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- [00:01]
A
Coca Cola for the big, for the small, the short and the tall. Peacemakers, risk takers for the optimists, pessimists for long distance love for introverts and extroverts, the thinkers and the doers for old friends and new Coca Cola for everyone. Pick up some Coca Cola at a store near you. Toast the holidays in a new way and raise a glass of Rumchata, a delicious creamy blend of horchata with rum. Enjoy it over ice or in your coffee. Rumchata. Your holiday cocktails just got sweeter. Tap or click the banner for more Drink responsibly. Caribbean rum with real dairy cream. Natural and artificial flavors. Alcohol 13.75% by volume 27.5 proof. Copyright 2025 Agave Loco Brands Pojoaaukee, Wisconsin. All rights reserved.
- [00:59]
B
Debt America's favorite four letter word. Are you doing better than the average American?
- [01:04]
C
Brian I am so excited to talk about this because we know that debt on one hand can be an amazing tool, but it can also be so, so dangerous.
- [01:13]
B
So we're going to walk you through how much debt each generation has, break it down by type, and give you some lessons to take away from each. So with that, let's jump, right?
- [01:29]
C
Yeah. Brian Debt is one of the biggest problems that's facing many Americans. We know that right now, according to Experian, the average American owes $23,000 in non mortgage debt. So the average balance across all of the Americans that live in this country, $23,000.
- [01:47]
B
Well, here's to give you context on this, if you take into account how many people have more emergency savings than debt. It's just only 53% have that. So it's almost like a coin flip where people have more debt than they even have emergency reserves.
- [02:04]
C
And then what about this? 54% of US adults would not be able to cover three months of expenses if an emergency happened. So the Average American has $23,000 of non mortgage debt and one out of two Americans could not cover an expense without going into debt. That is problematic. That's not the way that we want you living because we truly believe that there is indeed a better way to do money. If you've not figured out how debt actually works, you're likely not doing money the right way.
- [02:35]
B
So here's what we want to do. We want to go into each generation and try to figure out how do you avoid this? What will give you the stats and figures, but then also give you a way out of this trap.
- [02:45]
C
So let's start at the very beginning Brian, let's talk about Gen Z. These are folks right now that are like age 18 to 28 and we can tell we know this because me and you talk about it all the time. The 20s is probably the most powerful decade there is for compounding interest to work for you. But also if you do it wrong it can be one of the most devastating decades for compound interest to begin working against you.
- [03:10]
B
This is the decade guys. I tell you all the time if you just go look at our wealth multiplier, if you go look at our content@moneyguide.com resources you have the world by its tail. You literally, if you just do anything for the positive with saving and investing you, you're going to be rewarded many times over. Unfortunately this is when consumption and all the influences of all everybody who's out there marketing and advertising to you also falls into prey that you think, well debt is the bridge that will get me out of. My problem is I'm short on money so I'll just use debt as that bridge. They'll get me through this period until I get all the pay raises to get me up. All of this works against you. You lose out on the time and you fall into this debt trap. And that's what we need to kind of give you some context when you what does Gen Z look like when you talk about specifically debt?
- [04:00]
C
Yeah, let's look at it categorically. So let's start with student loan debt. Again these are folks that are 18 to 28 years old. If you look at all of the Gen zers that have student loan debt, the average student loan debt for those that carry it is $19,000. If we think about auto loans, automobile debt, the average car loan for a Gen Z that carries a car loan $21,000.
- [04:26]
B
And those car payments for the monthly payments for Gen z right under $600 with actually $577 a month.
- [04:33]
C
You know the most heartbreaking thing about that Brian? That these Gen Z have a car payment of $577. Do you realize that is almost the exact amount it would take to max out a Roth IRA if you just did that on a monthly basis. And yet it's going to automobiles, it's going to debt.
- [04:46]
B
Yeah, think about, think about when you get older. Nobody thinks about in their 20s though what it's going to be like to be in your 50s and 60s and beyond. And that's the thing that it breaks my heart is because you're going to look back on that car that costs you $577 a month and it will not be the same source of comfort that that Roth IRA would be.
