The three biggest financial mistakes that young adults make are:
- not paying credit cards off in full every month
- buying a car and
- going in debt for a college education (unless for a degree that GUARANTEES a high paying job).
In my last post about my bike renovation where I mentioned that the true cost of car ownership was about $15000/year, a lot of people clearly do not understand how to calculate true cost. The cost of ownership is NOT just gas and oil changes. You have to add insurance, maintenance AND depreciation because the car will need replacing. If you add up all those costs its 58 cents a mile. All those reports saying “$9000/year” are based on driving 15,000 miles a year. Yes, the “average driver” drives 15,000 miles a year BUT only because there are a lot of drivers who hardly drive at all – people like me who work from home, grandma, grandpa, etc. 20-50 year olds who are active drivers drive WAY more than 15,000 miles a year. Here in California, its not unusual for people to commute an hour each way to work every day and these people easily rack up 30,000 miles in a year. How many miles did YOU drive last year??? When making economic decisions you need to make a spreadsheet and look at ALL the costs, otherwise you are just fooling yourself. Cars are a lot more expensive than you realize. If you are young, you simply CANNOT afford to waste this money. Make work/living decisions such that you do not need a car and then take Uber when you cant bike or walk. That $15,000 per year you can then save and use for a house down payment.
So you are laughing because the photo shown here is of me in an expensive car? Yes, thats because I am NOT a young adult at the beginning of my financial career. I am a retired 56 year old engineer with a fully funded retirement guaranteed to increase in value faster than the cost of inflation -I can afford this car now, its a “toy”. Back in my 20s was the pre-internet, pre-Uber era so I had fewer options. Yes I did have a car but it was one I bought for $1500 that had a carburetor so I could do all the work on it myself.