$100,000+ Private Student Loans, Yet Borrows For A Stupid Tesla

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1:02Exclusions apply. Visit the website for full terms and conditions. Not only will you receive 20 % off your first purchase, but enjoy free shipping on any U.S. orders over$75 and free returns. Have a great day. My name's John. I'm 24. I'm from Massachusetts, and this is Financial Audit. Well, thanks for coming down from Massachusetts. What do you do for a living there? I'm a site reliability engineer. I work remotely from the house. Okay, cool. So I assume that comes with a pretty delicious income, right? It's pretty good, yeah. What is it? I think into my account I get about$8 ,100 a month. Wow, okay.

1:41That is a delicious income. Massachusetts is pretty expensive, though. We're in Massachusetts. Yeah, I'm on the south coast near Cape Cod. Okay, it sounds expensive. Is it expensive? what's your rent off the bat what's your rent i live with my parents actually really yeah so 97 200 net a year we're living with parents which means you better have an amazing retirement account and no debt but whoops you have debt yeah yeah a little bit account is okay interesting so what's your financial situation what are we looking at today um yeah i mean uh overall i'd say it's it's pretty good much better than it was like last year um what was up with last year uh you know i so i started i started this uh or i started doing engineering like jobs right out of college uh got a pretty decent like internship and from there uh i was actually really good with my money because i was a broke college student got a decent job and i was not spending any of it but then uh you know kind of lifestyle creep just hit me hard.

2:49You still have the parents. Right. Yeah. I did end up moving out for like a couple months, but I had a really bad issue with a, with a neighbor, um, in my apartment building. So that's why I moved back. Kind of issue to the church shoot you. No, she was just, uh, the, the walls were very thin and, and she was like, um, just always, uh, like yelling through the walls to like, keep it down. Even though like I'm a pretty quiet person. Um, and to the point where like, there was a there was a time where uh i called the cops on her because she was she was threatening to call the cops on me for just talking in my apartment and then break the lease uh they were pretty understanding because they've actually had quite a few people leave because of that i'm surprised they don't kick her out yeah literally within the week that i left another tenant had already left because of her um so it was a pretty pretty rough situation okay so then you're you went back home so lifestyle inflation or you're just spending a lot of money on just fun food and stuff.

3:44Yeah. Yeah. Basically. Um, like I, I mean, I was looking at my bank account, but it kind of just felt like, you know, I was getting the steady income and I could buy whatever I wanted. And, you know, like as long as, as long as I paid off my credit card at the end of the month, I was good to go. So, um, which I mean in general, okay, sure. And if we're, you know, if we're not in bad debts or anything, we can certainly spend like 30 % of our money, especially in your age on you know net money on fun there's nothing wrong with that but like i guess it depends the overall situation so we need to get an entire picture of what your situation looks like what would you give yourself right now in terms of your financial situation in general not for your age but your financial situation where you should be in life zero out of ten um yeah i'd probably give myself like a four okay yeah mainly because of the debts that I have.

4:37But yeah. Okay. Well, we're going to hit the debts first. So 24 years old,$79 ,623, a payoff amount for something. What is this something? That is a private student loan. Private student loan? Yeah. Well, it's on forbearance. So they did give you a for... Oh, dang. And then it's at 7%. Yeah. So does this start up when the federal ones start up? Yeah. Oh, okay. Well, nice enough for them to do it because sometimes like Sally Mae, that will, you know, be a d*** and make you pay all the way through. Yeah. Yeah. I'm surprised that they forbeared it until like kind of, you know, with the federal. Yeah.

5:24So I haven't paid a dollar of my student loans and that's why I've been trying to like kind of situate myself. Yeah. I wouldn't have. Okay. So my logic on this, in terms of student loans and the forbearance, it's like, okay, since there's 0 % on right now, it makes no mathematical sense to pay it, even if it is higher interest later than the 7 % we certainly want to pay off. But that's as long as the money we would put towards it to pay it off earlier. Well, it's on forbearance. It's going towards investing. Was all the money you would normally put towards it going towards investing? Every single cent?

