loan perk was much more important.
As of now only about 3 percent of companies are offering this perk, according to the Society for Human Resource Management (SHRM), but as the job market tightens, it’s likely to become an attractive way to entice young people who aren’t all that impressed with ping pong tables and free food.
Leverage Online Tools
One of the many great things about the United States of America is that every problem seems to bring a wave of entrepreneurs looking to solve it. There are quite a few new websites popping up to help companies and their employees manage the repayment of student debt. Both Student Loan Hero and Flex395 owner Tuition.io have tools to help manage student debt, including ways to analyze the costs and benefits of different payment strategies. These can be valuable tools to help you stay on top of debt and informed about new ways to pay it off.
Up Your Income with a Side Hustle
The more you can earn, of course, the faster you can pay down debt. If you have the time, consider a side hustle. It’s basically another job in addition to your primary source of income. It can be a way to earn more, gain new skills, or fulfill a creative interest. We’ll talk more about it in the next chapter. Side hustles can be a great way to earn extra cash to help you knock out your student debt so you can get it over and done with.
This may seem obvious, but I’ll mention it anyway – avoid taking on additional debt, which could distract you from paying down your student debt. That will likely mean putting off some purchases you want to make, even if retailers offer attractive financing. It may even be zero interest, but don’t buy anything new if it means monthly payments.
Take a quick look on Craigslist. Find an item that isn’t selling and ask if you can have it for free if no one buys it soon. Chat up the seller via email. Find out as much as you can. If it’s a moving sale or they’re redecorating and need the item out as soon as possible, tell them you will come and pick it up whenever they want. It may sound too good to be true, but it happens more often that you would believe.
On that note, someone you know is always redecorating or moving. Ask around. You’d be surprised how many people will be thrilled to give you something, especially furniture and old televisions, if you just come pick it up.
Which brings us to our next Role Model, legendary investor Elliot Weissbluth, and how he made a tough decision to say no to one of those no-money-down temptations when he was a young graduate.
• FOUNDER AND CEO, HIGHTOWER
MY FINANCIAL GROWNUP MOMENT
The summer after my freshman year of college I decided to buy a car. I walked into a dealership and learned that I had the option of financing one of their shiny new models by borrowing more money than I’d ever had in my life: no money down, just sign on the dotted line.
Tempted but skeptical, I looked at the interest rates and did some quick math. Yes, I could drive off the lot in a brand new car today and pay zero dollars out of my pocket. But the true, total cost of the payments and interest on the loan would have bought me two new cars on the spot. I turned around, walked out of the dealership, and bought a used Jeep instead – in cash. The Jeep needed a lot of work, but I realized I’d rather roll up my sleeves than rack up the debt.
MY LESSON TO SHARE
Using credit or loans to buy something you can’t afford doesn’t change the fact that you can’t afford it. It only makes sense when the purchase delivers a return on your investment to offset the cost of the debt – like a home that will increase in value over time or an education that will boost your future earning power. Cars, on the other hand, start to lose value as soon as you drive them off the dealer’s lot.
With a little elbow grease, my junker of a Jeep got me where I needed to go. More importantly, it steered me away from taking on an expensive debt burden early in my financial adulthood. Last but not least, that old Jeep introduced me to a new passion: to this day I still love to tinker under the hood of a car.
WHAT TO CONSIDER IN BUYING A CAR
ELLIOT’S PASSION FOR tinkering with cars is a great hobby. And it kept him out of the kind of trouble Heather Thomson faced early on. He thought about his priorities and his true needs. He also did not get emotional. We’ve all heard stories about people going in to buy a practical sedan and driving off the dealer’s lot with a fancy sportscar. Clearly, you need to pay attention to what’s really important to you.
Cars have always been a symbol of financial independence and freedom for young people. Countless movies and television ads have memorialized the ritual of a teenager getting his or her first car, and with it a taste of freedom from parents. In fact, in gathering these stories I was surprised at how often cars came up as being central to big life decisions. If your parents can buy you a car, debt free, count yourself lucky. But if you’re on the hook to finance it yourself, consider your options carefully.
DO YOU REALLY NEED A CAR AT ALL?
New options have emerged in recent years that are changing the game. First and foremost, the sharing economy has come to the car business. Now, especially in urban areas where cars are seldom needed, there are lots of sharing options. They include short-term rental companies such as Zipcar as well as taxi-alternative services such as Uber and Lyft. So you may be able to avoid the entire problem of taking out a loan to buy a car.
Think carefully about whether you really need to spend money on owning a car, and if not, then just say no. You can always change your mind later if your needs change.
DO YOU NEED TO OWN THAT CAR?
Leasing has become much more popular among young people. According to Edmunds.com, the percentage of young people ages 18 to 34 who are leasing cars is up 46 percent over the last five years. In fact, in the first half of 2015 close to a third of all new car purchases were actually leases, according to Edmunds.com.
Edmunds.com found that Millennials were sticking to their budgets – doing the math and realizing that they could get a better car for the same payment by leasing. They are avoiding going into debt to own a depreciating asset, as Weissbluth points out.
The right car also changes with your life stage, and leasing avoids committing to the wrong car. The needs of a single person are different from those of a couple, and a world away from the needs of a family. Leasing allows a lot more wiggle room as the picture changes.
I spoke to a number of the Edmunds.com survey respondents, and several told me that technology was a key reason they didn’t want to own a car. Buying a car today and owning it for the life of the car, usually more than a decade, would put them far behind the curve as technology changed. Think about what the technology in a car bought in 2006 would look like in 2016. Connor, a young entrepreneur I spoke with, admits he will always have payments. But he also told me that he will always be in the car he wants to be in.
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