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Young American: A portrait of overspending

Via Flickr, by user Wonderlane. Used under Creative Commons License.

I’d like to introduce you to a friend of mine; we’ll call him Young American. You probably know him (or her) as well.

Young American is in his early twenties, recently graduated from college, and got his first “grown-up job,” where he earns a yearly salary of $30,000.

With adult responsibilities and a decent paycheck, this single young person is enjoying some of the fun parts of an independent lifestyle, but nothing out of control. Like most young Americans, he has some student loan debt, and carries a credit card balance. With his new job came a new car, as well as the need to grow his wardrobe.

Young American is also a Christian, and an active member in his local church, where he does his best to tithe, give and support missionaries. Beyond this, though, he thinks that his spending is fairly typical. He doesn’t buy many big-ticket items; he simply lives at about the same level of lifestyle that his peers do.

From time to time, Young American overdraws his checking account. It puzzles him, because he has a good job with a salary, and should be able to afford his lifestyle as a single dude. He doesn’t really budget or keep track of where his money is going. But he’s beginning to notice that his credit card balance is getting bigger each month, even though he’s making the minimum payments.

Although Young American doesn’t really track his spending, I’ve tracked it for him. His $30,000 annual income breaks down into $2,500 each month. So how does his monthly spending add up??

  • Taxes & Paycheck deductions (health insurance, retirement, etc.) — $722
  • Rent or mortgage payment — $500
  • Car payment — $200
  • Gas (at $25 per week) — $108.33
  • Tithe — $250
  • Missions (giving to support short-term missionaries, about $150/year) — $12.50
  • Special giving (church ministries, charities, etc., at $100/year) — $8.33
  • Clothing (for the adult job and weekend fun, at $1,000/year) — $83.33
  • Lunch Out (three times a week, totaling $25) — $100
  • Dinner Out (two or three times a week, totaling $40) — $160
  • Starbucks (two or three times a week, totaling $10) — $40
  • Groceries ($40/week) — $160
  • Gifts (birthdays, weddings, etc., at $400/year) — $33
  • Hair Care — $20
  • Household upkeep (repairs, decor, etc. at $200/year) — $16.67
  • Car insurance — $100
  • Doctor and dentist visits (at $300/year) — $25
  • Medicine (regular prescriptions and over-the-counter) — $20
  • Miscellaneous expenses — $50
  • Cable and internet — $80
  • Movies and recreation (bowling, mini-golf, concerts, etc.) — $50
  • Supplies (batteries, light bulbs, makeup, etc.) — $15
  • Smart phone & data plan — $75.00
  • Utilities — $160
  • Student loan payments — $300
  • Credit card payments — $100
  • Car registration/property tax ($150/year) — $12.50
  • AAA Membership ($50/year) — $4.17
  • Vacation and travel (at $1,000/year) — $83.33
  • Christmas gifts (at $300/year) — $25
  • Car service (regular maintenance and emergency repair, $300/year) — $25

So how is our young friend doing? Well, none of his purchases seems outlandish. But once you factor in one-time and semi-annual expenses (spreading the cost evenly to each month), the picture turns bleaker. Though he earns $2,500 each month, Young American is spending $3,539.49. That’s a monthly deficit of $1,039.49. No wonder he’s racking up credit card debt and bouncing checks.

At this rate, our young friend is headed quickly to a life of financial slavery, struggling to pay the minimums on his debt and wondering where it all went wrong. It doesn’t have to be this way. But to break free, Young American is going to have to face some tough realities, make some difficult decisions about his lifestyle, and learn some skills, like budgeting and discipline.

Does this story sound familiar, or even hit too close to home? The good news is that there is hope, but we’ll have to start by renewing our minds and un-learning some bad habits. Ready to get started?

Up next: Fixing Young American’s money mistakes

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Trackbacks

  1. […] Up Next: Portrait of an over-spending Young American Share this:TwitterFacebookLike this:LikeBe the first to like this post. This entry was posted in Mastering your Money by bnjewell. Bookmark the permalink. […]

  2. […] friend Young American has a problem: Though he has a college degree and a job that pays $30,000 per year, his lifestyle […]

  3. […] friend Young American benefited from a budget in both of these ways. Putting his spending down on paper demonstrated how badly Young American was over-blowing his salary. And having a document to work […]

  4. […] monthly expenses, but fail to take in to account things that only happen once or twice a year. In Young American’s case, things like car registration, Christmas gifts and dentist visits were costing money that was […]

  5. […] impacts our lives in so many way: It rewards us for hard work, and punishes us for poor management. With a lot of money, a lot things in life become easier. When money is scarce, even the most basic […]

  6. […] may have mastered your out-of-control spending habits and become the world’s best budgeter. You’re not only allocating money for things that […]

  7. […] money away. But this attitude can get us into real financial trouble, especially when we begin spending unwisely simply because we think it’s our prerogative. Debt often follows close […]

  8. […] we’ve mastered our money and escaped the financial dangers of debt and out-of-control spending, we can make our money work for us. That means making the money that we have now grow, so that we […]

  9. […] many of us have built our spending habits around the lifestyles that we’d like to have (like Young American), rather than building our lifestyles around the realities of our finances. We can get away with it […]

  10. […] applies to life in general, and it also applies to financial life in particular. Bad habits like overspending, borrowing or hoarding eventually get us into a lot of trouble with money, and can even make us […]

  11. […] our families don’t always do us a lot of favors. Too many Americans get caught in poverty, overspending, debt, envy and other poisonous practices because that’s what they saw their parents doing. […]

  12. […] much of our problem often boils down to out-of-control spending. We studied the case of a typical Young American, who was spending far more than he was earning every month, even though his lifestyle didn’t […]

  13. […] being more careful and intentional about the way you spend money, and that’s a good thing. Out-of-control spending is one of the biggest risks to American personal finance. And while you probably don’t spend […]

  14. […] Thankfulness in your heart is the key to wise decisions in your mind too. If you’re thankful for the resources that you have, you’re much more likely to be a good steward of them. When you recognize that you’re managing resources for the God of the universe, you’re going to work hard to account for every dollar, and make sure that you’re not spending His money on wasteful or unwise things. […]

  15. […] of price possibilities, let’s examine the hypothetical habits of one person: Our old friend Young American. In past examples, Young American hasn’t necessarily been a drinker (we haven’t […]

  16. […] to a more complicated example: Let’s say that you’re a typical American consumer, with a typical lifestyle and typical amount of debt. You have a five-digit student loan balance, a […]

  17. […] or fear in your life, you’re likely dealing with an issue such as debt, poverty mentality, or undisciplined spending. Dealing with these underlying issues will help you eliminate your stress and escape your financial […]

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