Parents who wish your children to be debt free, PLEASE READ!

[Singuy]

I am a pharmacist, my wife is an optometrist, currently 31 y/o who will be mortgage free and debt free at 32.

By the time my wife and I are 32, her 176k worth of student loans will be 0, and I will have about 350k in equity (because my house is paid off).

Now we are not parents, but my parents inspired us to be as debt free as possible since the moment we landed in the U.S 25 years ago.

25 years ago, my dad owed 3500 dollars worth of debt to come here, started out with 0, spoke broken English, and washed dishes after his full time job. My mom and I arrived just a year later, with zero English speaking skills, living in a 300 sqft apt with others as roommates(this is FL, so living expenses was really cheap). My mom soon took a dish washing job, working 60 hours a week to put food on the table. We did not use the A/C during the hot summer months, went out to eat twice a year, and our monthly expenses were 400 dollars/month(this includes utilities, food, and rent in 1990). She made sure we saved 70%of all earnings every month.



Fast forward a few years, we finally had enough for a house with 20% down, then my mom decided to put every cent into the house so we didn't have to pay the 8% interest rate(in 1998).

Eventually we bought a motel at 500k, selling the house to make a 35% down payment. With this motel, my parents did not hire anyone(28 room motel), and worked practically 16 hours/day 7days/week so they can pay off the motel in 2 years (interest was 10%!). Eventually they did, sold it, and retired at 46.

My dad guided me to pick one out of 3 majors before going to the university (Medicine, Pharmacy, Bio Medical Engineer). He did not want me to chase my dream and end up paying for a degree that is worthless (ie. Liberal Arts). Because I followed their exact guidance, they paid for all my living expenses and tuition. I wasted no time, ended up as a pharmacist making 115k/year at age 24 yo. I am not a genius, in fact my first SAT score was 1150 out of 1600.

Currently my parents are still mentoring my finances, calling me out if I am wasteful because I have a mortgage. She taught me that mortgage is not a good debt, it's just debt..I need to pay it off or else I'll just end up giving the banks my money for nothing.

I have influenced my wife to do the same, pay off all her debt before even thinking about buying a fancy..anything. Our current projection is to have no mortgage and 1 mil of liquid cash in the bank(excluding 401k, etc) by 40.

If you are a parent currently struggling, I want you to learn from this story. My parents were not anyone special, in fact they had the disadvantage of not knowing the language. There's really NO excuse to be in the state that you are in with this great land of opportunity. YOU have to set a GOOD example for your children. There's no such thing as "I need to maintain my standard of living because I'm middle class". You do what you have to do, no matter how painful it is, or else your children and children's children will never be free from financial slavery.

Put down that 13 dollar martini, cancel your 200 dollar cable bill, and there's no such thing as a "dream car".

My wife and I make 280k/year, we eat out with coupons, go to Aldi, use portable electric heaters, drive 12 year old cars, and NEVER touch the bar outside of our house. We looked so poor that the Hyundia dealership didn't even want to greet us. There's really no shame in this, because we know that eventually we will be millionaires all due to good financial decisions.


Summary

-We made it this far because we make sacrifices..we did not and will not live like millionaires just because we make good money.

-My wife and I grew up in poor families with language disadvantages and little education, but they taught us how to save and make good financial decisions.

-We used higher education wisely. No time was wasted, and good majors were picked.Make sure you TELL your children what to do before they rack up 100k worth of debt, ends up working as a bank teller making 10 dollars/hr. If they refuse to do any of the majors you picked, then maybe college is NOT for them. A bank teller with 0 debt is better than a bank teller with a college education and 100k worth of debt!

-We did not strike rich from the lottery, or ended up with some obscure rare job like a NBA player. We are not particularly smarter than the average Joe.

-Lastly we pay everything off as fast as we can. We use credit cards just to rack up points, and put every cent into our mortgage and student loans.


Thanks for reading!

[PRICEPLUS]

Your parents are very wise and have given you a gift of great value. It is heartening to see folks getting ahead through hard work and saving! Thank you for sharing your story! I hope many take it to heart!