- [05:03]
C
So then we go on to mortgage debt. Again, this is Gen Z's that have mortgages. The average mortgage debt is about $248,000. And then this one is the most devastating if you look at Gen Z is that carry credit card debt. The average credit card balance that carried month to month from credit card users that carry a balance $3,700. So if you take all of these folks that have debt and you combine it with all the Gen zers that don't have debt and you just look at the total population of Gen Z adults, the total average debt for folks who fall into this age category, $23,300.
- [05:41]
B
Okay, so we got to help people figure out how do you avoid falling into these pitfalls. So I don't want you to be average. I want you to be a financial mutant. So we got to talk about this first thing, student loans. Look, we know education, making yourself better, increasing your ability to have a bigger shovel of your income is a positive thing. Absolutely. But somehow we've turned this positive event into a negative. So at least you have to kind of figure out what student loans. If we know education is good and improving yourself is good, where are the boundaries? So we don't get too much of a good thing and actually suffocate ourself with student loan debt. And we always say begin with the end in mind. What do we mean by that? Bo?
- [06:19]
C
Yeah, I think you ought to be thinking about when I'm racking up the student loan debt, what is the outcome that I want? Far too often I think just because people could get student loan debt and just because it was easy loose money, they did it. Rather, we want you thinking about what is my degree actually going to provide me? And if you can think about it inside of this mathematical construct, that I don't want my total amount of student loan debt to be greater than what I anticipate my first year salary being. We call this the first year financing rule. If you can abide by this rule, there's a really good chance that yes, you are going to have to graduate student loan debt. You're going to take it into the first few years of your career, but that's it. It's going to be there for the first few years, not for the first few decades. So you want to make sure that you do not accumulate more debt in student loans than you anticipate making in your first year.
- [07:08]
B
All right, so that's student loans. Now let's talk about the next trap that I feel like a lot of people in this generation fall into. And this is the auto loans. Now look, a lot of other content creators in the financial space will tell you just avoid auto debt altogether. And we even say financial. You know, if you think about your auto debt, it really is financial napalm. This will blow up your finances. Because I feel like the typical American screws this up so bad. But we are unique in the fact that we actually say, look, I get it. And we have a no hypocrite policy. I actually had to get my first job. I needed reliable transportation. So it's unfair to tell somebody who's broke as a joke. I've been there. When I was in my 20s, I had absolutely nothing to my name. I needed a good reliable car so I could start this journey because I was trading my time for money and that money I was turning into investments and resources on the back end. But without the car, this engine falls apart. So we needed some boundaries so people could do this well. And that's where we came up with what's called 23 8. And here's what's going to keep you safe. Allows you to get good transportation that's reliable, but doesn't let your ego, doesn't let you worry about what other people think, how cool or not cool you are. And that's why we wanted this. So put down 20% down. This is going to help you on the front end so you don't get beaten up by depreciation immediately. You want to pay it off within three years. This is going to blow a hole in what the whole auto industry is trying to do to with you. Because right now what they do is they say, what do you want your monthly car payment to be? And their game is they'll say, okay, we'll take you to a 4 year, 5 year, 6 year, 7 year loan and you can afford anything at $200 a month when you go out so far. But you never actually own the car. We don't, we don't play those reindeer games. We cut you down at three years so that way it keeps your car payment in check. And then we don't want those payments exceeding 8% of your gross income. And then we have two little caveats. This doesn't work for luxury cars. You have to pay same as cash on luxury cars. And we also don't want your car payment exceeding what your investments are so that we don't fall in that trap that we were talking about earlier with Gen Z it was we don't want your car payment exceeding what's going into the Roth ira. This is going to keep you safe.
- [09:22]
C
You know this is a hot take. I don't even think the caveat should apply to Gen Zers because I think that where you start with your car matters and if you're starting in luxury brands you're likely getting it out of whack early on in your career. You should be focusing on what is reliable, what gets to me, to my job and I don't even think again, hot take here. I don't even think luxury brands should be on the table for folks that are just starting out in their career even if they could pay cash for it, there's a really good chance that that cash, those hard earned dollars could work a lot harder for you doing something else instead of buying a luxury automobile.
