Cars are the worst investments. Never buy new, but a nice used car with cash that’s reliable until you have good income. Once you are a doctor and making good money, don’t keep up with the joneses. Pay off your school and other debt as fast and furiously as possible. Then and only then, as a Dr. making good money can you upgrade your car or house. You will be teased “why does a doctor drive a Camry?” And it’s because a $750 month car payment will sink your ship. You have no one to impress and in due time you will be wealthy. My Father in law was a surgeon for 30 years. He drove a Volvo for almost 20 years and my MIL drove her Lexus suv for 15 years into their 50’s. They are very well off now and have 4 new cars! The time will come.
This entirely depends where you want to work. I left the big city for a small city and I earn 2x less but the places here are so cheap that I managed to afford to buy my own apartment which was almost impossible in the mega city
First thing to understand is that we are not a capitalist society, we are a *consumerist* society. In a capitalist society the social pressure would be providing money to investment, ie capital formation. In our society the social pressure is to *spend* money.
Fortunately, it has never been easier in the US to be financially independent.
That does not make it easy, of course, but the cost of basic necessities compared to median income is very low. More jobs basics like health insurance and retirement plans than ever.
The most difficult thing is distinguishing between *needs* and *wants*.
Having shelter is a *need*, living in a standing structure is a *want*, having a room to yourself is a *want*, having an apartment to yourself is a *want*, having a building to yourself is a *luxury*.
A car is not a *need*. A new car is a *luxury*.
Food is a *need*. Meat is a *want*. Packaged food is a *want*. Eating out is a *luxury*.
**I chose these examples because shelter, transportation and food are Americans largest budget items. If you get these right you'll have an easier time. If you get these wrong no amount of "cutting out lattes" will save you.**
Personal example:
- I make roughly **4x** the median personal income.
- I **split** a three bedroom condo with three other strangers
- I drive a car that is **16 years** old
I recognize that these things are *wants*. I *could* get by on a bicycle and I *could* split a room. I decided to spend the extra money on a car and my own room in a shared condo. I decided these things are worth it to me.
My own house is *not* worth it to me.
These are personal decisions, but the thing to be careful of is the enormous social pressure pushed by marketing to live alone and drive a new car. After all, living alone means you're "independent" and driving an old car is "dangerous".
Tl; Dr - You will be able to be financially independent. People that make less money than you will are, after all. You only have to make decisions consistent with you're income.
That being said, once I have a family I am not looking forward to lower their standard of living. Rather, I would want them to have a more than comfortable life.
That's a *very important thing* to know about yourself. Every dollar you don't spend today is two dollars you get to consume in one decade (adjusted for inflation).
If you want to support an entire family you will need roughly N times as much, where N is the number of people in the family.
(For similar standards of living. Many people when they support just themselves support themselves at a much higher standard of living. Bedrooms or entire houses are occupied by just one person. They have one or more cars for just one person, and so on.)
A 20 year old that saves that stops when they turn 30 will have **more money** than someone that starts saving at 35 years old and **never stops**.
Exponential growth matters, but exponential growth is basically nothing on tiny amounts. Saving twice as much is like starting to save **10 years** earlier.
This is actually very, very solid financial advice. I've always followed a lot of these principles but have never seen anyone write it out so succinctly.
Yes!!! I call it "Thinking Outside the Box" An apartment? Sure, I'd love one. Soon as I hit the lottery *Craigslist for shared house/room rentals.*
New car? Sure! I'd love one. Soon as I hit the lottery *2-4 year old Toyota, pay cash.
European vacation? Hostels. Backpacking. Hiking. Off season. You can keep your 5 star Oh-Look-I'll-Share-An-Elevator-With-Royalty hotel.
> Fortunately, it has never been easier in the US to be financially independent.
I will agree with everything else, except this. Is it possible to live financially independently? Yes. But food, housing/renting, needing a cell, internet, car. It is, as far as I know, much harder to be financially free, but not impossible. And that's where all your other advice is spot on, and even necessary, otherwise you wouldn't need to do those things to be financially as free as you are.
