"What If I Don't Have $20,000?"

A few days ago, I wrote about a concept I call the “pile of cash test.” In it, I explained how a client of mine used this test to alter their decision from buying a $35,000 car with debt to buying a $20,000 car with cash. I received a lot of feedback from that piece, but a handful of people were quick to ask the question, “what if I don’t have $20,000?” One person was sincere in their question, but several were insinuating it is a dumb idea because debt is the only realistic way to buy a vehicle.

I thought it would be worthwhile to answer the question. If you don’t have $20,000, yes, I’m suggesting you don’t buy a $20,000 car. The point isn’t to figure out the best way to buy a $x vehicle, but rather to figure out what vehicle we can buy with $x of available cash. This idea brings a lot of criticism, I know.

First, I’m not suggesting we buy a pile of junk. Many people do that, to their demise. I’m an advocate for buying a reliable car that will require as little ongoing maintenance work as possible. Yes, a car is going to have issues and require maintenance. But it’s amazing how many people will make $800 monthly payments for 7 years just to avoid the occasional $1,000 repair bill. This is a very common justification for expensive, debt-fueled purchase decisions.

Data shows the average household in America spends $400 per month on vehicle loan payments. But there’s a catch! That’s the average per household…..including all the households with no car payments. I decided to do a little data digging of my own. Of the last 75 families I’ve met with, at the beginning of our coaching relationship they had an average monthly car payment of $320/month. So it was a bit lower than the national average. This is where it gets interesting. 51% of these families had ZERO car debt. Zilch! Wait, it is possible to go without car debt!?!? If you take those families out of the equation, that means the average household monthly car payment for those who had car debt was $650/month! Yikes!

This immediately brings two interesting points to the surface:

1) Many people do choose to live without car debt. Doing so, which often requires sacrifice and humility, opens up so many doors with that excess cash. More than half of the people I meet with have made this possible…..even before starting their coaching relationship with me. I can testify how much freedom and momentum these families have as a result of these decisions.

2) For the people who choose to live with car debt, it’s crushing them! I regularly see $1,000+ payments for single vehicles and households with $1,500+ of combined car payments. This puts a stranglehold on their excess income and prevents them from doing things that truly matter to them.

I think you deserve better than to use your precious resources to constantly fund a car payment. For some of you, true freedom may lie just on the other side of a few sacrificial decisions. I promise you it’s worth it!

The New Student Loan (Forgiveness) Crisis

We have a student loan crisis brewing in America. No, not the $1.75 trillion (and growing) of collective student loan debt that’s hindered the future of two generations. That crisis is well-documented, and tragic. The crisis I’m talking about today has more to do with the recent student loan forgiveness program.

Let’s rewind a bit, shall we? In March 2020, as COVID wrecked everything we knew as “normal”, the Federal government enacted a freeze on all student loan payments (and interest accrual). This has since been extended eight times, and payments are scheduled to commence on 9/1/2023 (barring another extension).

In the meantime, the Biden Administration launched a program to forgive $10,000 of outstanding Federal student loan debt (or $20,000 if you had Pell Grants) so long as your income is less than $125,000 (or a combined $250,000 if married). Millions of Americans immediately applied in late 2022 when the online application went live. Then just as fast as it launched, it was paused. Several lawsuits were brought against the Federal government, claiming the government didn’t have the authority to issue widespread forgiveness in the way it was executed. This sudden turn of events emotionally crushed many, causing widespread anger and dissension. But this isn’t the crisis, either.

Unbeknownst to most people, this same student loan forgiveness program applied to people who actually paid off their loans since the freeze began in March 2020. So instead of applying to have their loans forgiven, they were applying to get a refund for the qualified $10,000 or $20,000 sums. It’s difficult to discern how many people qualified for refunds, but statistics show approximately 9 million people paid on their loans since the freeze began. Many of my clients fell into this group, as they took advantage of the freeze to finally free themselves of the burden of their debt by aggressively paying them off. Amazing work!

This is where things get weird. Instead of going through the Federal government and waiting for their approval (which was obviously paused with the lawsuits), their respective loan servicers were the ones processing these requests. Lo and behold, checks started arriving. Hundreds of thousands of Americans (or perhaps millions?) have been receiving refund checks for their student loans. According to the texts, calls, and DMs I’ve been receiving, these checks are still arriving in people’s mailboxes.

Here’s the crisis. Many of these people have excitedly received these checks, then quickly spent them. After all, $10,000-$20,000 is a LOT of money. But here’s the new reality: if the lawsuit succeeds and the loan forgiveness program dies, these checks will turn into new debt. I’ve had multiple clients reach out and tell me when they log into their student loan account, they now have an outstanding balance that mirrors the checks they received. And just like that, after all that work, discipline, and sacrifice, many borrowers find themselves unknowingly back in debt.

If this is you, or perhaps someone you know, here’s what I recommend:

• Don’t spend it. This isn’t your money (yet).

• Don’t send it back. If the forgiveness goes through, you’ll be glad you already have this money. There’s no telling how hard it will be to get your money down the road if you have to re-apply for it.

• Put it somewhere safe….and leave it there. A savings account or high-yield savings account should do the trick. Just set it aside, and leave it alone.

Once all this mess gets sorted out in the courts, you’ll hopefully have a clear road map on how to handle your situation…..one way or another. But please don’t sabotage your financial life in the meantime. You worked so hard to get here. Don’t let this blessing turn into a curse.