- [09:56]
B
Save that disappointment for yourself later when you realize those driving a luxury car actually has more headaches than you won't. Believe me, I've been there, done that. Do the used reliable car in this stage of life.
- [10:07]
C
And the third thing, the third area category that we think you should avoid is around credit cards. If you are someone, maybe you came through college, maybe you're early on in your career and you have credit card debt and it's showing up on your balance sheet, make sure you pay it off right now before it becomes a bigger problem. Because it's one of those holes that the longer you let it sit there the deeper it gets and the deeper it gets and the deeper it gets and the deeper it gets the. So if you have credit card debt, make sure you're paying them off every single month. Don't allow compound interest to work against you.
- [10:40]
B
Here's a positive stat that I think is not. It's not something we can say it's because of how awesome this generation is. I think it's more of a component of they just had enough time to screw it up yet is Gen Z actually has the lowest average credit card debt out of any other generation. But I just gave you the answer. I think it's because they're the youngest.
- [10:59]
C
That's right.
- [11:00]
B
So they just haven't had the ability to youngest adults I should say so they haven't had the ability to go run up the money with the banks. And that's leads us to the key point that BO was just talking about and we even have a slide for this is that we say using a credit card. Credit card use is a. Okay, you Get a check mark on that. But credit card debt? No way. If you're having to carry any balance, even. Don't even get into the whole balance transfer game for 0%. All those things are traps. Just avoid credit card debt altogether. If you're not paying it off every month, you're really not a credit card person.
- [11:35]
C
Love it. All right, Brian, let's shift gears now. We talked about Gen Z. Let's move on to the next generation. Let's talk about millennials. These are folks that are age 29 to 44. And what often happens in this passage of time is a lot of people enter into what we like to call the messy middle. It's this stage in this season where all of a sudden, the commitments that we have and the things that we need to be doing and the things that we need to be spending money on begin pulling us in a thousand different directions at the same time. We're getting pulled in all those different directions. Our disposable income is also increasing. We're likely buying houses, getting married, starting families, advancing in our career. All of these things are beginning to pull against us. And I think far too often, folks in this messy middle, they just begin reaching for the easy button. I just need to figure out, how do I bridge the gap in this.
- [12:26]
B
This is like a country. Country song lyric. And the fact that this really is the decade or the. The period of time where you're short on time, you're short on money. So many things are going on in life that it's easy just to put financial decisions up on the shelf for a future time. And I'm here to tell you that is a mistake. Yes, the days are long, but I promise you, those years are short. There's that country lyric that I'm telling you. Prioritize your financial decision making. Even if you do feel like there's just not a lot of money out there, because this is why it's important. You don't want to. You want to be an active. You want to be the lead hero in your story of life. You don't want to be just a supporting actor that just goes along to get along. Because if you don't take an active role in your financial life, you will get left behind. And that's probably a great way to set up. Let's talk about what is actually going on for the typical millennial when it comes to debt.
- [13:21]
C
Yeah. Again, let's look at it in categories. If we think about student loans. For all the millennials that carry a student loan balance, the Average student loan balance is $33,500. Now, as we were looking through this, Brian, there was a stat that was. I don't know if alarming is the right word.
- [13:37]
B
It's ugly.
- [13:38]
C
And saddening is yucky.
- [13:40]
B
Yucky is the word that maybe yucky. Yucky was definitely. Because this is the messy middle. They got spit up on them. They know what yucky looks like.
- [13:47]
C
Do you recognize that 63% of student loans right now outstand that have a balance are either the same or higher than when the student loan was first issued? I'm going say that again. 6 out of 10 student loans that currently exist are larger now than when the money was actually borrowed. That means that what's happening with student loans is they're moving in the wrong direction. They are negatively amortizing. They are getting bigger, not getting smaller. I think a lot of folks in the millennial generation are seeing that be a reality. So that's student loans. Let's talk about auto loans, Brian. If you look at all the millennials that have an auto loan, average auto loan balance is higher than it was for Gen Z', ERS, just under $26,000.
- [14:30]
B
And that equates to a monthly payment of a little over $700, $735 a month. Bo, you made the point earlier on the previous generation. This is actually now bigger than what it takes to max out your Roth IRA.
