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Setting a Pattern in Your Life

Question: Heidi in North Carolina is having a hard time explaining to her daughter Alex the principles of staying out of debt. Alex is in her second year of college, and she wants some independence. She has saved $2,000 for a car, while Heidi has agreed to match another $2,000. Alex wants a $6,000 car and is considering a loan. Heidi asks Dave to talk Alex out of this loan.

Answer: The scenario sounds something like this: Most people have car payments. Most people are broke. Most people don’t do well with money. Most people don’t become wealthy.

The things that you engage in, the decisions you make with your money, and the decision you make as to whether to do this kind of thing or not set a pattern in your life that will extrapolate itself all the way out into your 30s. It’s like other behaviors that you choose to engage in or not engage in.

You haven’t gotten yet into the actual area of your major—you’re probably still doing core work—but as you get into that with physical therapy, it’s pretty easy for both you and I to imagine that you’re going to start being introduced to people making stupid decisions that affect their bodies, thus they end up in therapy, right? Bad habits or choices are going to put people on the table in front of you when you’re a physical therapist. Sometimes accidents do that, but also just bad living does that sometimes. Money is the same way. Personal finance is 80% behavior. The decisions you make with your money are going to dictate whether or not you end up in a financial counselor’s office or a bankruptcy attorney’s office or, worse than that, whether you just make a lot of money and never really have anything because you give it all to banks in the form of payments.

There’s a huge correlation between people who are able to build some wealth and those that stay out of debt just like there’s a huge correlation between people who eat too many Twinkies and those who end up with obesity and diabetes. A car payment is the Twinkie of the financial world. That’s what you’re signing up for—mediocrity at best. At worst, you’re signing up for real problems because you get in a situation and you can’t pay the payment. Then this car payment starts dictating how much you have to work. Then all of a sudden you’re concentrating on crap having to do with this car rather than finishing up your degree, which is where your future’s going to come from. You just don’t want to get that sidetracked all because you got car fever.

Everybody gets car fever. I teach this stuff for a living, and I see cars that I want that I don’t need to buy. Nobody’s excepting from that. If it’s not $6,000 this time, it’s going to be $16,000 next time. I think what your mom’s trying to do is to say you’ve got to learn to make decisions that cause you to live on less than you make and less than you have in cash so that you have more choices later. When you’re in debt, you lose your choices. You’ve got to pay that payment, so you’ve got to work at the restaurant. Your college experience now changes.

Using your rationalization, what would prevent you from buying a $26,000 car? It’s the exact same set of logic. Why not buy a car that’s safer and more reliable and that will last you through grad school and maybe even up into married life for $26,000? What’s wrong with that? Now you’ve decided how much debt you can handle at 19 years old. You know the answer to that. I’m sitting here telling you that you can’t handle debt and that it’s going to take you places you haven’t even anticipated. It’s because you fell in love with this one little car.

I think there are other cars out there. I don’t think you’ve found your car yet. I think to presuppose or to set up the logic that the only cars out there for $4,000 are 180,000-mile cars—that’s a false set of logic. There are obviously cars out there. Now that Jetta may not be there. The car maybe that you like—a certain style of car you like—may not be there, but there are certainly $4,000 cars that have less than that kind of miles.

I can tell you how this would go down at our house. We would sit and talk about it like we’re talking about it here. I have a 20-year-old son who is in college and my daughters before that. Eventually, if you were bent on doing this, I would remove all support from you because I’m not going to support you while you’re making decisions that I don’t agree with that are not good for you. You’d have to choose between my support and this stupid Jetta. In other words, I’m going to treat you like a child eventually if I can’t reason this through with you—if I’m your dad—because I’m pretty hardcore.

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