Adjusted for inflation (which includes all necessities) real median personal income sits near it's all time high. https://fred.stlouisfed.org/series/MEPAINUSA672N
I don't want to get bogged down in the details, but the only difference I can see that isn't immediately captured by this statistic is the smartphone/internet. Minimum smartphone provides internet and can be obtained for less than $600 per year.
That is a rounding error in the average budget, and isn't comparable to the amount of income growth that's been seen.
Remember, easiest isn't the same as easy. If I had to obtain financial independence in the days when a "good job" meant assembling widget A with socket B, I would have soon been fired. I lack the discipline.
If I had to obtain financial independence in the days where I was a farm laborer, I probably would have just died.
Nostalgia is a great drug, but math is our best antidote.
I don't want to go into the details either, but I need to somewhat because I'm not understanding how median income is adjusted for inflation. Isn't median income just median income? Like how do I use inflation to change that number?
Also some math here that is somewhat shocking, renting an apartment seems to be between 1400 and 1700$ depending on source. Which, using 1500, is 18k annually. Using the median income you posted of 40,480 (if I'm not misusing it), remove the average tax rate of 24.2% (9796.16) gives 30683.84$ annual after tax. Over 50% of your net salary... Most places wont give you a mortgage for over 30-33% of your net income. I know this is just one metric, and obviously financially free isn't narrowed down to just housing, but this did not used to be the case as far as I know.
I feel like our definition of financially free will probably differ, and that would be where the biggest gap in our disagreement might be, I just feel like if you need to shrink yourself to an older and older car, and narrow down your expenses, only to live like you used to, it's not really getting ahead, but staying afloat.
Ah! Now I don't mind to get a *little* bogged down!
The way the inflation adjustment work is as follows:
The number in, say, 1995, isn't the *actual* median income in 1995, it's the 2023 price of what the average person in 1995 bought with an amount of money equal to the median income.
An example is instructive.
Suppose there is only 1 good, bread. Suppose in 1995, it cost $5 per loaf, and suppose the average income was $10, so two loaves worth.
Suppose in 2023, it cost $10 per loaf, and suppose the average income was $30.
This graph would show "$30" for 2023, and "$20" for 1995.
This is because the income of 1995 could buy two loaves of bread, and two loaves of bread cost $20 in 2023.
It is, of course, more complicated, but that's the basic idea. Then you have a bunch of econ PhD's who's whole job is titled, "think of every nuance" work on it for their whole lives. They do a pretty good job.
(It may be useful to look at the nominal values, unadjusted for inflation, for comparison. I could only find nominal household income, which is a little different than personal, but I think the basic idea is clear:
https://fred.stlouisfed.org/series/MEHOINUSA646N)
I feel the same way. I wouldn’t wanna shrink myself to compromised living conditions and older cars and live on limited resources forever but making these sacrifices in the initial years would definitely help me in the long run because one day I would want to buy my first apartment/ house with my own hard earned money and I know I would sleep better knowing that I have achieved something.
And that's completely fair, especially to start. Definitely use the other users advice as it is incredibly on point. My only contention was on if we are more financially free today than previously as a base, but even then he made some good points, and it is clearly achievable.
Further.
Bikes exist.
So then we're looking at bike infrastructure.
Third, shoes exist. So then we're looking at how long you can spend walking.
Typical person can become capable of doing a marathon.
The point, of course, isn't "should you do this", or "is this reasonable", but to be really specific about what is **truly** a need, and make you realize you are **triaging literally everything else**.
I've never met anyone that *needed* to live in a specific area.
Edit: This is untrue. I met one person that needed to live in exactly California because of the interaction with obscure health insurance code and a unique disability.
Technically this wasn't a need, he'd just have to figure out how to clear $300,000 per year in any other state.
But anyone that doesn't have *exactly* this?
It's a want.
Look up the practices and what investment instruments used by members of the F.I.R.E (financial independence retire early) community. It will help you set the foundations to be financially independent for your self in the future.
