Welcome to another installment of IonTuition’s Q&A series with personal finance bloggers. We have Chris Peach, the creator of Money Peach, sharing his personal finance tips with us today.
In 2011, Chris and his wife found themselves living paycheck to paycheck with zero money in savings, a bunch of maxed out credit cards, and $52K in consumer debt alone. Once they hit rock bottom with their finances, they decided they were no longer going to live that way. They were done being normal.
Over the next 7 months, they rolled up their sleeves, completely changed their behavior with money, and paid off $52k of debt. People thought they were crazy, and even they thought it was insane, but they weren’t going to live a life of payments anymore. Chris and his wife started doing things backwards from society: They stopped borrowing money, they started using cash for everything, and they started living within their means.
After Chris and his wife took their money and life back, Chris started showing a few people how to do the same. He moved on to showing many people, then started teaching a few classes, and now he educates people all over the world on how to handle money through Money Peach’s blog, one-on-one financial coaching, and a 9-week online program called the Awesome Money Course.
What’s the best piece of financial advice you ever received?
Getting rid of your car payment.
The largest expense we will make in our lifetime is our mortgage. Right behind our mortgage is our cars. The reason why this is such a game changer is cars are notorious for dropping in value like a rock. Consumer reports estimate that a new car loses 11 percent of its value in the time it takes you to leave the lot and get to your driveway. Then, over the next 4 years, your new car drops a total of 60 – 70 percent in value.
Let’s look at the numbers: If the average new car is purchased for $32k, then on average the car is only worth about $11k in 4 years. This is equivalent to your car dropping $100 per week on average! This doesn’t even include the average monthly car payment of $482 each month.
What’s the answer then? Buy a 4-year or older car and let the previous owner lose $100/week for the first 4 years.
We once had two car payments that totaled more than our mortgage because we were part of normal society. We decided to sell the cars and buy beaters. One of the vehicles we bought for $8,000 was originally purchased for $48k (luxury SUV). Someone else paid $48k and sold it for $8k. We are going to drive this car for 3 – 4 years and sell it for $4k.
This is why the rich get richer and the poor get poorer – they don’t place a large portion of their money in things that drop in value over their lifetime.
What’s your advice for those who already have student loans?
Pay them off as soon as possible. Don’t graduate and live the lifestyle of someone making real money. Instead, continue to live like a poor college student and get those things paid off. As soon as you start living like every other normal college graduate by getting a hefty mortgage, a new car, or some other luxury thing that can wait, the sooner you’ll become another broke statistic.
The sooner you pay off your student loans, the sooner you are to be living life on your terms…not the bank’s.
How do you stay ahead on paying your student loans back?
See above – Continue to live like a broke college student and pay them off. There isn’t a magic pill to make them all go away, but you can look at refinance options to lower your interest rate so you can pay them off quicker. Also, I rarely encourage anyone to fall into the trap of work here for 10 years and we will pay off or forgive you of your student loans.
I don’t want you to be in student loan debt for 10+ years. Pay them off as soon as possible.
If you could go back in time and give your 18-year-old self a piece of financial advice, what would it be?
Please see the blog post “Letter to me: 12 things I would tell myself about life & money.”
Would you go to a different school if you knew what you know now about student debt?
I would go to any school I (or my family) could pay cash for. If I have the cash to attend an Ivy League school, then I think that’s great. However, if I am 18 years old and I don’t have a dime saved up for college, then I am going to attend a community college for the first 2 years and pay cash for the average $3,200/year tuition and then the average $9,100/year tuition my 3rd and 4th year at a in state university.
Read more from Money Peach on Chris’ blog, visit him on Facebook and follow him on Twitter.