It’s Never Too Late

Last weekend, a friend approached me and said he had news wanted to share with me. Immediately, his eyes welled up as he started talking. He excitedly shared with me how he and his wife had just become debt free and set into motion a dream they had talked about for so long.

Any time someone shares a big win, I celebrate with them. However, this one felt different. I worked with them nearly a decade ago…..with very little success. And that experience came on the heels of very little success for the prior several decades. Literally decades of wishing, wanting, and not seeing it materialize. But not this time! This time they did it!

It’s never too late. This couple could have given up decades ago, conceding the system was rigged against them. I’m so glad they didn’t. In that moment, I could see so many regrets, mistakes, and failings wipe away from him. It’s like they dissolved right there in an instant.

It’s never too late to do the thing you’ve constantly failed at, were too scared to try, or kept putting off for any number of reasons. It’s never too late!

The Road to Nowhere

One of the side effects of being so open about my debt and career journey (recent podcast episode) is the amount of feedback I receive. So much of the feedback is positive, but not all. Some people, perhaps out of jealousy, or self-talk, or their own debt/career frustrations, offer a lot of criticism and skepticism to my story. These little nuggets of negativity (er, constructive feedback), often start with “but". Here are a few common ones regarding our $236,000 debt journey:

• “but I don’t have a high income like you did.”

• “but we aren’t able to sell one of our cars like you did.”

• “but we can’t leave our house and live in a tiny apartment like you did.”

• "but you didn’t have kids.”

• “but you had two incomes.”

• “but the cost of living is higher where we live.”

• “but we can’t just stop spending….we need to enjoy life.”

These statements may or may not be factually true (fact check below), but one thing is certain: The road to nowhere is paved with lots of “buts”. You can have progress, or excuses, but you can’t have both! At some point, if we want to win, we have to set the excuses aside and get about the business of finding a way. There’s always a way! We also need to stop comparing someone else’s situation to our own. When I share my story, it’s just that…..my story. It’s not the absolute blueprint for success, but rather the blueprint that best suited our specific situation and our life.

“The road to nowhere is paved with lots of “buts”. You can have progress, or excuses, but you can’t have both!”

Instead of making excuses why we can’t make this decision or that decision, we need to start asking ourselves what decisions we can make. If you think you can or cannot win, you’re right. So how about we start to believe we can……and make it happen! We need to find deep and meaningful sacrifices that work for our situation. We need to decide there’s no amount of pain we won’t endure for the sake of a better tomorrow. Now having been on both sides of the debt spectrum, I feel even more convicted in my previous statement. Knowing what I know now, I would have intensified the pain even more in order to get to the other side of the debt.

It was a long and grueling 4.5 years to pay off our $236,000 of debt, but doing so changed us. It showed contentment like we had never known before. It taught us money couldn’t buy happiness…..because we had no money and we were pretty dang happy. It showed us anything is possible if we do it together and care enough to make it happen. It showed us what true freedom looked like, which emboldened us to draw a line in the sand and say “never again” to debt. Lastly, it taught us to dream…..and dream big. And not only dream big, but to be crazy enough to believe these dreams are possible.

Look at all that stupid debt!

Here’s the reality of the “but” statements above:

• Our income wasn’t all that high during our debt payoff season, as I was still young in my career and the country was still working its way out of the recession.

• Selling one car really sucked, but it was a defining moment where we made a choice that no sacrifice was too big to fix this mess. I never want to do the single car thing again, but I’m so glad we did it then!

• The only thing stopping you or me from moving from a house to an apartment is pride. Any other excuse is a lie. I went from a new, 4-bedroom house in KC to a 600 square foot, 1-bedroom apartment (80s vintage everything) in Des Moines. Very humbling!

• We didn’t have kids at the time, fair point. But we do have two toddlers today and it that didn’t keep me from leaving my career and taking a 90% pay cut. No excuses here!

• We did have two incomes, but one of them was a limited-benefits, near-minimum-wage childcare job. We weren’t exactly rolling in the dough with that second income. But Sarah worked hard in that job and it meant a lot to us! Fast forward to my drastic career shift in 2019, I was the sole breadwinner of the house since Sarah stays at home with the kids…….but we weren’t going to let that be an excuse.

• The cost of living in Des Moines is lower than some cities and higher than some cities, but it’s not the reason we win or lose. There are people winning financially in expensive cities and losing financially in cheap cities.

• Spending can be fun, but it can’t make us happy. You can choose to keep spending, or you can choose a better life. Or maybe you can choose a better life, which could include more spending down the road. Think of it as one year, or two years, or however many years……for the rest of your life! We spent 4.5 years sacrificing, which is followed by 60 years of freedom. I’ll have the six decades of awesome, please!

The road to nowhere may be paved with “buts”, but the road to freedom is paved with sacrifice and a deep desire for better. So maybe it means selling a vehicle. Maybe it means downsizing your home. Maybe it means giving up travel for a season. Maybe it means picking up some extra income. Whatever it looks like in your life, just do it! It’s just one season, and I promise you every subsequent season of life will be better for it!

More than anything, here’s what I want you to take away from this piece. You can do it!!!! There is nothing that can stop you if you want it bad enough. Don’t let anyone or anything hold you back! You got this! For each of us, there comes a fork in the road where we must decide what’s more important: Our stuff or our dreams? Comfort or happiness? Pride or freedom? I made my choice! What about you?

“For each of us, there comes a fork in the road where we must decide what’s more important: Our stuff or our dreams? Comfort or happiness? Pride or freedom?”