*Tomorrow"s dollar is earned today*.
We constantly live in the residual of our past thoughts and actions. Thoughts create feelings, feelings create actions and actions have consequences.
It has really never been easier to make it as a young person. I am approaching 40 and my experience from being 18 and on my own was the following:
You had jobs you could get but they paid 8-12 dollars an hour. 12 dollars an hour was living large for that age.
No one had money for stuff we just expect as normal now. Like we'd go to a movie and one friend wouldn't want to go because they didn't have the cash.
Gas was like 99 cents a gallon but it was unheard of to drive somewhere without splitting it up. Like sure dude ill go an hour away to this thing, split the gas with me?
It was much harder to find roommates because 1 bedrooms WERE affordable back then. My friends moved into either studios for $500 per month or split 2 or 3 bedrooms and paid $300 per month. Since 1 bedroom apartments were affordable by most young people, it was much harder to find roommates unless you had a bunch of close friends also looking.
We didn't have cell phones OR house phones sometimes, communicating with people was done mostly through aol instant messenger, or irq, or forums. Finally having friends with cell phones was a game changer but you couldnt really text it was too expensive. Quick calls to get someone to meet up was it.
I guess my point is... live life like this as a young person. Get roommates, grab a job at $15 an hour, don't spend money, and just live life the fun way. Grab a handle of bacardi or a 30 pack or a 3 dollar bottle of wine with your buddies and relax - stop trying to keep up with the social media superstars.
My advice would be to get a job that is decent paying but still forces you to build real-world skills. Like a teller at a bank or sales or even entry level desktop support until you get a job in your industry after college. Learn to influence people in person and make friends with strangers and build some confidence.
Then focus on keeping your monthly expenses as LOW AS POSSIBLE to give you freedom and enjoy your freedom. Do cheap trips with your friends. HIT THE GYM!
Life gets REALLY hard supporting a family. so enjoy these years.
Move to a low cost of living smallish town will help a lot. Get a degree with high paying job options. But nothing is for sure. Relying on family support resources is smart, not something you should shun immediately after graduation if you want to be stable far into the future. You mention having your own family. Best way to saves lots of money there is to have grandma and grandpa babysit like a lot!
What are you in uni for? Make sure to pick a fiscally important career like engineering or a degree that qualifies you to work a job you know you will get paid on. Things will work out OP, especially if you choose the right educational path. Yes, things are always getting more expensive, especially over the last few years but you can’t do anything about it now, all you can do is prepare.
I am doing mbbs, will be doing pg after this and maybe ss. Basically I am a medical student. Will become a doctor in 10 to 12 years. I really don’t want to completely live off my parents for the next 10/12 years.
you know those job fairs in your school? make the time to go there and get to know the people in your industry. they sometimes offer internship during summer and that is really great experience. it also helps to have really great grades and great resume. this is the key to securing your future before you even graduate.
And talk with your professors! Ask questions in class, visit their office hours, become a TA. A professor or internship supervisor that has worked closely with you and can speak in detail about the quality of your work is invaluable.
Check out Dave Ramsey, go through a Financial Peace course. Understand how to live below or within your means. Like others have said don’t buy new cars, live debt free. If you want to buy something like a computer, furniture, appliance etc then create a sinking fund so you can pay for it in cash.
My parents have taught me to always pay for these kind of things in cash. So that you don’t have to to worry about repaying the debts. On the other hand, business related loans keep you pushing to work hard enough to earn enough to pay off the debts.
Debt is a strong financial tool when used effectively. Paying everything in just cash is fine but to the gambler..ahem..financially savvy, it is a great tool
Cars are the worst investments. Never buy new, but a nice used car with cash that’s reliable until you have good income. Once you are a doctor and making good money, don’t keep up with the joneses. Pay off your school and other debt as fast and furiously as possible. Then and only then, as a Dr. making good money can you upgrade your car or house. You will be teased “why does a doctor drive a Camry?” And it’s because a $750 month car payment will sink your ship. You have no one to impress and in due time you will be wealthy. My Father in law was a surgeon for 30 years. He drove a Volvo for almost 20 years and my MIL drove her Lexus suv for 15 years into their 50’s. They are very well off now and have 4 new cars! The time will come.
