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We did not have an inheritance, but both of us had a good start in life with college fully paid for (which back then was about $8k per year). I also got a new-to-me used car from my parents for a college graduation present. On top of that, I am a super saver and live pretty frugally (had roommates after college, am a vegetarian, not a big drinker, not into name brands, etc), so I was able to consistently put away money month after month since my early 20's and benefit from the "magic" of compounding. In addition to that, we got lucky in the DC real estate market. Bought a house for $300K in 2000 and sold it for $575K 13 years later. And to add to the discussion of kids vs. no kids, we have 3 children, but didn't have my first until I was 32, so most of my savings came before I started having kids and switched to part-time work.
Being debt-free out of college with a vehicle that has been paid for is very literally the best possible start in adult life that you can have. The biggest problem with student loans is that they are drastically reducing the effectiveness of the magic of compounding you mention. When it's difficult to save anything your first decade out of school it's a whole lot harder to end up financially comfortable or retirement-ready down the road.
Good for you continuing to save. If it weren't for my wife having a start in life like you did, I'd still be making the minimum payments on my loans which BARELY cover interest. Now I'm aggressively paying them down and we are home owners. A world of difference.
Being debt-free out of college with a vehicle that has been paid for is very literally the best possible start in adult life that you can have.
Best possible? Better than having that and a house paid for also?
Quote:
Originally Posted by Garfunkle524
The biggest problem with student loans is that they are drastically reducing the effectiveness of the magic of compounding you mention. When it's difficult to save anything your first decade out of school it's a whole lot harder to end up financially comfortable or retirement-ready down the road.
Good for you continuing to save. If it weren't for my wife having a start in life like you did, I'd still be making the minimum payments on my loans which BARELY cover interest. Now I'm aggressively paying them down and we are home owners. A world of difference.
Career choice matters a lot too. A high income can offset the effect of student debt.
Best possible? Better than having that and a house paid for also?
Well, barring any acts of god (I'd consider having a house bought for you or a huge inheritance or major things like that an act of god).
Quote:
Career choice matters a lot too. A high income can offset the effect of student debt.
This is correct, but even a high-earning entry level person is likely to be much better off in the long run if they start with zero debt and a vehicle that has been paid for.
Just like one calculates affordability of houses as a ratio of income, prospective students should consider their ROI on cost of education, this makes good sense, education is an investment.
Education in America is so darn expensive. It is ridiculous to me. I am indian and I paid 4k-5k for a 4 year education in engineering. My first year pay in India was 4x the total cost of my education.
In America, that is simply not possible. I hear undergrad education at a good school is 100-200K for 4 years. How did it get like this? Even with a salary of 60-90K , with high taxes, it will take forever to pay off the debt...
I graduated with 0 debt, because I was funded during my masters. If I was not, I would be 50-60K under. I started a new family straight out of school, and that would have been devastating to us. I really feel bad for young people with so much debt.
Just like one calculates affordability of houses as a ratio of income, prospective students should consider their ROI on cost of education, this makes good sense, education is an investment.
Education in America is so darn expensive. It is ridiculous to me. I am indian and I paid 4k-5k for a 4 year education in engineering. My first year pay in India was 4x the total cost of my education.
In America, that is simply not possible. I hear undergrad education at a good school is 100-200K for 4 years. How did it get like this? Even with a salary of 60-90K , with high taxes, it will take forever to pay off the debt...
I graduated with 0 debt, because I was funded during my masters. If I was not, I would be 50-60K under. I started a new family straight out of school, and that would have been devastating to us. I really feel bad for young people with so much debt.
At 100-200k we should be on our way to MD or something rather advanced or chances are it's been a gob of blown money on a social experience. College has become a big business that largely caters to the parent's pride and the social life of the kid. There are plenty of options to get your degree done for far less than 100-200k, while not 5k it's entirely feasible
I have a pension for the rest of my life from my departed husband provided I do not remarry. I owe nothing, but, phone bill, car insurance, rent and whatever I choose to buy each month. I also own very little except my dogs, my clothes and a very reliable 2009 Honda Accord. I choose to no longer work other than simple pet sitting so my life is simple, but, very nice. Very little NW but no debt so no problems and not even a CC.
There are plenty of options to get your degree done for far less than 100-200k, while not 5k it's entirely feasible
I should start a thread, I wonder how much people pay...100K does not sound that outlandish. 200K , sure. 100k is 25K/year. I suppose, when I look at it I always see out of state tuition.
What do you think is a reasonable cost of 1 year of education, Lowexpectations?
Location: Chapel Hill, NC, formerly NoVA and Phila
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Quote:
Originally Posted by aramax666
you are scaring me.
I don't mean that I had most of that net worth before having kids. We didn't. We had about $350K then (about 15 years ago). I meant that it was before kids that I was actually putting money away into savings. Once I had kids and started working part-time, the savings rate went way down, at least on my end. My husband still contributes to his 401k (and gets a very generous match) and we do an IRA but that is it. But because I started saving early, the savings/investments have compounded plus the run-up in our house which we sold 2 years ago have increased out net worth
I don't mean that I had most of that net worth before having kids. We didn't. We had about $350K then (about 15 years ago). I meant that it was before kids that I was actually putting money away into savings. Once I had kids and started working part-time, the savings rate went way down, at least on my end. My husband still contributes to his 401k (and gets a very generous match) and we do an IRA but that is it. But because I started saving early, the savings/investments have compounded plus the run-up in our house which we sold 2 years ago have increased out net worth
I know... and thats why its scary... essentially you had your seed money in place and compounding helped along the years. But what you are saying is savings rates collapsed after kids. for those who don't have kids AFTER setting themselves up ( like you had the foresight to do)... it could be a tough battle.
I had my kid at 30 and my NW was pretty low at that time. And its been an uphill battle to increase my savings rate. My solution was to work on growing income, but I am just three years in, and don't know what other expenses await. But I am hopeful albeit scared.
Location: Chapel Hill, NC, formerly NoVA and Phila
9,779 posts, read 15,797,090 times
Reputation: 10888
Quote:
Originally Posted by Garfunkle524
Being debt-free out of college with a vehicle that has been paid for is very literally the best possible start in adult life that you can have. The biggest problem with student loans is that they are drastically reducing the effectiveness of the magic of compounding you mention. When it's difficult to save anything your first decade out of school it's a whole lot harder to end up financially comfortable or retirement-ready down the road.
Good for you continuing to save. If it weren't for my wife having a start in life like you did, I'd still be making the minimum payments on my loans which BARELY cover interest. Now I'm aggressively paying them down and we are home owners. A world of difference.
I agree that it made a HUGE difference. And I am very grateful that my parents made the sacrifice to put away money for college for me and my siblings. Neither one of my parents had the opportunity or the finances to go to college. Because they put me through college, we are planning to do the same for our kids. That's also why I mentioned it. Because it's hard not to compare to one another, but we all come from different backgrounds. I know I got a good start in life, and that is a big part of why we have a good net worth. We also know that luck (buying a house in Northern Virginia before the run-up) played a part as well in addition to not being a big spender and making some sacrifices.
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