- [14:43]
C
This is really close to almost $10,000 a year. That's not going to their arm or dollar bills. Rather, it's going to pay for a car. If you look at mortgage debt across millennials, the average mortgage debt for millennials that carry a mortgage, $306,000. And the average credit card balance for Millennials that are carrying a balance, $7,600. This is double what it was for their Gen Z counterpart. So it makes me nervous that millennials are not recognizing how devastating credit cards.
- [15:15]
B
I think a lot of people will see that stat and be like, okay, $7,500. That doesn't sound so horrible. It's less than $10,000. But when you start thinking about a lot of these credit card companies are charging you between 20 to 30% interest rates on this, you quickly realize, man, this is thousands of dollars a year of lost money. And if you go look at our wealth multiplier and look at it through those lenses of man, what could this money be? What's the opportunity cost? You'll quickly start realizing your consumption is destroying your future financial self.
- [15:45]
C
So if we add all of These up, we think about what's the average debt balance for a millennial? This is across both millennials that carry debt and those that don't carry debt. The average debt balance is almost $63,000. Again, this is a stage of people that are mid career that should have their debt decreasing, not increasing. Yet the numbers, the averages tell us something very different.
- [16:09]
B
Well, this leads to. Because we got to, we gotta get you out of this. So here's how to avoid some of these pitfalls. The first thing this is gonna seem a little contrarian, but we did this on purpose is we've told you in your 30s, you really are in this messy middle where you got a lot of things pulling at you and, and you're going to have student loan debt. We just went over those numbers. But a lot of these student loan numbers, the interest rate is actually quite reasonable, especially if you're old enough that these are loans that came out and they're less than 5%. Don't get in a hurry paying all these the student loan debt off and not funding Roth IRAs, not funding other things because you got to start building while you have a huge wealth multiplier where every dollar has a chance to grow on itself many times over. You got to get to work while you're in this crucial stage of life. And sometimes people are just so excited to pay off all debt because they paid off the credit cards first that they pay off some of these low interest debts at the expense of their future self.
- [17:05]
C
Yeah, not all debt is high interest debt. So one of the things that you have to be able to discern in your 30s is what qualifies as high interest to what qualifies as low interest. If it's low interest, perhaps it does not need my attention. If it's high interest, perhaps I should satisfy. So that's student loans. Let's talk about mortgages. Brian, One of the things I think that is so tempting, again, this is that stage of your career where you're beginning to get some traction. Maybe you're beginning to have some success and it becomes really, really enticing and really, really exciting to think about. Oh, I'm going to upgrade. I'm going to get into more house. I'm going to increase what my living situation looks like. But far too many millennials find themselves in the spot where now they are house rich, but lifeful poor. All the wealth that they have, all the resources they have, are now tied up in their primary residence.
- [17:53]
B
That's why Bo, we came up with a rule Just like we have car buying rules, why wouldn't we have a house buying rule too? So we have 3, 5, 25 rule and what this does. We are one of the few content creators in the financial space that we recognize, look, that first home purchase, just to get on the home ownership train, people aren't putting down 20%. We didn't have to change this post inflation, you know, and all the other things that came out as after the pandemic. We already had this rule because this is what we resembled.
- [18:19]
C
That's right.
- [18:19]
B
A lot of our financial advisors resemble this. A lot of our clients resemble this. You only have to put down 3 to 5% on the first home purchase. Now it's only on your first. When you upgrade to the second house, you are going to need to put down that traditional 20%. We need to make sure that you're in this home at least four, five years. There's too many friction and transaction costs to make this something that you're burning and churning through homes. It just doesn't work that well. And then we want to make sure that once again you are not house rich, life poor. That's why we try to keep your monthly costs below 25% of your gross income so that you can actually have some money to live life, save for the future and live your best financial life.
