Real Numbers
Money that you spend breaks down into two categories: your money (from savings) and other people's money (that you borrow). There are two primary factors to consider. First is that money that you have that you spend, from any source, is money that you cannot spend someplace else. This is called opportunity cost.
And as discussed in the lesson on Debt, the interest that accumulates over time from a debt that you owe can amount to a huge amount of money. It is very common, for example, for people to take a huge loan called a mortgage that is used to buy a house and to have that mortgage wind up costing 3x the original listed price of the house over 30 years. Before you enter any financial arrangement, know the real numbers.
Everyone would someday like to own a house, if for no other reason than to be able to stop paying for your housing. But as a young person, it is very difficult to make a commitment to, say, a mortgage loan for a house that lasts longer than you have yet been alive.
When you put all of those things together, the best choice is typically to wait a while to buy a house and then do so on a fifteen year mortgage and not on a thirty year mortgage. You save a huge amount of interest. You can wait until you are forty years old to buy a house and still own it outright by the time you are fifty-five. And you have that much more time to both make a final decision about where you want to live and to save the cash needed for a downpayment.
So the lesson here is to always be honest with yourself and with your numbers and find the right alternative that will get you where you want to go. Then make a plan that matches. Stick to your plan and things have the best chance of happening the way you want them to.
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Real Numbers
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