Don’t Be Fooled: Indecision Is Definitely A Decision
“I’m waiting to become an actual adult,” Jonathan tells me. “Making decisions scares me though, so I often choose not to make them [regarding money].” Jonathan is a man with both undergraduate and graduate degrees, a steady job, and no reliance on his parents for anything financial. But this isn’t the first time I’ve heard the sentiment behind “I’m waiting to be an adult.” Today, it seems that these things are not enough.
Perhaps marriage, a house, or children constitutes becoming an adult. Or is it when we reach a certain age? Regardless, the old standard of getting a job and striking it out on your own no longer constitutes adulthood to the millennial mind. It may be because wages have stagnated, so newly minted college students still feel “student poor.” For Jonathan, one factor certainly plays into his feeling of perpetual adolescence. “Paying off my student debt is my only big goal right now. Money isn’t that important to me, but having that debt looming over me bothers me.”
Jonathan makes his minimum payments, slowly chipping away at the principal while living inexpensively in an urban apartment with several roommates. “Nobody in my family had dealt with student loans before, so I was the inaugural one. I wasn’t very smart about it. In grad school I got an assistantship and started making better financial decisions, but…” he was burned badly by what he considers his first, and only, big financial flop.
He took out all the money they would give him, even if he didn’t need it strictly speaking, and is now struggling to pay it back. He wouldn’t call himself frugal or spendy, but there’s always just a little too much month left at the end of money. And it’s hard to fault him right now. Sure he goes out with friends and spends a little here and a little there that he doesn’t need to, but he got a used car from his Aunt instead of getting a car payment, and lives in what he calls “probably the cheapest apartment in Austin.”
Despite his distinctly non-luxurious lifestyle, Jonathan is paying for that one financial mistake he made when he was 18 – racking up a lot of debt for a degree that couldn’t produce the kind of income he needs to pay it off in a timely manner. The worst part is that making that one bad investment in his education has turned Jonathan off from other kinds of investments.
“I don’t think I want a mortgage because the thought of debt is not worth the investment to me. Being able to have a financial foothold without accruing any debt is my biggest abstract goal.” That’s a laudable goal, but an unrealistic one for your average American. While there are many good reasons to never buy a home, of which my favorite article on the subject is linked, those arguments come from someone with a diverse portfolio, a long term plan, and the self-discipline to enact that plan. For your average American with a savings rate of less than 5%, a home is one of the only ways people ever save any money at all.
But this blog isn’t really for your average American. It’s for people who care enough about personal finance to make themselves better, save more, and live the good life both today and in the future. And while blog posts like this and articles like the ones posted above are good places to start, it’s impossible to become financially independent (or reach any financial goal) without dedication and action. Jonathan’s indecision mindset might be the most dangerous part of his outlook on finances. He’s correcting his student loan mistakes, but I’d argue that he’s making an even bigger one right now by doing nothing more.
At Monte Largo, one of our core values is Time Is Your Most Valuable Asset, and the longer one waits to start investing, saving, and learning about money, the less money they’ll have when it comes time to retire (or worse, when tragedy strikes). This is called the time value of money, which basically says that if you invest $1000 today, it’ll be worth a lot more in 10 years than if you wait 5 years to invest that money. That $1000 burning a hole in your pocket is more valuable right now than it will be tomorrow or any other day in the future because inflation, uncertainty, and time are not on your side.
All that being said, Jonathan has, for better or worse, been forced to make some decisions recently. “About a year ago I got out of a serious relationship. I always saw him as this rock because he’s a grown-up. He did my taxes for me. He was really put together and took the brunt of the financial decisions. When we split I went through a crisis of ‘I’m starting my life now, this person who has all the answers isn’t there anymore.’ Learning how to be an adult trial by fire was scary. Living on half the income was hard.” But he’s doing it and slowly learning how to make those decisions for himself.
“I’ve become more cautious and aware. I’m beginning to see the value of money. It’s not this pretend thing anymore. I used to be more lackadaisical and haphazard. And while I don’t think I make stupid decisions…” it’s just been scary for him to make many decisions at all. On the whole, there is no one size fits all approach to money, investing, and debt. Jonathan is what financial planners would call a low risk tolerance individual, meaning the idea of tying up money in things that aren’t sure bets (like mortgages and stocks) is uncomfortable.
Finding the right balance between today’s sanity “I don’t want anymore debt” and tomorrow’s happiness “thank goodness I invested so I can retire/pay for this surgery/provide for my family” is a tricky one. Unfortunately, it’s necessarily up to the individual to find that balance, and it all starts with learning how to grow from our mistakes and use them to make better decisions in the future.
Nathan is the Chief Financial Advisor at Monte Largo Financial
*Jonathan’s real name has been omitted for privacy