Debt isn't required: how to spend wisely in your twenties

Hamm says he was sucked into accruing debt by the sense that he needed to overspend for his education, car, and home. Hamm says the belief that debt is simply a fact of life for those in their twenties is misleading, though; he offers his advice for how to spend and save wisely.

Like a lot of people in my twenties, I spent much of that decade in a rush to saddle myself with a lot of debt. I owed money for my education. I owed money for my car. I owed money for my home, too.

I had this strong sense that I needed all of those things now to show the world and those around me that I had somehow arrived in adulthood. “Look at me,” I thought. “I have my own car. I have my own house. I have my own degree.”

The truth is that with the exception of my education (for which I drastically overspent), I didn’t need any of these things to show the people around me that I had arrived. I didn’t really need any of these things, period.

All I needed was a place to live close enough to public transportation to get back and forth to work and a roof over my head (in the form of an apartment).

It’s absolutely true that I wanted those things. It’s also absolutely true that I simply bought into the idea that people in their twenties had to assume debt in order to get the things they wanted.

I believed that debt was simply a fact of life for people in their twenties. I believed it was completely normal and appropriate to spend most of my twenties … and my thirties … and my forties paying fistfuls of interest payments to banks.

Boy, was I a fool.

Here’s the truth. A tiny bit of patience when you’re in your twenties saves you literally hundreds of thousands of dollars. I’m not exaggerating in the least.

The first thing I should have done when I got out of college is find a cheap apartment somewhere along a public transportation route. My housing cost should have been the cheap apartment rent. My transportation cost should have been a mass transit pass.

No car. No expensive apartment. No house.

Instead, I would have taken all the money I threw down the tube on those things and eliminated my student debt as fast as possible. Some back-of-the-envelope math would have put me at debt freedom just before my 25th birthday.

In the real world, I had a big apartment and a shiny pickup on my 25th birthday. I also had about $40K in student loan debt, another $10K in credit card debt, and another $10K on a car loan. That added up to more than my annual salary.

Once I was debt free, I should have ensured Sarah’s debt freedom, then we could have kept on trucking in that apartment. If we had kids and needed to get a larger space, we would have moved to a larger apartment.

Meanwhile, we could have easily saved $20,000 a year between the two of us. Give us five years at that pace and we have $100,000 in the bank at age 30. That’s enough to buy us a decent home in our area. Obviously, if were in a higher cost of living and a higher wage area, you can multiply all of these numbers by whatever works for you.

The biggest reasons we happen to be debt free in our mid-thirties is because we worked our tails off being frugal for several years now and I have put in an incredible amount of time building other revenue streams for my family. In fact, if I had played my cards differently in my twenties, we would be in incredible financial shape right now if I include those extra earnings.

To make a long story short, we didn’t need debt to live and we still don’t. Neither do you. No one needs debt to finance their life. If you’re taking on debt to finance a purchase that you couldn’t afford out of pocket, not only are you agreeing to hand over a bunch of money to the bank in the form of interest, you’re also adding to your monthly bills, restricting your career and personal freedom.

Debt isn’t required. In fact, debt leads down a pretty messy road, one that you don’t see on the outside but one that burns you up on the inside.