[Tessol36]

Thank you for sharing your story. Its very inspiring. I hope to be debt free one day. I am working long hours to pay off my debt and I am hopeful this year it will happen. Thanks

[dczech09]

Thanks for sharing! That is a great story and it is very inspirational!

I myself just got out of debt. I am investing for the future, incrementally saving a solid sum of money for emergencies, and I am getting ready to save for a house. My goal is to be financially-able to purchase a house outright within 10 years! In a culture that believes debt is the way to obtain stuff, my goal may seem a little crazy. But I am a pretty crazy guy, so its all good!

I really liked how you mother mentioned that a mortgage is not good debt; it is just debt. Great point! Your parents were obviously very wise!

I am going to share this on my Facebook page! This is great stuff for people to read!

[dczech09]

Duplicate Post

[Nika]

Your parent's story is great. So is your success.

Money is a finite resource, but so is life.

I would certainly hope to guide my child to not make detrimental choices and explain how debt can limit choices. But to go so far as to pre-select only 3 approved majors for him and that's it.... sounds overly controlling. It is his life after all.

Secondly, I got liberal studies education, and I am doing just fine. I find your statement that certain majors are "worthless" to be condescending and insulting. There are millions of people in those occupations that make our world interesting and provide valuable services. Not all of them are poor. You must never read, or listen to music, or plan to have children who will go to school, or go out for entertainment, use products or websites that involve design or creative thought, or even watch TV... I can go on and on. Your world must be completely utilitarian.

Thirdly, we are saving for my son's college education, so that he won't have to start out with debt and will have more options, no matter what major he will choose.

Living below your means is a great strategy for life. Delayed gratification is a necessary skill. Yet I don't see forever eating only in places that accept coupons as some kind of badge of honor and that anyone who goes out for drinks is wasteful. Same way I would not see anyone who does not stay only in five star hotels as not having good taste or not appreciating a higher level of cleanliness.

I am a little curious what are your goals in life? What are you saving for?

I don't want to downplay what you and your parents have accomplished or how hard you worked. I just thought you sounded somewhat disdainful of large categories of people, including social drinkers with cable.

[Singuy]

You absolutely make valid points, and I agree with most of which you said but I think there's a little misunderstanding.

A. It is true that picking out majors for your children is "controlling", but we now live at different times than when I was in school. My pharmacy school was only 10k/year, now it's 23k/year. Undergrad is no longer 70 dollars a credit hour, and most state scholarships that used to cover 100% of tuition plus books, can't even cover 80% of tuition, not to mention everything else. I simply cannot recommend any 18yo to sign up for college and not know what to aim for in life. You used to rack up 30k of loans, and can afford to look for that rare obscure job for a year or two, but no longer the case when you have 150k worth of loans. I am not saying everyone who ends up with a liberal arts degree cannot find a job in that field, but statistics don't lie, most college grads cannot find a job with their majors being utilized(unless you are in specific high job demand majors). Also if you have rare talent in something, of course pursue it. Most people are just average at everything however, so people really need to be smarter and clearer about investing in higher education than before. Lastly, racking up 150k worth of debt, just to find a job that pays 40k a year is also questionable. Of course if your tuition is paid for, then go and pursue your dream, but I know most college students are not this lucky.

B. We are living like poor college students, using coupons to eat out only because we have student loans /mortgage to pay. We are not saving the money, it's actually being used to pay toward our debt. We will definitely indulge what life have to offer after we are debt free. 85% of my co-workers are in massive debt, and yes they make our money too. Their houses are 15% paid off, but they feel that they need 3 separate gym memberships per person and paying 700 a month in electricity. This one co-worker, making 240k/year as their household income, was thinking about taking money out of their 401k to pay for their kitchen remodeling.....

C. My story above was aimed toward parents who are upside down, drowning in debt. The type who needs to "maintain a standard of living" by using their credit cards, living above their means. And yes, if you are drowning in credit card debt, having a drink at a bar is living above your mean. If they don't change their ways, than their children will follow the same dark path. There's absolutely no excuse to be in the situation they are in, unless there's a huge medical condition hindering success.