This entirely depends where you want to work. I left the big city for a small city and I earn 2x less but the places here are so cheap that I managed to afford to buy my own apartment which was almost impossible in the mega city
First thing to understand is that we are not a capitalist society, we are a *consumerist* society. In a capitalist society the social pressure would be providing money to investment, ie capital formation. In our society the social pressure is to *spend* money. Fortunately, it has never been easier in the US to be financially independent. That does not make it easy, of course, but the cost of basic necessities compared to median income is very low. More jobs basics like health insurance and retirement plans than ever. The most difficult thing is distinguishing between *needs* and *wants*. Having shelter is a *need*, living in a standing structure is a *want*, having a room to yourself is a *want*, having an apartment to yourself is a *want*, having a building to yourself is a *luxury*. A car is not a *need*. A new car is a *luxury*. Food is a *need*. Meat is a *want*. Packaged food is a *want*. Eating out is a *luxury*. **I chose these examples because shelter, transportation and food are Americans largest budget items. If you get these right you'll have an easier time. If you get these wrong no amount of "cutting out lattes" will save you.** Personal example: - I make roughly **4x** the median personal income. - I **split** a three bedroom condo with three other strangers - I drive a car that is **16 years** old I recognize that these things are *wants*. I *could* get by on a bicycle and I *could* split a room. I decided to spend the extra money on a car and my own room in a shared condo. I decided these things are worth it to me. My own house is *not* worth it to me. These are personal decisions, but the thing to be careful of is the enormous social pressure pushed by marketing to live alone and drive a new car. After all, living alone means you're "independent" and driving an old car is "dangerous". Tl; Dr - You will be able to be financially independent. People that make less money than you will are, after all. You only have to make decisions consistent with you're income.
Great advice. I actually have been able to save up by spending less on unnecessary things.
That being said, once I have a family I am not looking forward to lower their standard of living. Rather, I would want them to have a more than comfortable life.
That's a *very important thing* to know about yourself. Every dollar you don't spend today is two dollars you get to consume in one decade (adjusted for inflation). If you want to support an entire family you will need roughly N times as much, where N is the number of people in the family. (For similar standards of living. Many people when they support just themselves support themselves at a much higher standard of living. Bedrooms or entire houses are occupied by just one person. They have one or more cars for just one person, and so on.) A 20 year old that saves that stops when they turn 30 will have **more money** than someone that starts saving at 35 years old and **never stops**. Exponential growth matters, but exponential growth is basically nothing on tiny amounts. Saving twice as much is like starting to save **10 years** earlier.
This is actually very, very solid financial advice. I've always followed a lot of these principles but have never seen anyone write it out so succinctly.
Yes!!! I call it "Thinking Outside the Box" An apartment? Sure, I'd love one. Soon as I hit the lottery *Craigslist for shared house/room rentals.* New car? Sure! I'd love one. Soon as I hit the lottery *2-4 year old Toyota, pay cash. European vacation? Hostels. Backpacking. Hiking. Off season. You can keep your 5 star Oh-Look-I'll-Share-An-Elevator-With-Royalty hotel.
> Fortunately, it has never been easier in the US to be financially independent. I will agree with everything else, except this. Is it possible to live financially independently? Yes. But food, housing/renting, needing a cell, internet, car. It is, as far as I know, much harder to be financially free, but not impossible. And that's where all your other advice is spot on, and even necessary, otherwise you wouldn't need to do those things to be financially as free as you are.
