Outdated money rules. We grew up with them and don’t think twice about why they exist or why we subconsciously follow them. We just kind of mindlessly follow along.
Examples and Thoughts
Here are some examples of outdated money rules and my thoughts on them.
Upgraded Apartment
Get a nicer apartment/house after your first real job out of college or school. Instead, why not live like a broke college student for another few years and invest as much money as you can?
Doing this will give anyone a massive head start and get compounding started earlier. For example, instead of renting a really nice one bedroom for $2,200, what if you rented a room in a house for $1,200? That’s $1,000 every month that could be used to invest.
$1,000 per month invested over a four year period at a 10 percent rate of return comes out to $61,261. If no more contributions (not likely to never contribute again) were made and that money just stayed invested, it would be worth $1,068,968 in 30 years assuming the same 10 percent return.
That’s a million dollar gain just by living with roommates for the first four years out of college. A young person in this position can still go out, hang out with friends, take trips, etc. They’re just living with roommates for a few years instead of the upgraded apartment.
Nicer House
Upgrade your house whenever you start to make more. Why is this such a widely accepted practice?
I totally get it if you want a newer house and all the things that come with it: better schools, a place for the kids to play, tree lined streets, etc. That makes a lot of sense.
But moving just because of some idea that you’re “supposed to move up” doesn’t make much sense to me.
Car Payments
It’s always been assumed you’re just supposed to have car payments. Know who gives that message? Car companies and banks who give the loans.
It’s been culturally accepted to have a car payment. But there’s really no need to ever have one. Start with an inexpensive but reliable car, save up for the next one, buy a nicer one, and repeat the process. As you make more money you can upgrade to a nicer car.
So Much More to Question
These are just some of the old money rules that are worth questioning. Just because people have unofficially been following certain rules doesn’t mean you should, or anyone should for that matter.
Do what works for you. And remember, nobody is going to be impressed with what you buy or spend your money on.