6:02Absolutely not. Then you did it wrong. so yeah completely agree okay so what was the logic behind not paying this off then because clearly we've decided you did it in the wrong way what was the logic um there was absolutely no logic 100 like like i said last year like uh i i think my my take home for the year was like 89.4 k and i spent 89k where'd you go to school in the first place why'd you have to borrow so much private student loan debt? I went to a private university freshman year and ended up losing my scholarship because I had like a 2.99 GPA and needed to maintain a three or higher. But because of that, I switched to a state school, but I lived on campus there.

6:48What private school did you go to? I want to take a brief moment to thank today's episode sponsor, SoFi. Student loans are crazy. We know that. We talk about them all the time on this show, and there needs to be a way to get a better grasp on them. We know that many private student loans that people take out while they're in college can have insane predatory interest rates. And when you're stuck in a situation like that, you feel like you just cannot get out of it. You feel like you can't even picture what the future looks like, whether or not you can get a house or retire. But that's where SoFi can be a helpful resource.

7:21With SoFi, refinancing your student loans can be a step forward in making your financial goals a reality. They're a mobile-first personal finance company that's helping their members bank, borrow, and invest all in one app. Their mission is to help their members achieve financial independence and realize their ambitions. They've helped nearly half a million people refinance their student loans by offering competitive rates and no fees. The process is fast, easy, and available seven days a week with live customer support. Plus, student loans are eligible for unemployment protection, providing the loans are in good standing.

7:54So if you want to see if their rates are competitive for you, just take 60 seconds and go to SoFi.com forward slash Caleb or use the link at the top of the description below. It was a Wentworth Institute of Technology in Boston. Yeah, it doesn't mean anything. Why don't you just get certified or something? Well, dude, I swear in tech right now, man, I know tech is having, you know, a little bit of a post hiring everyone layoffs type thing. But even still for the people that are getting hired, man, experience first. Even LinkedIn just came out with a thing today saying, so dating the episode recording, saying that they think the future based on the applicants and what hires are looking for are going to be based on job experience.

8:41This episode is brought to you by NBA on Prime. This Tuesday at 830 Eastern, it's the Emirates NBA Cup Championship game on Prime. This year's quest for the cup has been building to this, the championship game live from Las Vegas. Not a prime member? Sign up for a 30-day free trial to get started today. The Emirates NBA Cup championship game this Tuesday at 830 Eastern. Only on Prime. Restrictions apply. See amazon.com slash amazon prime for details. And not degrees. Man, we could have got you certified. Imagine if you went through something like the partners we have, course careers, or any other certification program and got certified in something, and you made the same amount of money each year, and you didn't have$80 ,000 of private student loan debt.

9:27Obviously, okay, I'm not going to bully you for something you've done in the past, so I don't want you to think of that. But that's just an example for those out there, especially those who want to get into tech or are graduating high school and they're trying to decide what to do next, man. A lot do require a college degree. I highly doubt what you did does. um yeah i mean actually for for my current career i don't even think they have um they have majors for it um it's kind of like software engineering adjacent um so yeah i completely agree like i'm not saying the degree is bad either because you can get a good return on your investment but i'd rather like two years at community college and two years at a state school after that yeah yeah for sure yeah no when i was in high school basically it was just like oh everyone goes to college i'm a decent student you go to college you know that was kind of the thought process and I basically just went to Wentworth without even touring other schools, seeing what else was out there.

10:19I partnered with Course Careers for a reason, man, for other people to check them out because avoid this crap. Jesus, crazy. I will say, though, I was lucky to come out. Basically, I graduated in March 2020 when COVID went crazy. I got my internship like before my senior year was over and from there I've had a pretty good I've had like stable income since so Let's calculate what this minimum monthly payment is going to be So would you say this was a mistake? I wouldn't say for I can't take it back and I have a really good career Would you say it was a mistake? I wouldn't say it was a mistake for me, no Okay, well if you don't want to make a mistake today you should hit the subscribe button because that'll be the best decision you've made of the day.

