How Financial ‘Musts’ Pressure You Into Big Debt

financial expectations

So few of the pressures we deal with in daily life have anything to do with what we want. Instead, we run scripts of what we’ve been taught to believe through our minds.

I should go to the best college I can get into, regardless of the price.

It’s a good idea to buy a house as soon as possible.

At some point, I should get married and start having kids.

Funny how these “shoulds” come up before we have a chance to think about what we want. The real problem doesn’t just lie in these goals, though. It lies in how much money we spend to make them happen.

It’s hard enough to build a life, but to build one you’re not even sure you want? That’s a recipe for financial disaster.

What financial expectations are you feeling pressured by?

Financial pressure isn’t new, but it seems to be hitting millennials the hardest. The age-old expectations of growing up to buy a house and have kids have compounded with a newer expectation to go to the best college you can, no matter the cost.

With that, we’re seeing a never-ending rise of student debt — and that debt is making everything else harder to do.

Just how real are these pressures? The majority of Americans feel financial stress, but a study from the American Psychology Association shows that a whopping 75 percent of millennials report feeling financial stress.

And this stress isn’t about keeping up with the Joneses; it’s about making ends meet. The report goes on to state that for 57 percent of millennials, “paying for essentials is a somewhat or very significant source of stress.”

What kind of financial expectations are you feeling pressured by? Here are a few of the most prevalent.

1. Go to a “good” college

We don’t just expect kids to go to college anymore. We expect them to go to the best college they get into, even if the cost is double. Why? Because we think it will net a higher return on the overall investment.

But if someone attends the best college they can and then doesn’t get a high paying job, they’re stuck with potentially debilitating debt. The investment was made, but where’s the return?

Never brush aside the costs that vary between colleges. Average tuition costs show that a student going to a four-year private school can look at paying approximately $32,000 per year, as opposed to $9,000 per year for an in-state public school.

For a four-year degree at a private school, you’re stuck paying $128,000; a public school degree would only cost $36,000.

2. Buy a house

You’ve probably heard that renting is “throwing money away.” Combine that with the fact that owning a home is perhaps the biggest tenet of the American Dream, and it’s safe to say there’s a healthy pressure to own your house.

If you struggle with your mortgage payment, you’re far from alone: A 2014 survey by The MacArthur Foundation found that over half of U.S. adults have had to make at least one sacrifice to cover housing costs.

Those sacrifices include getting an additional job, postponing retirement savings, cutting back on health care, and racking up credit card debt.

Some of those things lead to greater financial difficulty. Using credit cards to make ends meet means subjecting yourself to a 15% average credit card interest rate. You could be looking at years of debt if you multiply that with just a few months’ balance.

If half of adults are making these kinds of sacrifices to keep up with their mortgage, any return on your home’s “investment” could be destroyed.

3. Get married and have kids

It’s true that the decision to start a family of your own isn’t a financial choice, but it does come with financial implications.

Let’s start with the not-so-simple act of getting married. Last year, The Knot found that the average cost of a wedding in America is more than $32,000 — honeymoon not included. That’s about as much as one year in a private university (or four years at a public university).

That’s just for day one of your new life together. Once kids come along, your finances will look a lot different.

The Washington Post broke down the current costs of raising children. The result? Parents are now spending anywhere between $13,000 and $14,000 per year for a child.

How these expectations pay off

Since there are two sides to every story, it’s worth exploring if these financial expectations pay off. Let’s find out.

1. Does a “good” college lead to higher pay?

The belief that a private college leads to more opportunity is nothing new. But is it valid? Studies point to a strong “no.”

While private colleges have higher graduation rates, they don’t necessarily lead to more job opportunities. A Columbia University study shows that 81 percent of 2007-2008 graduates of non-selective public schools are currently employed. Compare that to 75 percent of the same group from very selective private schools.

However, when comparing the pay of both groups, statistics lean in favor of very selective private schools. The average ‘08 graduate of a non-selective public school earns $39,208, compared to a $40,664 average for graduates of a very selective private school.

But is that small difference in pay worth the decidedly larger investment for tuition, especially when you look at the employment statistics?

What’s really interesting about this isn’t just where things are today, but where they might go in the future. Payscale argues that in the next decade, public college graduates will see a 24 percent higher return on their investment than private school grads.

Going to a private college may lead to higher pay, but not necessarily a better chance of getting a job. Nor will a private school degree always pay off its significantly higher tuition.

2. Is buying a house an investment?

The price of buying or renting a home varies greatly depending on where you live. To see if renting or buying is more cost-effective in your location, use this calculator to compare the price of renting as opposed to buying.

If you own a home, you will be responsible for maintenance costs over the years. If you’re hoping to someday sell it for a profit, you’ll likely need to make updates, too. Don’t forget about the other associated expenses of homeownership, including property taxes, insurance, and homeowner association fees.

To answer this one, forget about what the best investment is and think about what you want. If owning a home is a dream of yours (not something you think you’re supposed to do), then these costs could be worth it. Just make sure you know what you’re getting into.

3. Will getting married and having children make you happier?

All the other financial expectations we talked about have a clear way to measure your potential returns. But that can’t be done for getting married and having children.

This one, more than any other, is about what you want. Not sure if this is the lifestyle you want? Dive into some statistics about happiness in relation to marriage and parenting.

Psychology Today doesn’t believe it’s possible to know if married people are happier than single; there are too many factors that lead to happiness to be able to pinpoint marital status as the main contributor. However, experts seem to have a lot to say about happiness in relation to parenting.

Statistics about parenting and happiness vary all around the world. Unfortunately, these statistics show that parents in America are less happy than non-parents. Two of the largest possible factors are the lack of governmental policies to help parents and the high cost of parenting in America.

That said, measuring happiness in parents versus non-parents might be as hard as measuring happiness in single people versus married people. That’s because there are other studies that show there’s no statistical difference in happiness between one group or the other.

How to decide for yourself

None of the above decisions are easy to make, nor should they be made based on what anyone else believes you should do.

It’s not always easy to know the difference between what you feel you should do and what you really want. But if you dig deep and ask yourself “why” when picking your priorities, it becomes a lot easier to decide for yourself.

We only get one life to live. Make sure you live yours to your fullest.

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