America – land of the free, has been one of the richest countries in the world for quite some time now.

With the capitalist economy, pretty much anyone can become wealthy. So many people move here from overseas in search of a better life. With that being said, it is also one of the dumbest countries when it comes to how we handle our money.

The average American household carries $137,063 in debt including mortgages. The average student loan debt is $30,100. THIS HAS GOT TO STOP!! We have got to stop borrowing money on things we can’t pay for with cash. There is always another option than borrowing money.

A home mortgage.

Mortgages are about he only thing you can borrow money for that doesn’t go down in value so it’s an okay debt. Try your best to save a 20% down payment at least, so you can avoid mortgage insurance (which usually cost about 0.5% to 1% of the entire loan).

Understanding how your credit score impacts the interest rate you'll get on your mortgage is important.

The term of the mortgage you go with can be a big factor in how much you end up paying for your house. Usually, you can save a lot of money on interest by going with 15 year loan instead of a 30 year.

Car loans.

Car loans need to be a thing of the past in this country.  I have never owned a car that was newer than 10 years old. I have also never missed a day of work because my car broke down on the way. Buying an older car with cash means you get to avoid the interest on the loan, the full coverage insurance, and the car isn’t going to go down in value much more than what you pay for it.

Let’s see what a new car will cost us based on average costs in America.

  • Price of new car – $31,400
  • Car loan interest rate – 4.21%
  • Car loan length – 67 months
  • Car insurance – $115 a month
  • Total car cost over the 67 month period – $41,303

This car would end up being worth $18,840 by the end of the loan resulting in a loss of $22,463. If you had purchased a $5,000 car with cash, with liability insurance only, you would pay a total of $8,054 over the same 67-month period. I’ve found Geico to be the cheapest Auto insurance in my area.

Le's say the smart person that bought the cheap car invests the difference of cost that the person who bought the new car paid. At the end of the same 67-month period, the person who bought the cheap car would have $40,094 invested (assuming an average rate of return at 7%).

The cheap car would be worth about $3,500. You would get around to all the same places you would go in the new car, only you would have almost the same amount you would spend on the new car invested. $40,094 is A LOT of Uber rides if your cheap car were to break down.

If you think you need a nice car to impress the people in your life, you need to find new people to be around. But if you can’t get new people to be around, impress them with the amount you have invested, not the hunk of metal that drops in value by 60% in five years.

Don’t have $5,000 to purchase a car with? Start walking or riding a bike to work. Live too far from work to walk or bike there? Move closer or get a job closer to where you live.

It is ridiculous the amount of time and money Americans spend on commuting to work. A 30-minute, one-way commute to work cost you 260 hours of your life each year. That’s 6.5 40-hour work weeks! If you’re driving 20 miles to work, at 55 cents a mile, that’s $1,144 a year. Consider that the next time you’re interviewing for a job.

Student loans.

Student loans can be avoided. In fact, things are changing, and you really need to find out if the subject you want to study even requires a degree to get a job in that field. Sure, a degree will most likely help you get a job, but is it needed?

I don’t have a degree and I’m currently working in the field I want to be working in. I went to community college and I can say that I’ve learned more about I.T. through self-studying than I did from the teachers and classes at college.

Work experience is usually more important than a degree. Once you have your foot in the door, you should be able to advance in your field without a degree.

If you do decide to go to college, you need to be as smart about the cost as possible. It is ironic that you’re supposed to be getting smarter at college yet, we are so dumb about how we pay for it. Here are my tips for getting your degree on the cheap.

  • Go to a community college for the first two years and get your core classes knocked out. Community college is much cheaper than 4-year universities. In some states, it's free.
  • Apply for as much financial aid as possible. Apply for scholarships and federal/state grants.
  • When you are done with community college, try to get a job in the field you’re going to school for with your associates degree.
  • If you still think you should get a bachelors degree, go to an in-state college only. In-state tuition is so much cheaper than out of state. It’s bizarre that anyone would go to an out of state school. You can move anywhere you want when you graduate if you really have the urge to move away.
  • Do not go to an expensive private school.
  • You should be working somewhere while you’re going to school and that should cover the cost of tuition and books (which should be less than $10,000 a year).

Credit card debt.

Credit card debt and other miscellaneous purchases on lines of credit are the last form of debt I want to cover. I am not against you owning a credit card, if you pay it off every month. The average interest rate on credit cards is around 20%.

For every $1,000 dollars you don’t pay off, that’s $200 dollars you’re just casually throwing away. You need to get on a budget and plan to save for any expenses you are going to be making in the future. On our journey to becoming financial black belts, craigslist and buying things used are the way to go. Most of the time, you can find high quality used items at a fraction of the cost if it were new.

Debt is like the financial equivalent of fat. To be top notch financial beasts, we need to trim the fat off and live debt free. It’s time to start attacking your debt with fierce intensity. Debt will only slow you down on your path to financial independence. My wife and I are currently living on $25,000 a year after tax, tithes and savings.

This wouldn’t be possible if we had any other form of debt other than the mortgage. Fortunately, I have avoided debt in my life all except for my wife’s engagement ring (that I could have paid cash for but was an ignorant white belt at the time). Living debt free feels really good. Once you are here, you never want to go back.