3-$5k each. Maybe get someone to consolidate the personal and CC debt, or negotiate a smaller buy out of the loan by using the thread of bankruptcy.

If they can remove the $35k car and get the $180k in debt down to $90k. They could knock this out in 3 years.

 

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[Thomas Baptiste]

The system is the problem. For the majority of people, from a young age it's been the same regurgitated story and expectations being forced onto them:
Go to school (no matter the cost) and get an education to land a good paying job.
Get married (no matter the cost) and have a family.
Buy/build a house and buy a car (no matter the cost).

The dream is 'If you can have it all then you'll be happy, and life will be a bed of roses!'

Apparently everyone turns a blind eye to the debt that accumulates over the years of making these types of decisions.

It's funny to me how people will willingly stack up debt, but criticize and look down on people who try to get out of that life and live debt free. Strange world we live in.

 

[lewj24]

Pardon my ignorance, but I've never really understood why this happens.
Hopefully someone can clear this up for me.

How does any institution lend such a huge amount of money (say upper 6 figures) to people who may never be able to pay the loans back?

Is there any consideration of the risk on the lending institution's part?

Students loans are backed by the gov't and can't be bankrupted out of so they will give you all you want.

Home loans have the home as collateral.

Car loans have the car as collateral.

The personal loans and credit cards are what I don't understand. Maybe he got a bunch of credit cards with over 20% interest to live through college and it snowballed out of control if he wasn't paying them off? Maybe he got loans from family or friends? No clue.

 

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[DustinH]

The home is a rental, they can sell a collect about $70k if I remember correctly. $230k a year means about $160k after taxes. So if they live on $30k a year, they can pay down $130k a year. So after 1 year, the CC debt is gone. After year 2, the car and personal loan and some of the student loan. I guess after year 4 they should be in the clear.

I think they should sell the cars, get 2 beaters at $3-$5k each. Maybe get someone to consolidate the personal and CC debt, or negotiate a smaller buy out of the loan by using the thread of bankruptcy.

If they can remove the $35k car and get the $180k in debt down to $90k. They could knock this out in 3 years.

One thing to add to the cost of borrowing so much money, especially for W-2 employees, is how much money you have to make to pay off credit card and student loan debt. The debt service for those is not tax deductible so you pay them off with after-tax money. Assuming they pay a typical average of 30% in taxes, they would have to make $194,000 to pay off $136,000 in credit card debt. To pay off $335,000 they would have to make about $480,000 in income. None of this is including the accruing interest on the loans. Just talking about this is stressing me out, and I have no skin in the game.

 

[Nodus]

An MBA drenched in debt........ Unfortunately I suppose people seek him for "professional business advise"

 

[G-Man]

This!

I don't know the inner workings of the student loan beast that lends frivolously, but what I do know is that this is the kind of thing that happens when a market is over regulated.

Under a strictly free market capitalistic lending system, the lender would be in the business of making money and would examine the strength of the client, their likelihood of paying it back and set the interest rate accordingly.

Obviously competition of lenders, the clients history with money, and choice of a more solid career path should be what keeps those rates down. It isn't.

You could probably get a 3 percent loan for 300 grand to learn about gender.

It's not just regulation - regulation is the explicit terms of the system. There are also the implicit terms of the system. Taleb talks a lot about this. So if, for example, the federal government has no explicit obligation to bail out financial institutions in times of crisis, but historically does so, this is going to create a pattern of behavior as though the government did have the obligation to bail out - these are the implicit rules of the system.

My dad talks about a capitalistic student lending system all the time. He said that to qualify for a student loan the banker told him to change his major from physics to engineering (one has more jobs than the other), and he had to report his grades to the bank. Just a little different than now.

 

[RazorCut]

I can literally hear the anxiety on her voice when he tells that they will need to live below their means. Wow.

Yes it's a tough pill to swallow, as is loosing face with your peer group but eventually you run out of road if you keep spending beyond your means.

If they were earning 1m a year then the debt would be manageable and they could rein in their spending and clear it in a short space of time. But they don't.

As @Scot points out it's not the size of the debt it's the relationship to income. Some people only owe a few thousand dollars but it may as well be a million as they have no way to pay it back. It probably seems like a million to them anyway. Stuck in the payday loan system and not knowing how to get out save buy a lottery ticket every week and pray.

 

[The Abundant Man]

 

[Andy Black]

can't they just declare bankruptcy?

everything except the student dept should go away?

I reckon they’d be back where they are. They need to stop digging to get out of their hole.

 

[JG17]

A good friend of mine says this about vehicles "Let the doctors and lawyers pay the depreciation on vehicles. I'll buy them a couple of years old for 50% off".

Love this quote. Thanks for sharing.

 

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[SamuraiRod]

I saw the video thumbnail on Youtube and thought that they made some mistakes gambling in real estate.

Yikes.

How the hell do you get over 100k in credit card debt in the first place too? That's absolutely ridiculous.

 

[Deleted50669]

Jesus Christ, and I thought mine was bad... well, it is lol.. but that's tragic

 

[lewj24]

The interest alone is killer:

$335k student loans at 5% interest= $16,750
$136k credit cards at 20% interest= $27,200
$80k in personal and car loans at 5% interest= $4,000

Not including the house they are probably paying at least $37,000 just in interest every year. That's a good chunk of change.