11:08Terrible segue. But you should subscribe because we're trying to get to 750 ,000 subscribers. I'm very thankful for everyone who has subscribed so far. Thank you. So at 79 ,623, 7 % interest, it's probably the traditional 10-year repayment, I assume? Yeah. I mean, they have like a 30-year repayment, but I'm not doing that. But you're on the 10? Yeah, yeah. Okay. I basically want to pay it off as fast as possible. and since the start of this year I've started budgeting and everything so my spending is very low sure and it better because this is about to be $924 a month repayment death death absolute stupidity death oh my goodness just to get a degree and I'm glad you're making good money with it but again, I'm not going to bully you on it too much.

12:04Yeah, I'm hoping to pay it off a lot. I'm hoping to put more in the... Because then we go to the stupid next... Sorry, go ahead and continue and then I'll go into my... I was just going to say that I'm hoping to pay that off a lot faster to save on some of the interest costs. Oh, we're gonna. 7 %? Yeah, you're damn right. Yeah, absolutely. And then we immediately go to the next one and we decided oh, we're 24, we better get a brand new awesome car yeah gotta get a tesla where you owe 51 628 kill me now 98 death stupid six percent so it's not the worst but if you consider a depreciation in cars in a standard car market which we're getting closer and closer and closer to actually entering oh again yeah 900 931 minimum monthly payment So now with the minimum monthly payments, we're like close to$2 ,000 a month starting in August.

13:02The car gets worse too. So that Model 3 was$56 ,000 when I bought it because it has the full self-driving and the auto acceleration boost. Because of the full self-driving, I've actually been trying to sell this car. I can't find anyone to buy it because no one wants to pay the$17 ,000 for the software option. So I'm basically like negative 20 K on it. Um, I've been trying to sell it for, uh, I, I'm, I mean, I just want to go get as close to even on it. Um, you know, but like, I'm more than happy selling it. Like I've accepted that, that I may want to do that to like kind of better my situation.

13:44Um, I work from home. Like I said, I literally don't need the car. I'd be happy with literally anything. Um, and my fiance and I are looking to move in together soon. She has a car. congratulations thank you appreciate it so what oh what's like the lowest you'll sell it for let's get it on the books yeah so um i i just recently updated this loan to like auto pay the max that i can to try and like eat you know break down some of that debt um on it so i can sell it and you know not have to pay like the whatever it is out of pocket i'm not really sure that's kind of what i'm worried about is with all that negative equity like if i were to sell it privately like like you know if they bought what is the lowest if you determined um i mean i'd be willing to sell it for like 35 30 um it's just i need to be the plan yeah i because even still like i'll save like i think it was like 11k in interest if i do that like right there alone it kind of helps with that negative equity so it does yeah man because the tesla it's like my dream car no and yet i'm just investing everything right now which is what you should be doing we got to take advantage of our age.

14:50I'm almost in those in that big scary 3-0. But even still, the compound growth that we get to take advantage of at our age, dude, it should not... $900 should... more than$900 should not be going to a vehicle at where you are. Make a good income. Let's get an okay car. Sure. Absolutely fantastic. $30 ,000 car. I don't give a... But are we doing this now? And when we talk about car debt in general and this is just again with everything i say this is based on my own past getting out of really bad debt and getting in a good point and then you know at a good point now and helping people wanting to help people get out of the situations that i was in there are certain debts that i'm okay with if we go about it a smart way because math always wins math always wins where i think about depreciation with a standard car like if we use three percent leverage on a car, which is very difficult to get today.

15:47That's where I'm okay with it. If everything we would normally put at it, I'm going to use an example I'll use again. So what was this? What was the car? It's a Tesla Model 3. No, no, no. What was the price of the car? Oh, 56 ,000. Okay. Let's call it a 60 ,000 car for the example. Okay. You're going to, you have$60 ,000 saved up to go get a$60 ,000 car. You can buy it in cash or you can put$10 ,000 down and then borrow$50 ,000 at a 3 % interest in this dream scenario. Then if you invest the other$50 ,000 in the S &P 500 and it goes, and that's not an investment advice. This is an example of, okay, the S &P 500 with dividends reinvested is going to do over 10 % a year.