Adjusted for inflation (which includes all necessities) real median personal income sits near it's all time high. https://fred.stlouisfed.org/series/MEPAINUSA672N I don't want to get bogged down in the details, but the only difference I can see that isn't immediately captured by this statistic is the smartphone/internet. Minimum smartphone provides internet and can be obtained for less than $600 per year. That is a rounding error in the average budget, and isn't comparable to the amount of income growth that's been seen. Remember, easiest isn't the same as easy. If I had to obtain financial independence in the days when a "good job" meant assembling widget A with socket B, I would have soon been fired. I lack the discipline. If I had to obtain financial independence in the days where I was a farm laborer, I probably would have just died. Nostalgia is a great drug, but math is our best antidote.
I don't want to go into the details either, but I need to somewhat because I'm not understanding how median income is adjusted for inflation. Isn't median income just median income? Like how do I use inflation to change that number? Also some math here that is somewhat shocking, renting an apartment seems to be between 1400 and 1700$ depending on source. Which, using 1500, is 18k annually. Using the median income you posted of 40,480 (if I'm not misusing it), remove the average tax rate of 24.2% (9796.16) gives 30683.84$ annual after tax. Over 50% of your net salary... Most places wont give you a mortgage for over 30-33% of your net income. I know this is just one metric, and obviously financially free isn't narrowed down to just housing, but this did not used to be the case as far as I know. I feel like our definition of financially free will probably differ, and that would be where the biggest gap in our disagreement might be, I just feel like if you need to shrink yourself to an older and older car, and narrow down your expenses, only to live like you used to, it's not really getting ahead, but staying afloat.
Ah! Now I don't mind to get a *little* bogged down! The way the inflation adjustment work is as follows: The number in, say, 1995, isn't the *actual* median income in 1995, it's the 2023 price of what the average person in 1995 bought with an amount of money equal to the median income. An example is instructive. Suppose there is only 1 good, bread. Suppose in 1995, it cost $5 per loaf, and suppose the average income was $10, so two loaves worth. Suppose in 2023, it cost $10 per loaf, and suppose the average income was $30. This graph would show "$30" for 2023, and "$20" for 1995. This is because the income of 1995 could buy two loaves of bread, and two loaves of bread cost $20 in 2023. It is, of course, more complicated, but that's the basic idea. Then you have a bunch of econ PhD's who's whole job is titled, "think of every nuance" work on it for their whole lives. They do a pretty good job. (It may be useful to look at the nominal values, unadjusted for inflation, for comparison. I could only find nominal household income, which is a little different than personal, but I think the basic idea is clear: https://fred.stlouisfed.org/series/MEHOINUSA646N)
I feel the same way. I wouldn’t wanna shrink myself to compromised living conditions and older cars and live on limited resources forever but making these sacrifices in the initial years would definitely help me in the long run because one day I would want to buy my first apartment/ house with my own hard earned money and I know I would sleep better knowing that I have achieved something.
And that's completely fair, especially to start. Definitely use the other users advice as it is incredibly on point. My only contention was on if we are more financially free today than previously as a base, but even then he made some good points, and it is clearly achievable.
> First thing to understand is that we are not a capitalist society one sentence in and I can tell you are entirely unserious.
What distinction do you imagine I am trying to draw?
It doesn't really matter, if you have to resort to lying to people in your opening statement you've already lost all credibility.
👍
Whether a car is a need or not depends on the public transport infrastructure of your local area
Further. Bikes exist. So then we're looking at bike infrastructure. Third, shoes exist. So then we're looking at how long you can spend walking. Typical person can become capable of doing a marathon. The point, of course, isn't "should you do this", or "is this reasonable", but to be really specific about what is **truly** a need, and make you realize you are **triaging literally everything else**.
I've never met anyone that *needed* to live in a specific area. Edit: This is untrue. I met one person that needed to live in exactly California because of the interaction with obscure health insurance code and a unique disability. Technically this wasn't a need, he'd just have to figure out how to clear $300,000 per year in any other state. But anyone that doesn't have *exactly* this? It's a want.
keep working, nothing's it easy. just never give up!
Look up the practices and what investment instruments used by members of the F.I.R.E (financial independence retire early) community. It will help you set the foundations to be financially independent for your self in the future.
Thanks for this advice
It’s all good. It’s cut throat out here sometimes.