 

[SEBASTlAN]

Another quality post

 

[theforamyst]

This week I finished listening to TMF and while nearing the end I was thinking "I've got so much out of it. Probably even more than someone who went to college and studied MBA". Let alone this guy who is a million dollars in debt. I'm sure he can buy a copy of TMF now to get out of debt.

And if you study MBA what do you learn exactly? Will it prepare you to being an entrepreneur? Or is it more for if you want a career in corporate life?

 

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[Rabby]

I flipped out at the part: "we both work in government." Of course you do, no doubt in charge of a departmental budget with your MBA and Public Policy degrees

And if you study MBA what do you learn exactly? Will it prepare you to being an entrepreneur? Or is it more for if you want a career in corporate life?

A lot of MBA programs are preparing people for employment. Corporate managers, etc. It's become a credential where the HR department checks a box and maybe you're eligible for a raise or promotion.

Sorry to burst this bubble, but money is hard to come by. It takes a decade or more to become rich. "Hustling" burnes you out by 40. Getting a job is your best bet. College works. Doctors make $200k+ per year. Doctors who marry other doctors make $500k per year.

LOL. Assuming this is sarcasm. Poe's law!

I know several doctors and lawyers who can't figure out how to pay down their debt. I've also met people who keep getting more degrees because student loan payments aren't due if you're currently pursuing a degree. One guy I knew was going for a double PhD because it would take longer. Two useless subjects of course.

By the way, the debts aren't high just because of tuition. I used to assume that. But as it turns out, people finance their living expenses with these loans. The money is easy come so guess what? Living expenses could mean luxury apartments and eating out every day. And hey, maybe lease a Lexus? Who checks on what they're spending the money on anyway?

Under a strictly free market capitalistic lending system, the lender would be in the business of making money and would examine the strength of the client, their likelihood of paying it back and set the interest rate accordingly.

We're not making bad loans, we're fighting inequality. Providing opportunities to the poor!

The rhetoric may be political and class based, but I think a lot of it is economics -- policy makers follow flawed economic theory, try to keep the currency moving, keep "spending" up to "strengthen" the "economy" as they understand it. Or as it serves some metric they care about.

These are the metrics, the numbers that incentives and votes are based on. Consumer spending is up! Everything's Ok! Never mind that the average household is underwater.

Sub-prime mortgages were the same scenario. Certain lenders (not all of them) and a majority of policymakers wanted to push them. Same rhetoric -- opportunity, equality, access to capital. The lenders survived on incentives, subsidies, and permission to use convoluted accounting practices to avoid receivership. Meanwhile, conservative bank CFOs were threatened with audits, discrimination suits, receivership, or forced to resign under pressure from regulators.

More traditional bankers can lobby for less regulation, but it falls on deaf ears when "spending" or "consumption" economic theories prevail over "production" theories. We'll always fall into debt if we're consuming more than we produce, but people don't want to acknowledge that. It's probably not even a consideration in today's public policy, the subject the young woman on the phone studied.

The anointed say "consumption" has to be distributed equally among all. Debt programs are one way to finance that, and you don't have to raise people's level of production to do it. Any type of debt can become the vehicle: home loans, school loans, business loans, payday loans. Ultimately it will hurt the people who are supposedly being helped, along with everyone else, because we have people living on debt that's over 10x their production level. But hey, that "consumer spending" number went up another tick! Alright!

 

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[ManlyMansNegator]

This is a blessing in disguise, he won’t be able to ever pay his debts.Expect him to go into fastlane soon.

 

[Scot]

What do the economics of being a vet look like? My daughter thinks thats what she wants to do.

Horrible haha. They have the worst debt to income ratio of any medical profession.

Thankfully my day job makes more than enough to support us.

 

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[GuestUser4aMPs1]

Pardon my ignorance, but I've never really understood why this happens.
Hopefully someone can clear this up for me.

How does any institution lend such a huge amount of money (say upper 6 figures) to people who may never be able to pay the loans back?

Is there any consideration of the risk on the lending institution's part?

 

[NewManRising]

I didn't watch the video. But I wonder if this is the same couple from a few years ago that was trying to beg for the internet to pay off their loans. They had a blog and they explained how they got in debt. The idiots were going on trips, paid for their education, marriage, honeymoon, a couple of nice "toys" and so on, on credit.

 

[The Abundant Man]

Sorry to burst this bubble, but money is hard to come by. It takes a decade or more to become rich. "Hustling" burnes you out by 40. Getting a job is your best bet. College works. Doctors make $200k+ per year. Doctors who marry other doctors make $500k per year.

The few "red colored" balls that come out of the gumball machine are the lottery winners. Those are the ones that write books or make youtube channels about how easy it is...

That's the sad truth. Most of you are brainwashed.

Mic drop. Forum closed.

Nice Sarcasm. Maybe Adam McKay(Anchorman, Step-Brothers, The Big Short, Vice) should direct your movie.

What about this guy? John D. Rockefeller. He amassed a wealthy fortune as early as his 20's and is now the wealthiest person in modern history. Plus he lived till 97