At the time it didn’t seem like such a big deal. In fact, I thought we handled things quite well given the circumstances.

It wasn’t our fault that a drunk driver plowed into our parked car in the middle of the night while we were on vacation more than 500 miles from home. No one was hurt; it could have been worse. In fact we didn’t even know our car had been towed to the salvage yard until we tried to load up for the trip home.

We knew our loss would be insured, and crossed our fingers that the proceeds would be enough to pay off the loan. How we would manage to replace this car was another matter altogether. But one thing was clear: We had to have two cars.

To buy a new car would have required that we borrow the down payment and take on much larger payments. Another option was to lease a new car with nothing down and end up with lower payments than we’d been making up till now. A third choice was out of reach because we didn’t have funds to buy a used car.

At this critical decision point in our lives, my husband and I blew it. We made the worst choice possible—to lease a new car. That one decision turned the course of our lives into a financial nightmare.

Our first leased car lost its value terribly so we owed a lot when the lease was up. Again we had no available cash, so rolling the shortfall into another lease was easy enough. We repeated this so many times—and even upped the ante by leasing two new cars at a time—it became nearly impossible to break the cycle. This went on for 22 years.

Looking back it’s easy for me to see the error of our ways. However, I believe that even in my financially stupid years, if I’d taken five minutes to visualize the choice we were about to make in light of the future, I would have at least hesitated. And I want to believe we would have made a much different choice.

This past June, millions of college seniors graduated and will soon begin new jobs, moving into new apartments and facing a world of new financial obligations, many of them with a load of debt. Michael Eisenberg, CPA and spokesperson for the National CPA Financial Literacy Commission estimates that the average college student who takes out student loans graduates with $20,000 in loan debt and about $2,000 in credit-card debt. |

These students are at a critical decision point. Just how critical is commensurate with the amount of debt they have. And so to all college graduates—those in debt up to their eyeballs, as well as those who’ve come through unscathed—I offer this unsolicited advice:

The decisions you make in the next few weeks will be so critical they will impact your life in a profound way for the next decade—or longer. If you make the wrong decisions, you will suffer in ways you cannot imagine. But if you make the right decisions, you will rise above the crowd and be on your way to achieving your dreams.

For those of you who are in debt, listen up. Nothing is more important right now than for you to devise a plan to rapidly—I repeat, rapidly—repay your debts. That means no more purchases added to the credit cards. It means making payments on your student loans starting now, not in six months. It means identifying your debts as your number one priority and the biggest challenge of your life so far.

For all of you, whether you have debts or not, let me ask: Do you remember how you struggled as a starving college student? Get used to it. You’re going to starve for a while longer as you settle in and get your bearings in the real world. You know how to live frugally, so just keep doing it. It will not kill you. 

Do not buy a new car. Do not. Contrary to what you believe, you do not deserve a new car. That will come when you have enough money to pay for a new car. Until then forget auto loans and auto leases. Stick with paid-for clunkers and other forms of transportation so you can stay away from debt.

Do not opt for a fancy apartment. Ditto for the $1,500 suits and fancy leather goods. Do not fritter your money. If you have a job, that is wonderful. Immediately begin saving at least ten percent of every paycheck. Start a special account to save for a car, for a nicer apartment.

Stock up on the ramen noodles and lean on all those tricks you learned for how to exist on a shoestring. College prepared you for this way of life. This is just for a season, not forever. And if you are diligent, you will be rewarded as you begin to experience an improved financial situation.

If you take on car payments, extravagant rent, a fancy wedding, new clothes, time off, trips abroad and all the other things you believe you so richly deserve because you’ve been struggling for so long just to get through school—prepare to plunge.

The chances for financial recovery once you take that plunge will be difficult. You’ll set yourself up to face a lifetime of daily struggles and hardship. You will open the door to awful things like depression, divorce and bankruptcy. 

Jump on the upward course by choosing frugality. Even with student debt, if you choose to avoid new debt and to live below your means so you can repay your debt quickly, you will be on your way to financial freedom. You’ll be soaring in no time.

You’ve reached a critical decision point. There’s no turning back now. Your choices are clear. It’s either up or down.

Choose well.

 © 2007 Debt-Proof Living. All rights reserved. Used with permission.

 "Debt-Proof Living" was founded in 1992 by Mary Hunt.  What began as a newsletter to encourage and empower people to break free from the bondage of consumer debt has grown into a huge community of ordinary people who have achieved remarkable success in their quest to effectively manage their money and stay out of debt.  Today, "The Cheapskate Monthly" is read by close to 100,000 Cheapskates.  Click here to subscribe.