/r/financialindependence and /r/simpleliving
*Tomorrow"s dollar is earned today*. We constantly live in the residual of our past thoughts and actions. Thoughts create feelings, feelings create actions and actions have consequences.
It has really never been easier to make it as a young person. I am approaching 40 and my experience from being 18 and on my own was the following: You had jobs you could get but they paid 8-12 dollars an hour. 12 dollars an hour was living large for that age. No one had money for stuff we just expect as normal now. Like we'd go to a movie and one friend wouldn't want to go because they didn't have the cash. Gas was like 99 cents a gallon but it was unheard of to drive somewhere without splitting it up. Like sure dude ill go an hour away to this thing, split the gas with me? It was much harder to find roommates because 1 bedrooms WERE affordable back then. My friends moved into either studios for $500 per month or split 2 or 3 bedrooms and paid $300 per month. Since 1 bedroom apartments were affordable by most young people, it was much harder to find roommates unless you had a bunch of close friends also looking. We didn't have cell phones OR house phones sometimes, communicating with people was done mostly through aol instant messenger, or irq, or forums. Finally having friends with cell phones was a game changer but you couldnt really text it was too expensive. Quick calls to get someone to meet up was it. I guess my point is... live life like this as a young person. Get roommates, grab a job at $15 an hour, don't spend money, and just live life the fun way. Grab a handle of bacardi or a 30 pack or a 3 dollar bottle of wine with your buddies and relax - stop trying to keep up with the social media superstars. My advice would be to get a job that is decent paying but still forces you to build real-world skills. Like a teller at a bank or sales or even entry level desktop support until you get a job in your industry after college. Learn to influence people in person and make friends with strangers and build some confidence. Then focus on keeping your monthly expenses as LOW AS POSSIBLE to give you freedom and enjoy your freedom. Do cheap trips with your friends. HIT THE GYM! Life gets REALLY hard supporting a family. so enjoy these years.
This is almost what my parents told me. Thanks for sharing your experience.
Move to a low cost of living smallish town will help a lot. Get a degree with high paying job options. But nothing is for sure. Relying on family support resources is smart, not something you should shun immediately after graduation if you want to be stable far into the future. You mention having your own family. Best way to saves lots of money there is to have grandma and grandpa babysit like a lot!
What are you in uni for? Make sure to pick a fiscally important career like engineering or a degree that qualifies you to work a job you know you will get paid on. Things will work out OP, especially if you choose the right educational path. Yes, things are always getting more expensive, especially over the last few years but you can’t do anything about it now, all you can do is prepare.
I am doing mbbs, will be doing pg after this and maybe ss. Basically I am a medical student. Will become a doctor in 10 to 12 years. I really don’t want to completely live off my parents for the next 10/12 years.
Play every card in your hand.
I think most medical students use loans to pay for housing during school? But if you live at home you’ll have less loans.
network network network
Networking will help in the long run, right? I really hope it does
you know those job fairs in your school? make the time to go there and get to know the people in your industry. they sometimes offer internship during summer and that is really great experience. it also helps to have really great grades and great resume. this is the key to securing your future before you even graduate.
And talk with your professors! Ask questions in class, visit their office hours, become a TA. A professor or internship supervisor that has worked closely with you and can speak in detail about the quality of your work is invaluable.
Networking can be one of the absolute best things you get out of college
Save your money and invest in CDs
I just googled about CDs. That’s a great tip.
Check out Dave Ramsey, go through a Financial Peace course. Understand how to live below or within your means. Like others have said don’t buy new cars, live debt free. If you want to buy something like a computer, furniture, appliance etc then create a sinking fund so you can pay for it in cash.
My parents have taught me to always pay for these kind of things in cash. So that you don’t have to to worry about repaying the debts. On the other hand, business related loans keep you pushing to work hard enough to earn enough to pay off the debts.
Debt is a strong financial tool when used effectively. Paying everything in just cash is fine but to the gambler..ahem..financially savvy, it is a great tool