- [18:59]
C
So obviously houses are probably one of the most expensive things that you're going to buy, especially in this decade. But another thing you're likely going to do is buy a car. Now we've talked about for Gen Z's, it's really about just having reliable transportation. I need something that can get me from point A to point B. But there is a chance in the messy middle in this next season and stage, you need a car for a different reason. Maybe your family is growing, maybe you have a longer commute, maybe you fill in the blank on the reason that you need to change the vehicle that you're driving. If you're going to be in that situation, if you're going to make that decision, we want you to understand what can you actually afford? Because it's very easy to justify, oh, I need the bigger car, I need the safer car, I need this. And all of a sudden you begin making those small little decisions that make the car more and more and more and more expensive. So we want to make sure that when you do upgrade, you stay inside of your affordability. So we want you to go to moneyguy.com resource so we actually have a car buying calculator that Tells you, hey, based on where I am, based on what I have going on, this is how much car I should consider buying. If you can use the tool and keep that reined in, you're going to prevent yourself from having all of your dollars going towards an automobile that's going to depreciate over this decade.
- [20:14]
B
I think you're being too nice. I'm going to give a little more tough love here. So look, look, I look over my life and I say, okay, when was a nice car like a social currency that I see people making huge mistakes. And I think about high school. When you saw the parents that gave their kids way too nice of a car for high school. And yes, in the moment that gave some temporary social status to that high school kid. I liked when I got to college, it was okay that I had a beater or character builder and I realized that a lot of students really didn't care what car you drove in college. And I was like, good, we're finally out of that dysfunctional thing that happened in high school. And little I know when you get in your 30s and you start having a growing family. No, that social thing that. And I don't know if it's the ad agencies and everybody telling you what you should and shouldn't do and they're totally misleading you is. And I'll tell you what I know by this. When I was buying my wife's most recent European SUV, I saw multiple 30 something families there with these tricycle motors looking at these same luxury vehicles. And I'm like, what are you people doing? You don't need to be here. You need to be buying reliable transportation that fits in 23.8. Assuming because they're not paying cash. And by the way, if you're not paying cash for these luxury cars, you are already blowing up 23 8. But don't let yourself get trapped in that. I think that's where that's the tough love BO is I don't want somebody. You did so Good in your 20s, you get in your 30s and just because the kiddos are now riding in this car realize they're going to be tearing up chips and crackers. You don't want luxury cars for those vehicles anyway. Don't fall into that trap.
- [21:53]
C
I think another thing that happens, obviously the automobiles are a thing that becomes exciting and enticing during this stage, but I think just lifestyle creep in general is a real thing that takes place. And in your 30s, in this millennial generation, it becomes very, very tempting to try to keep up with the Joneses. And I think that's one of the reasons why we see the millennial credit card balance increasing. I've got all these different things pulling me in all these different directions. So what do I do? I swipe and I carry a balance. I swipe and I carry a balance. Make sure you're not letting your lifestyle creep outside of what you can actually afford on a month to month basis.
- [22:32]
B
Faking it until you make it is actually a failure when it comes to finances. And I think a lot of people, that's the life they live, they'll think, I'll just catch it up, I'll make more money, I'll be up. No, you're losing out on the time. You're losing out on the opportunity. Don't fall into that trap. That's why don't let lifestyle creep own you. Remember, this is, this is go back to the basic. We are a okay with credit card use. Credit card use is a okay because there's a lot of benefits. Sometimes with, you know, financial transactions, buying stuff online, you're gonna be glad you have a credit card. So credit card use is a okay. Credit card debt, meaning carrying a balance, not paying it off every month, that is a no way moment. You no go. Don't fall into that trap because if you're paying a financial institution 20 to 30%, you'll never get a hit. So many of you know, in my eyes, Beau is a world class communicator. But even he got something out of that class that I made him watch. A masterclass by former FBI hostage negotiator Chris Voss.
- [23:30]
C
Brian, that is very kind of you. And yes, we had a business negotiation coming up. So you and I watched the art of negotiation on masterclass and it was awesome. It helped us really get in the right headspace. And on the same page, there are.
- [23:43]
B
Tons of money guy approved ideas on Masterclass. You know, we love making small repeatable decisions. Today to build your great big beautiful tomorrow. A masterclass. James Clear, you know, the author of Atomic Habits, he has a whole class on that.
- [23:57]
C
Or learn how to tell a great story with big short and moneyball author.