D. Our goal in life is to retire early, travel the world, experience life to its fullest, help the real unfortunate, and to prevent any regret we may have on our deathbed.

[LivingAlmostLarge]

There are many shades of grey in frugality.

But seriously you don't have to be super frugal to get where you are going. You don't need a super high paying careers like pharmacist or optometrist, it's what you spend more importantly. Read MMM blog about how he retired at 30 with $800k because they spend little.

Then realize that there are those wealthy enough to afford anything. The amount of money they have they can afford private school for kids, trust funds, etc. I say because i didn't realize until recently meeting people who have $100k+ weddings, $40k 1 carat flawless diamond engagement rings, etc. That there are people out there who come from money and MAKE a lot of money. to paraphase they make a CRAPLOAD! We aren't talking like 6 figures more like 7 figures a year.

So I've come to the realization that though you think some people are living foolishly and there are MANY who do! There are also those in the "living large" category who can afford it easily. To put it mildly, my Dad has always out earned his STUPID. He's leased cars, changed cards yearly (benz, BMW, Lexus, etc), spent tons on traveling, suits, etc. But they still have money in the bank, SS, paid for homes, etc. So some people just make A LOT of money to spend stupid and still save.

Trust me according to your frugal rules my parents should be dead broke and in the poor house. But age, education, and he was an immigrant and career meant that he outearned stupid. My mom was very poor growing up in the US no indoor plumbing, etc, and yet she has a pension and a nice living. You can always outearn stupid more than being frugal.

[Singuy]

There are many shades of grey in frugality.

Trust me according to your frugal rules my parents should be dead broke and in the poor house. But age, education, and he was an immigrant and career meant that he outearned stupid. My mom was very poor growing up in the US no indoor plumbing, etc, and yet she has a pension and a nice living. You can always outearn stupid more than being frugal.

I'm sorry, I have trouble understanding your arguments. Your parents should be dead broke if they earned the American household average, which is 47k/year. My parents did not out earn "stupid" until they saved enough, made sound investments with that money, and worked extremely hard at their business. Most Americans, however, don't out earn "stupid", trying to make the ends meet, not able to make investments like opening up a motel. There's a reason why the president set a salary penalty tax on households earning 250k/year+, because that is 1.7% of the population. 98% of the people do not out earn stupid..so I'm not sure what your arguments are because it does not fit into the model of general validity.

My story is geared toward people who think they have it bad because they earn the American average. Their pitfall consist of wanting to live the American dream way too early, racking up debt in the process. There are way more people with less than 5k in their savings(4700k is the American average), than out earning stupid (the top 1%). How many people do you know wanting to "upgrade" their lives to the 100k-150k tier even though they still make the 47k salary? "Bad credit?, No credit? No Problem!" is the American slogan for spending.

I think a lot of people misunderstood about what I wrote about being frugal. We are frugal ONLY because we still have debt, sucking away our money at a higher interest rate than investment (6.8% for student loans, 4.5% for my house, 0.9% if we have CDs, yes we do have 401k). Even so, I should of saved up enough capital to pay off my house with cash, than to have the banks suck the interests away from me the past 7 years. After everything is paid off, we can start living stupid and save.

[JoeP]

People want easy. So rather than do what your parents did, and rather than shape at an early age how you look at money, and rather than have commitment to earn a degree in a high-demand field to give you a good chance, some people would rather get handouts.

The fortunate side effect of your story is that there are actual benefits earned from making the journey. With shortcuts and handouts, that is often missed; focus is more on the end goal.

[figuringmoneyout]

Great story! You were extremely lucky to have parents that set you on this course and taught you what you know. Not everyone gets that and most of us have to figure it all out for ourselves. I definitely plan to be like your parents and give my future children a good path for being debt free because I personally love being debt free.

[llckll]

Wow, that is hardcore.

My wife and I just started our journey to becoming debt free.