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16:56Annually with all the up years and down years combined based on historical performance, that's obviously going to beat the 3%. And the 3 % we're also taking into account depreciation, So maybe the interest rate mathematically, if we really stretch it out, looks like more 4 % or 5%, maybe even close to 6%. But still, you're beating it in the S &P 500. 6 % with depreciation, certainly not going to be beating that. Now, where I'm against it is if people go ahead and put the$10 ,000 down, and instead of investing the$50 ,000, they just go below the$50 ,000 or even a part of the$50 ,000. Then it's no longer mathematically making sense.

17:29also when people go and take out debt on a car okay you have$60 ,000 you're gonna get a 60 ,000 car oh maybe we'll put$10 ,000 down but maybe since we're putting$10 ,000 down maybe we get a 65 ,000 car maybe we get a 70 ,000 car no you're gonna get a 60 ,000 car because that's the cash you have it only works in specific instances you did not do it right oh yeah absolutely not and I've actually had three cars before this uh so like I said my my spending was like unhinged last year uh in the past couple years um cars are one thing that i've really been into like my whole life so i just ended up just going like through car after car um yeah so like a lot of money was lost just like paying down payments and on say like selling the cars afterwards um and yeah this car was like the the last one before i like got my act together i bought this car at the end of last year um and realizing now like last year so this is how bad it is yeah yeah geez yeah because if you get out of this car even if you sell it for like thirty thousand dollars then you still have to come up with the other twenty yeah yeah so do you need a car or do you and your fiance live together we don't live together yet yeah okay but we will be starting at the end of the summer yeah end of the summer so pretty soon yep and i live with my parents and they have cars as well oh that you can borrow and then your fiance she has a car yep okay cool cool

18:48okay sorry i assume she she yeah okay she yeah yeah i would borrow her car when necessary there if you're working from home and then we just get rid of this car dude no at that point i got all the pictures taken for the for the posting oh you're ready ready to go what are you gonna list it at um i was thinking of listing it at like 40 going down to 30 when yeah yeah okay it will like with with those options like basically a tesla model 3 without those options are selling for like 28 30 like same year with those options technically it should be worth like a bit over 40 but just like going to a dealership they just don't want to pay for these software options.

19:23No. So I'm hoping someone out there wants full self-driving. It's pretty cool. Sure. So we also have federal student loans? Yeah. Jeez, it just keeps going. Yeah, the student loans are rough. You just want to do debt, debt, debt, debt for this. So we're over$100 ,000 in student loans. Yeah, I think it's about$100 ,000. That's insanity. So here we have$26 ,700 276 I'm guessing that's going to be about a $250 minimum monthly payment on the traditional 10 year now typically when you see these again it doesn't show the interest rate now because they're under ferment I don't know why they do that because it's stupid but it's probably going to range anywhere from 4 to 6 yeah I think it was 4.15 I couldn't get it to show up there yeah I believe so well usually they're different per yeah i don't know i'm gonna say four to six percent i saw it on a page uh like a couple weeks ago and i couldn't find it again um but yeah it's somewhere around there maybe that's the average across all of them could be now what is this it's just a you spent money on a card and then you paid it off yeah i think that's a best buy card i you know wanted to bring that up because uh you know more more awful spending no longer the case the balance on the best right it's clear that's why i sent that the other picture gotcha so we've paid off the best buy card yeah it would have been 30 but i'm glad we paid that off what was that what were you doing on the best buy card you must have bought something just idiotic purchases i bought like a two thousand five hundred dollar graphics card and then uh what is that a 4090 it was a 3090 ti 3090 ti okay yeah yeah to play like counter strike the plague counter strike just yeah stupid maybe for the new counter-strike oh yeah you never know with all the smoke yeah um i'm that game i'm desperate sorry i am too i have way too much time on it my friend tries to coach me he's very good he's in like the top zero one percent of them he's crazy but we have an american express i don't so new charges hundred uh no new charges 658 and And they're pretty much all bulls.

21:39So like$658 a bulls mostly. There's a few things like, okay, ring monthly. I'm okay with that because it's good to keep that stuff backed up.