- [24:00]
B
Michael Lewis with masterclass. Become the best version of yourself by learning from the best. And if you're getting ready for a holiday or New Year's trip, you can download classes to watch offline and make the most of your travel time.
- [24:12]
C
And there's no risk. New memberships come with a 30 day money money back guarantee.
- [24:17]
B
Masterclass always has great offers during the holiday, sometimes up to as much as 50% off. Head over to masterclass.com moneyguy for the current offer.
- [24:27]
C
That's up to 50% off at masterclass.com moneyguy masterclass.com moneyguy let's be real.
- [24:35]
B
Even my CPA heart knows no one starts a business for the joy of calculating tax withholdings. And that's exactly why we get excited when we hear small business owners talk about tools that actually make their lives easy, easier.
- [24:48]
C
Yeah, and Gusto is one of those tools. It's an online payroll and business benefits software built for small businesses. It's all in one remote, friendly, and incredibly easy to use so you can pay, hire, onboard, and support your team from anywhere.
- [25:03]
B
Now look, Bo and I don't run payroll ourselves anymore, but we've been there and we've got friends and clients who do. And the thing we hear over and over is how much time Gusto saves them. Nobody wants surprise fees or to spend half a day figuring out payroll taxes.
- [25:18]
C
That's why when Gusto says you get unlimited payroll runs for one monthly price, no hidden fees and no surprises. We love that. We've had clients switch to Gusto and immediately feel like they got their Saturdays back.
- [25:32]
B
And the setup people tell us it's easy. You bring your existing info and boom, you're off and running. Plus, you don't pay a dime until you run that first first payroll, which we love.
- [25:43]
C
So if you're a small business owner wearing all the hats, do yourself a favor. Try gusto today@gusto.com moneyguy and get three free months when you run your first payroll.
- [25:53]
B
That's three months of free payroll at gusto.com moneyguy one more time gusto.com moneyguy.
- [26:02]
C
There are a lot of great platforms and tools out there, but it can feel almost pointless if you're constantly switching between tabs, apps and devices. Grammarly gives me everything I need to get my writing done all in one place.
- [26:15]
B
I had to send a kind of sensitive email the other day, and it was great to bounce ideas off of Grammarly's AI assistant. The first suggestion was a little too strong for my taste, so I gave it the feedback. Hey, this is too aggressive. The next suggestion Absolutely nailed it. It struck the perfect balance, improving what I wanted to say while still sounding like me.
- [26:34]
C
Grammarly is designed with professionals in mind. It works across all of your apps so you get real time writing support on any project, email or presentation. Just open a doc and start writing. 93% of professionals report that Grammarly helps them get more work done.
- [26:50]
B
I absolutely love that, Bo. And I even love that it's actually built into my mobile phone too. I mean, it doesn't have to just be on your work desk, on your work computer. It can be on your mobile app too. So sign up. For free experience how Grammarly can elevate your professional writing from start to finish, visit Grammarly.com podcast. That's Grammarly.com podcast.
- [27:11]
C
All right, Brian, we've talked about Gen Z, we've talked about Millennials. Now let's talk about your people. Let's talk about the Gen Xers. These are folks from age 45 to 60. Now, this is what you would expect. You would expect for folks at this age in their late 40s and 50s, you'd expect student loans to be almost gone. Y you would expect that they're likely paying cash for their automobiles now. You would think their mortgage balances are going down because they're extinguishing that debt.
- [27:39]
B
They're over 45, so they could.
- [27:41]
C
And you would think that credit cards are no longer an issue. That should not be happening. However, in reality, the situation looks a little bit different.
- [27:50]
B
Remember, we're not talking about financial means. We're talking about the average American. And unfortunately, those stats look a lot different. Student loan debt. This one blew my mind. Average student loan debt for those that still have student loans is right under $46,000. Here's another shocking. The average account age, because I was like, man, maybe this is just the kids. You know, we are old enough. We have kids in college. No, listen to this step. The average account age is 384 months. That means that these Gen Xers have had student loan debt on average for 32 years.
- [28:20]
C
Unbelievable.
- [28:21]
B
That doesn't even seem like that should be part of our reality.
