America is the richest country that the world has ever known and yet nearly half of its
citizens are living paycheck to paycheck and according to recent studies 61% of Americans
don't have enough savings to last 6 months without a paycheck.
Why is that the case?
It's been almost a decade since the Great Recession and yet almost half of Americans
are still living paycheck to paycheck.
And I think a large part of it is because of our money habits.
Financial education in this country is lacking to say the least.
It's not something that's taught in schools, and unfortunately for most of us it's not
something that we can learn at home either.
Because what are our parents going to teach us?
If half of them are living paycheck to paycheck and 61% don't have enough money to last 6
months without a job, are the lessons that they're teaching us actually going to benefit
us?
And the unfortunate answer in most cases is no.
We're going to learn the same lessons that are parents learned about money.
The same lessons that most of society has learned about money.
And those lessons are backward.
Things such as you're always going to have a car payment is something that's just accepted
in society today as fact.
And I'm here to tell you today that it's not, and I can say that from personal experience
I do not come from wealth, my parents never had a lot of money when I was growing up.
In fact a trip once a year was considered a treat.
However I was lucky enough to have a father that studied Finance religiously, and while
he did pass away before he was able to put his ideas into practice long enough to gain
wealth he did have enough time to pass those lessons on to me.
As a result I've never had a car payment.
I don't have student loans.
I've never owned a credit card.
In fact I do not owe a single penny to anybody.
And that's one of the greatest feelings in the world.
You don't know how much stress your debt is putting on your shoulders until it's gone.
And I've been able to experience it because my dad made me realize just how impactful
those payments are in the long run.
And today I want to pass that knowledge on to you, so that you too can experience the
relief of being debt-free.
Hey guys Daniel here from Next Level life and today we're going to be talking about
debt.
More specifically we're going to be talking about just how much that car payment is really
costing you.
Let's get started.
According to a study done experian the average car payment today in America is about $500,
$503 to be exact and what's worse is the car loan on average lasts about 68 months or a
little over five and a half years.
And what's more according to AutoTrader the average person only keeps a new car for 71
months, or just a shade under 6 years.
Which basically means that as soon as we're getting ready to make that last payment on
a car loan we're also almost simultaneously getting ready to sign a new one.
And again this is normal in America.
So that answer the title question of the video, how much is this really costing you?
I think the best way to illustrate this is with an example.
Let's say that John financed his first car at 18, he had a car loan that cost $500 a
month.
He like most Americans will have a car loan for the rest of his life.
But how much is this going to cost them in the long run?
Well according to what we found out in my how to become a millionaire video, on average
at least over the last 40 years the market has returned about 8.6% per year.
$500 at 8.6 percent per year for 40 years is $1,906,776.89.
Now that's what the typical Financial Guru will tell you and it's great because that
kind of money is a very effective tool into getting you to rethink the value of a car
loan.
However it is a little bit too simplistic for me, so let's see the other side of the
coin.
Let's assume that in the previous example even after paying his car loan john still
had $500 a month to invest meaning after 40 years he would have a nest egg of about 1.9
million-dollars.
On the other side we have Jane who buys her first car with cash and does the same for
every new car that she gets.
In other words she will never have a car payment.
Now she's also getting her first car at 18 it's probably not a brand new one, we'll assume
that she saved her money from her part-time job after school and bought a used car for
say $5,000.
Once she has a full-time job i'm going to assume that every new car she gets will be
a $20,000 purchase.
Assuming she makes the same amount of money as John, will Jane end up with more money
in her nest egg by buying her $20,000 cars with cash every 7 years but then investing
the extra money she has in her pocket by not having a car payment over the course of 40
years?
The answer is as it turns out absolutely yes.
She will have way more than John, in fact her ending net worth after 40 years will be
$3,229,066.54!
That's almost 70% more than John.
And even if you were to say that in the years that Jane bought the car she didn't invest
anything because she used all her spare cash to pay for the new car, she would still and
with a 40-year net worth of $2,835,972.02!
Still nearly a million dollars higher than John.
Even if you were to say that she bought more expensive cars, say instead of a $20,000 car
every 7 years she bought a $40,000 car every 7 years.
She would still end up with a net worth of $2,232,696.20!
Still over $300,000 more than John.
And that my friends is the power of being debt-free.
But that'll about do it for me I hope you enjoyed the video and if you did or if you
learned something be sure to like And subscribe I've got a lot more of these Finance coming
out in the near future as well as some more book summaries and other fun stuff.
But with that being said, thanks for watching and have a great day.