21:52And there's some things that are like services. I'm thinking maybe some utilities. I'm not 100 % sure. And then obviously supercharging on the Tesla. That replaces gas. I'm not going to beat you down for that. But then New York Bagel and Speedwell Coffee and Shaw's and Paddle.net and Bertrick's and Ben and Jerry's and Blue Kangaroo and Stop and Shop for 15 bucks and Wellies and Superstop. So I will say like Shaw's, Stop and Shop, Speedwell, that's all groceries. Speedwell is like my coffee subscription. Oh, well, you don't need that. Well, no, like whole beans. I do espresso at home. Oh, cool.

22:31But that's an expensive way to do coffee still. And Taco Bell. and I'm a coffee dude. I get it. I get fancy beans. I brew them and I do espresso at home as well. I was just drinking espresso right before this. But still, when we're in bad debt, do we need that? I don't think so. And Taco Bell and parking and TJ Maxx and Hulu, Ricardis and Hulu, Bova Bakery, Dragon Bowl and Mac and Bolo's and Panera Bread and Ichigo Uber Eats, Red Robin. Don't think we need to be doing that. Sure. I will say I have a pretty reasonable budget for food spending, like going out to eat. You shouldn't have a going out to eat spending thing if you have a 7 % student loan thing that's starting in two months.

23:14If you have a Tesla at 6 % with depreciation included in that, no. We shouldn't be having that. That's fair. And then$7 purchase, which was on Amazon for another card. So you pay off all the credit cards. We don't have a credit card debt, which is good. We just have disgusting private student loans and some federal student loans that some of them won't be great and then a tesla that you're underwater in yeah lovely lovely lovely okay is this a checking account i think this is a checking account oh yeah it looks like my check so you have eight thousand bucks in there nine thousand bucks in there roughly yeah okay so nine thousand and checking nine thousand checking there wasn't really much in here that was crazy paying for rocket money which i'm you know a rocket money proponent rocket money is great that's what i use now um and just paying off bills and cars but this this is interesting verizon wireless for 237 dollars and that happens twice that's my phone bill yeah what the is it just your phone no no so i live with my parents and uh i don't pay i i give them some money for rent but we don't have like any like super hard like lines but i basically just take over the phone bill and the and the internet okay well what happens when you move out in three months Then we're going to split it.

24:27Yeah. Okay. Yeah. So right now you take care of that though. Yeah. What was that again? How much was that? It was, it's two, it's going to be two, uh, 11. Cause I just got rid of, I was paying for like protection and it included like tech support, which is like an extra$30 a month. And they didn't tell me. So I called them up and I got that sorted. Okay. Uh, then this is an other online banking, but money was in, money was out. I didn't want, I don't know. It's just Forbes is only a hundred bucks. That's the, that's the savings that's tied to that checking. Well, you're clearly... Why is it$100?

24:59We've had$12 ,000 in there. How do you go from 12 to 0? I opened up a high yield, and that one has like a 0.06 or something. Oh, so that's what the Marcus is from. Yeah, exactly. You know, honestly, even better than this, not to keep plugging, but I only partner with companies because it's even better. You get 4.15. It's only 0.15 better, but you can get 4.3 by using the high yield that I use, which I linked below. Yeah. Plus a bonus. You'd probably get a$250 bonus as well if you transferred over there. Might be worth it. A few extra cents a year. A few extra dollars, depending. But you have$20.

25:32This is a real good story about Bronx and his dad, Ryan, real United Airlines customers. We were returning home, and one of the flight attendants asked Bronx if he wanted to see the flight deck and meet Captain Andrew. I got to sit in the driver's seat. I grew up in an aviation family, and seeing Bronx kind of reminded me of myself when I was that age. That's Andrew, a real United pilot. These small interactions can shape a kid's future. It felt like I was the captain. Allowing my son to see the flight deck will stick with us forever. That's how good leads the way. $24 ,417 in there, which I'm very happy to see.

