What Do Adults Do With Their Money?

What Do Adults Do With Their Money?

It all started with a question.

After spending a year working two part-time jobs, graduating from college, and spending another year working three part-time jobs, I was now in grad school over 400 miles away from home.

I had just spent a year in grad school on a slim stipend that put me around the federal poverty line, and I added up all my expenses. To my surprise, I found that I was actually making money in grad school! Not much, but hey, a surplus is a surplus! I did get an extra couple thousand dollars from summer employment, so I was actually doing okay. Not great, but okay.

But I had proven to myself that I could live—and pay all my own bills—on a $12,500 annual salary. Not that I had a very high standard of living, but at least I could do it!

After toting up the numbers, I came out 'in the black,' as they say. I never expected grad school to actually be profitable!

I wasn't only looking back at the past year; I was also looking ahead. In just a couple short years, I'd be earning an actual salary. For the first time in my life, I wouldn't be a student, or a grad student, or a young person balancing multiple part-time jobs while looking to further his education.

I'd have an actual, full-time job. With commensurate salary and benefits.

And I wanted to know what to do with my money before I got there.

Here I am in 2014, living on less than my $12,500 a year. In a couple years, my salary should roughly quadruple (and in retrospect, that's almost exactly what happened). Though I already knew my lifestyle might double once I was a real adult, it definitely wouldn't quadruple.

So...what do adults actually do with all that extra money?

The Mortgage Trap

 The Mortgage Trap

I just watched the 2005 movie Thank You For Smoking for the first time recently. (I know, I know...in my defense, I was in high school when the movie was released, and I hardly watched any movies back then. I'm so far behind that I'll never catch up ¯\_(ツ)_/¯ )

One line particularly struck me, when Heather Holloway (the reporter, played by Katie Holmes) asks the main character, Nick Naylor (an excellent portrayal by Aaron Eckhart) why he speaks and lobbies on behalf of tobacco companies. Naylor's reply was that it pays the mortgage. He then speculates that maybe the world would be a better place if everyone rented.

In fact, you can just watch the scene yourself:

Superb writing, and excellent acting and directing. Seriously, it's a really good movie, and I wish I had watched it before.

But this isn't a film review page, so let's get to the meat.

Would the world indeed be a better place without mortgages?

You may have read my 2018 article on why you shouldn't buy a house if you want to get rich. If you REALLY want to question everything you've ever learned, you should read my inspiration for that piece: Jim Collins' take on Why Your House Is a Terrible Investment.