- [28:24]
C
So that is not where you want to be when we look at auto loans. The average auto loan for a Gen Xer, $28,000. That equates to a monthly payment of $839 a month. And you may be wondering, okay, well, how, how is this happening? But by the time you're at this stage, hopefully you begun paying off these cars. Well, I think what a lot of Gen Xers do is they buy a car that they can't afford, they stretch out the term for longer than they should, and they just roll that negative equity in.
- [28:53]
B
We're stacking bad decisions. We're stacking nicer cars, we're stacking unpaid for cars with that negative equity. This is a disaster. Guys. If you're in Gen X, you should be paying cash. I think it's actually just like, you know, if you go to college and you struggle with subject, they make you do remedial classes to kind of get caught up. I think if you're a Gen Xer and you can't pay cash for cars, then you need, you're buying too nice of a car. This should be the generation that you're paying cash for the vehicle. If you can't, you're buying too nice of a car.
- [29:20]
C
When we think about mortgages, the average mortgage balance for Gen Xers that haven't mortgage is about 264,000. And the average credit card balance for a Gen Xer that carries a balance month to month is just over $10,000. So when you add all of this up and look at all the folks from age 45 to 60, the average debt load for a Gen X individual in this country is just a hair under $70,000 not moving in the right direction.
- [29:49]
B
It's kind of indicting a little bit for my generation. Does it, does it make you feel good for what the next 50, 15 to 20 years looks like? But, but let's talk about how we avoid these pitfalls because we are glass half full optimists. Here's the first thing. On mortgages. Now this is a little contrarian. I'm all about paying. You know, y' all know I paid off my mortgage in the last year and I like telling people, even in Millionaire Mission, I told people, hey, once you're over 45 and you're in a great place financially, you have our full permission to get crazy paying off that debt. However, a lot of you need to put the work in. You don't. You can't be a debt crusader unless you're actually ahead of the curve on saving for retirement, building up assets. Because what I don't want, we know that close to, I think it's around 78, 79% of you have mortgages that are less than 5%. And I don't want people paying off low interest debt in a very aggressive fashion when they're still not even saving for the future. Because by the way, we're running out of time for compounding interest to do any of the heavy lo lift for us.
- [30:50]
C
Another thing, we want to make sure that if you are in this stage and maybe you are doing some things right and making some sound financial decisions and having some success, and you're thinking, okay, well now I want to upgrade to the next house. I want to Move into the next home. We say that when you buy your first home, we love, apply, we love applying the 3, 5, 25 rule. But when it comes to buying your second home, your upgrade 20% is a must. So if you're thinking about buying another home but you do not have 20% that you can put down as a down payment, we would argue that you cannot afford that home. So now let's talk about auto loans, Brian, because again, I think one of the pitfalls you can avoid so that you don't fall into this negative equity trap is if you buy a car, whether you're buying a new car, whether you're buying a used car, if you can aim to drive it for seven to 10 years, you're going to stave off the negative thing that most Americans fall.
- [31:40]
B
Well, I don't mind being the heavy here. I think on auto loans for this generation, 40s and 50s, I want you paying cash for most of these cars because you should be at the point of discipline that you can do this. And for sure on luxury vehicles, if you're in step eight of the financial order of operations has to be same as cash. I don't want you getting caught up in, I can finance it this way. There's just, there's debt is not good for you, especially on automobiles. This ought to be something that gets you from point A to point B. Unless you're really conquering the game of life.
- [32:11]
C
Now, this one is pretty frustrating when we think about credit cards as it relates to Gen Xers. Gen Xers have the highest average credit card balance of any of the other generations. Higher than Gen Z is higher than millennials, higher than Baby Boomers. So something has gone awry. And I would argue if you're someone out there between the ages of 45 to 60 and you've not yet figured out I can't carry a balance, it's going to work against me. Credit card debt is chainsaw dangerous. Then perhaps you're just not a credit card person.
- [32:40]
B
Perhaps you need to total it.
- [32:41]
C
That needs to cut it up and not use it. Because we know that when it comes to credit cards, it is fine if you use them. It is not fine if you carry a balance. And at this stage, if you're a Gen X or still carrying a balance, perhaps you should get rid of your credit cards altogether.
