I recently wrote an article for Investopedia that examines whether it is possible to live life completely free of debt and credit cards. In my opinion, it is possible, though it does limit your options.
Some people argue that the ability to finance such purchases affords people opportunities they would not otherwise have—the opportunity to attend a prestigious private university, for example. Others see the easy availability of financing as a serious handicap for those who choose to take advantage of it. After all, how fun is it to pursue your dream of going to law school when you’re racking up $100,000 worth of debt in the process, thus locking yourself into a needing that high-paying lawyer job to pay off your loans regardless of how much you end up enjoying the work? Some people aren’t terribly bothered by debt, but others feel trapped or have found themselves living one paycheck away from financial disaster because of their debt.
Here are some additional thoughts on living without debt in specific areas where people commonly take on large amounts of debt.
Your monthly budget will be easier to manage when you don’t have a car payment, and insurance costs less on older vehicles.To purchase a car with cash, you should have at least $2,000 saved up (that’s $1,000 for the best twenty-year-old car you can find, and $1,000 for the repairs it will inevitably need). Saving up $2,000 is considerably more manageable than saving up $10,000.
If you’re afraid you’ll spend the money before you can save what you need, set up a high-interest savings account at an online bank and have money automatically transferred every month from your checking account to your separate savings account. The idea here is that you won’t need to have the discipline to actively save the money, and you won’t spend it since you won’t see where it’s going, but eventually the money you need will all be tucked away. In the meantime, structure your life in such a way that you don’t really need a car—live close to work or school and walk, bike, take the bus, or give a friend some gas money for anywhere else you need to go. You’ll appreciate your car that much more if you make yourself earn it. Just ask anyone at a bus stop—no matter how hard it is to get around without one, car ownership, especially new car ownership, is a privilege, not a right.
If you choose to work until you have enough money saved up to pay for school, or do both simultaneously, you’ll want create a resume and look for an office job—those generally pay more than retail and service jobs.
If you’ve successfully graduated from high school, you probably have the skills to make at least $10 an hour somewhere. By securing a job in this pay range, you’ll reach your financial goals almost twice as quickly as you would making minimum wage, and your feet won’t hurt at the end of the day. If you don't know how to get your foot in the door for a job like this, go to a temp agency--there's a good chance they can help you.
Hopefully these suggestions, along with the ones in my latest Investopedia article, will give you some inspiration to lead a debt-free life if such a lifestyle appeals to you.