26:06Yeah, and I will say, though, and one of the reasons why I was pretty happy to chat with you is that$24 ,000 right there was my savings for down payment on a house. So it is in savings, but I was very close to, I actually had an accepted offer on a house. the whole thing went through and then it basically got bought at foreclosure as well so then i ended up pulling out of that because it was like some crazy situation and i didn't want to how much was the house it was like 350 okay yeah housing's cheap up there uh it needed some work it was a small ranch it needed some work um compared to austin 350 would be a shed yeah well i'm not i'm definitely not in the city like nearby boston is is awful but i figured by the coasted so it'll be expensive but i got i don't really know the area and so yeah yeah it was it was it seemed like a good deal which is why we kind of pulled the trigger on it but okay um i'm glad that i got out of that out of that deal because it was a pretty sketchy gotcha and then we have a schwab which is 401k 401k you don't have a roth ira no i don't okay we got to get you a roth ira here pretty soon uh and it's 30 000 in a 2065 so index retirement fund which i love those.

27:20There's a good, they're more aggressive at first and they get more conservative as we get close to that retirement age that is the 2065. So that's cool. That's it, right? No more debt? Yeah. Yeah. Yeah. That's it. Yep. Scared me. So now it's going to come down to what do we do about all this stuff? Yeah. I had like a couple month plan. So basically like - was your plan? Me and my, my fiance were like going to re-attack trying to get a house, um, at the start of next year. No, no, no. Go ahead. Continue. Okay. Um, so my plan was to like right now my monthly spending with the car, like insurance and everything is around like 2000, 2300 or something like that.

28:08Um, so I was planning on using basically every other dollar to put towards, uh, first to pay down the car to get it like, even like not underwater anymore. So I can sell it. Once I sell the car, I was going to like start paying off the student loans, like basically all that probably like around five grand a month towards student loans for a couple months. Um, just to pay that down as much as I can. And then when we get the house, I would probably bring it down more closer to like the, uh, the minimum payments or double the minimum payments, something like that. Well, in most cities right now, you can rent for kind of under the value of homes.

28:43And a lot of the major cities that especially exploded during the pandemic. So I know in Austin, you can rent for a more affordable price than owning right now compared to the values of the homes. So I might rent for a little longer until interest rates start doing the thing, you know, inflation, also dating inflation 4 % today, year over year. So, you know, we'll see how long they hold if they go up, maybe again, just a little. and then at some point, they'll probably come down. Maybe in a couple years, that might be the good time for you to get a house. But no, right now we're focused on paying off of 7 % private student loans at$80 ,000 of stupidity.

29:20We're not getting a house right now. No mortgage. So$211 is going to your phone. Debt, we're getting rid of the Tesla immediately, so I'm not going to put your minimum monthly payment of that in there. The$924 of the private student loans and the$250 of the public student, federal student loans will be$1 ,174 a month. Cool.

29:55Use credit cards. So you're an okay credit card person, so I'm going to allow you to do that. But one thing you could consider, well, you use Rocket Money as well. So Rocket Money is good. Never mind. So you're good there. I'm just trying to think of other things to recommend you. But I think you have good programs right now. You have good programs right now. So$1 ,174 is minimum debt payments. Do you know what your rent is going to be in a few months? If I were to get an apartment? Oh, it's not decided? Oh, so I live with my parents right now. Yeah, but you said you're moving in with your fiance.

30:33She's moving in with us. Oh, that's completely different. Okay. Yeah. What's your internet? Do you have to pay? The internet is a hundred. That's a cheap internet. Okay. Yeah, that's gigabit, but it doesn't work too well. Not fiber? No, not fiber. That sounds about right. Okay. Now you don't pay for gas because it's Tesla and we're getting rid of the Tesla anyway. So now we're going to do the charging. Do you pay for any other utilities? like electricity at the home or is that on the parents? I give my parents 150 a month, um, for just the utilities and whatnot. Now, how does the food situation work in the house with groceries and all that?

31:12Uh, I just, I buy all my groceries and if my parents, I cook a meal, like I'll, you know, I'll, I'll eat with them sometimes, but, um, I handle my own food. Then I think you can do kind of cheaper than most people, right? Like how often do you eat what they prepare? Um, not, not too often, like maybe once or twice a week. Once or twice a week. Yeah. I'm going to give you$250 for groceries. Yeah, I will say I've been kind of being a rat at the house and I've been living off of maybe$100 to$150 a month on groceries. My budget I set to$400, but I haven't really hit even close to that. Now I'm going to give you$250.