The Big Choice

In today’s reader mailbag, I answered a question about digging out from under a pile of debt with some comments about a big choice people have to make in their twenties:

The problem you’re having is the problem a lot of people our age have: we want everything but we don’t have the resources to pay for it.

Many people solve that problem by taking on an absurd amount of debt, an amount that they’ll spend most of their life repaying. It’ll cause them to walk a financial tightrope for most of the rest of their lives, making it impossible to do anything but work at whatever job will pay the most, at the complete mercy of their boss.

I prefer the other solution. Put off some of those “needs” until you’re a little older. You don’t need the new car and the new house and the kids immediately. Live cheap when you’re in your twenties and early thirties and channel everything into your career and freeing yourself from your student loan debt.

It’s a decision most of us have to make at some point. I think many people dive into the first choice without reflecting on the consequences – but I think that solution sometimes ends in miserable lives. You have an opportunity right now to figure out which path you want to take.

All throughout the last several days, as we had family visiting and we spent some time with several of our friends, this choice kept popping into my head. I kept looking at the decisions various people had made in their twenties and how it affected their life today.

John, for example, chose to put off his “needs.” After college, he got a very good job right in his career path and he could have easily afforded a shiny car, a nice house, and the like. Instead, he spent his twenties living in a small apartment in a poor neighborhood, driving a beat-up used car, and focusing on succeeding in his career path. Where’s he at today at age thirty two? He owns twenty acres of land – and by “owns” I mean he doesn’t have a mortgage. He has absolutely no debt. He has tens of thousands of dollars in savings. He has a very strong position at his current job. And he’s only thirty two.

I chose a different path, at least at first. I also got a great job in my career path (based on the degree I earned in college), but I got married very quickly. We had an expensive honeymoon. We racked up credit card debt left and right. We had kids very quickly. Eventually, we had lots of stuff, but we had no financial foundation at all. I had a career path that had no flexibility. We didn’t have money for a house down payment. We could barely cover the bills we had.

The truth of the matter is that one path is very easy at first and the other is harder, but not impossible. It’s easier to just say “yes” to all of the credit and live the material high life. The problem, of course, is that a person’s early professional income rarely matches up to all of the stuff that they want, but the tools are available to simply put those payments off to the future.

The problem is that if you follow that easy path, you absolutely shackle your future opportunities. Since you have so many debt payments – the house payment, the student loan payments, the car payments, credit card debt – coming at you in addition to normal monthly bills and living expenses, you become tied to the highest-paying job you can get, with that money all channeled into paying for all of your stuff. That job can be punishing – at such a job, you’re often doing nothing more than working or thinking about work. You can’t change careers. You can’t lose your job. And you’re stuck.

On the other hand, if you take the road less traveled right off the bat, you give yourself tons of opportunities down the road. John, for example, has enough cash in the bank that if he chose to go back to school and change careers right now, he could without skipping a beat. If he loses his job, it’s not panic time – instead, it’s time to sit back and just think about what comes next in his life, calmly and rationally. If an emergency happens, he can deal with it without skipping a beat. If he decides that he actually wants something, he can buy it – but the first few years of his professional life helped him to learn a lot of personal restraint, so he only buys stuff he truly wants and will get value from.

From my perspective, the real truth of the matter is we all have a choice to make in life. Do we want freedom or do we want stuff? I’ve tried both paths and freedom is a lot more enjoyable.

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