- [32:58]
B
Yeah, I mean seriously, tough love is necessary when it comes to credit card debt at this age because you can't afford to pay 20 plus percent when you're just hoping to build assets for Your own retirement and financial independence.
- [33:11]
C
All right, Brian, let's talk about this next stage. These are the baby boomers. These are the folks that are at retirement or nearing retirement or in retirement, ages 61 to 79. And the goal is you should be debt free and financially independent and in a great financial spot. But the unfortunate reality is a lot of Americans do not find themselves there. When we think about average debts for this age range, student loan debt for baby boomers is still on average for those that carry a balance $48,000.
- [33:44]
B
Now look, some of this is from their kids, but it's still crazy to me if the average account age in this category is 328 months, which is 27 years. So we are just living a lifetime of student debt. That is a curse in your household if you're not getting this under control at this stage of your life.
- [34:02]
C
When it comes to auto loans for folks in this generation, the average auto debt for a baby boomer, $24,000 a year. That's a monthly payment of $574 a month. You already said this for Gen Xers, Brian. At this stage, this should be an all cash stage. When you buy a new car, you should not be carrying a balance. And yet the average American is in fact doing that.
- [34:26]
B
And then mortgage debt, I mean, I'd even say in this, we want them to be completely debt free at this stage. And you see it is getting smaller from other generations, but it's still over $200,000 of mortgage debt, even for those that are greater than 60 years of age.
- [34:40]
C
And when it comes to credit cards, the average credit card balance for baby boomers that carry a balance, it's a little over $8,100. So if you add all of these debts up across all of the baby boomers out there, the average debt debt load for a baby booming right now, still $56,000. Brian. I would love to see this be a zero number by this stage of life. And yet many Americans are not there.
- [35:03]
B
So let's quickly tell the boomers how they can avoid these pitfalls. Mortgages. Look, guys, are you truly financially independent if you have an obligation of a mortgage? I would say I don't think so. So I would really strongly encourage you. Let's take steps. The wealth multiplier is just not that big anymore at this point. So let's get those dollars to pay off debt so you can own your life and own your time that much sooner.
- [35:28]
C
When it comes to auto loans, you should be paying cash for cars at this age. At this stage, we do not want you financing automobiles anymore. We want you to figure out how can you pay cash so that you are completely unencumbered on your automobile.
- [35:41]
B
And then let's talk about credit cards. You know, look, I've made the same statement. Credit card use is a. Okay, but credit card debt, no way. If you are a boomer with credit card debt, you're just not a credit card person. Take it. Take it for what it is. You just don't have the discipline. This is not a tool that has worked well for you. So maybe you need to go the t total way. I think this is. These are things that concern me because a lot of our audience, you're not boomers and you're not even Gen Xers like me. A lot of our majority of our audience are the millennials and the zoomers or the Z's. You guys have the opportunity to fall in these traps, and this is what I need everybody to hear. How your journey started does not have to define how it ends. You actually get to be the hero of the of your own financial story. Just don't let some marketing firm that's out there trying to push this consumption society on you. I want you to break through that. That's the biggest thing that people can do to better yourself, take control, be an active participant in your financial life. Bo, where else? What else should people do? Where should they go to make sure that they're on the right path?
- [36:52]
C
Yeah, we believe there's a better way to do money. We believe it so much, we have an entire website, moneyguy.com dedicated to helping you do money better. We have tons of calculators, tons of resources, tons of free stuff for you to take advantage of. Go to moneyguy.com and you can check all of those resources out.
- [37:10]
B
It's worth repeating. How your journey started does not define how it ends. I'm your host, Brian, joined by Mr. Bo Moneyguy team out.
- [37:20]
C
The Money Guy show is hosted by Brian Preston and Bo Hanson. Brian and Bo are partners with Abound Wealth Management. Abound Wealth Management is a registered investment advisory firm regulated by the securities and Exchange Commission. In accordance and compliance with the securities laws and regulations, Abound Wealth Management does not render or offer to render personalized investment or tax advice through the Money Guy Show. The information provided is for informational purposes only, may not be suitable for all investors, and does not constitute financial tax, investment or legal advice. All investments involve a degree of risk, including the risk of loss.