Let's talk about the next decade. Let's talk about folks that are in their 30s, folks that are in this stage of life because this is a very interesting stage of life that we very affectionately call the messy, messy, messy, messy middle. You're dead in the middle of this right now, bro. And this is the thing I love. We have a graph on this because it is so life is so unfair. I mean, because you think about it, when you're young initially, you know, you get out of college or whatever. A lot of times you don't have a lot of obligations, nope. You don't have a lot of money either. And then all of a sudden you get in your 30s and you got relationship stuff, you have, you know, your first house, you have probably growing family. And Bo, you can see it, your commitments skyrocket. Somehow, your disposable income is getting just squeezed down. We get it. We completely get it. And we have this chart. But Bo, you noticed something about this chart. Tell me, tell me what you notice.
We all recognize in our 30s that there's a disparity here. I've got all these commitments and I have less and less and less disposable income. And so, what we naturally do is whenever there's a chasm that we have to cross, we say, "Okay, I need to figure out a way to build a bridge to close that gap." And that's not inherently a bad thing. I mean, a lot of us, we go buy our house, the reason that we use a mortgage is because this is a bridge to homeownership. If we don't have enough cash to pay for a house outright. So it's okay to build that bridge. But what I think happens in our 30s is too many people use the wrong materials to build the wrong bridges to the wrong final destination. And so you have to ask your question, am I running up the stew, the credit card debt to live a lifestyle that I shouldn't be living? Am I running up the housing debt subsidizing my lifestyle because that's not what I should be doing? If you're in your 30s and you're using debt as a negative bridge, all you are doing is literally robbing from your 40, 50, and 60-year-old self by forcing that consumption into today's time.
We know this is the decade. I think the average age that people are now having children is... has moved up to age 30. Age 30 for the first child. First home purchase used to be 33. Now it's 36. So all this stuff is happening. Look, this is an exciting period of time. I'm just saying, don't take the easy way out. Using debt is that bridge to nowhere. You know, squeeze it down, begin with the end in mind, make sure you're thinking through every decision you make because this is where you can get yourself in a heck of a problem for the long term. So be very purposeful with every decision.
So let's think about what the average Millennial looks like. That's the demographic we're looking at, that's how Credit Karma classified this age group. Well, if we think about student loan debt for the average Millennial that has student loan debt right now, it's a little over $31,000 of outstanding student loan debt. Now that may sound bad to you or may not sound bad, but this next statistic, I think, is devastating. 61 percent of student loans have a higher balance now than when they were first issued, which means the value, the outstanding amount on the loan, is higher than when it was taken up. But how's that even happened? How do we even find ourselves in that place? This is a problem. We obviously have negative amortizing debt out there. If you have 61 percent of the loans that are bigger than they were actually issued, that means that people are paying even below what the interest is. It's building upon itself. Now look, I know that there are proposals out there, there's even plans that are supposedly going to fix this. But I'm telling you guys, get very serious. Be honest with yourself on your debt repayment because I know this is a hot topic right now after the Supreme Court decision and we know student loan debt repayments are going to begin back on September 1st. Get very serious to make sure you are not letting your debt continue to build upon itself because this is not sustainable for you or your financial independence in the long term.
So if we know that the average student loan debt is $31,000, next question: what about auto debt? Well, the average Millennial currently carries about $24,000 of auto loan debt. But I think it's actually... the numbers are a little bit deceiving because that number doesn't seem crazy high, but listen to this: the average monthly payment is over $550, amount a month, and the average account age, like the tenure of the loan, is 67.2 months. That's over five years for auto loan debt. So it sounds to me, Brian, if I was going to sort of summarize this, Millennials are not following 23A. They are not subscribing to tried and true rules that will keep them outside of the ditch.
Yeah, I mean, when we talk about 20 down, don't amortize longer than three years, and your payments can't exceed eight percent of your income, when we came up with this, the three years is the part that I think squeezes people. Because that's gonna keep you honest on how much car you can actually afford, because what the car industry is doing is that they just keep expanding how long you can finance it, because it does wonders. We've shown in a lot of case studies that what you know on a three-year payment would be around twenty thousand dollars of financing. If you expand it out to six or seven years, it balloons up to over forty thousand dollars. That looks great if you're selling vehicles. It's horrible if you're trying to figure out how do you keep yourself from getting in too much debt. Do not fall into that trap. The three years is there for a purpose. I want you to be thinking reliable transportation, more of the Corolla, more of the Civic. I'm not wanting you buying the Sequoia or, you know, whatever the fancier version of that baseline is. Because you go get yourself in a pickle of a situation. Cars are supposed to be transportation, not something to impress your peers.
And if we think about average Mortgage Debt for Millennials that have mortgages, it's about two hundred and sixty-one thousand dollars. Average credit card debt from Millennials that carry credit card debt, this is an increase from Gen Z, is almost six thousand dollars. So then if you look at the total average debt across all Millennials, even those that don't have any debt at all, it's a little under $49,000 of debt that is currently sitting on their balance sheet. Yeah, this is why we probably should talk about what pitfalls to avoid, because this generation, you're already being stretched so thin. Let's jump right into some of the pitfalls.
The first one is the mortgages, you know, you guys, this is definitely one of those things where you want to make sure you do it right. The first one is: the mortgages. You know, you guys, this is definitely one of those things where you want to make sure you do it right. I would encourage you to please check out, you need to be following the Money Guys' rules of housing
So, we think that when it comes (and it's no surprise, by the way), let's ask the question: why do we even get here? Well, Millennials, you just said, Brian, that the first-time home buyers are now 36 years old. So, it's right square in that Millennial time frame. And you compound that with housing prices that are soaring. So, it's gotten much, much more expensive to get into a home. So, if you fall into that category and you're trying to figure out how, I do think we have some rules of thumb that we hope can keep you inside the guardrails.
The first is: make sure you understand your timeline. Am I going to be in this house for at least five to seven years? Because real estate decisions need to be long-term decisions. The second thing you should think about is how much am I going to put down on my first house? Now, if it's your first one, you don't have to do 20% down. Our view is you can get into the first house with three percent, five percent, ten percent down, so long as you don't run afoul of the third thing. And that is, your monthly housing costs cannot exceed 25 percent of your gross income. If you can follow those three metrics, those three rules, there's a really good chance that you're going to find yourself in an appropriate house that you can afford, and that will allow you to still fund your other financial goals.
So, this is a good, generalized three rules here, but I want to tell you a lot of you are gonna probably want to go deeper and make sure you, for your own personal situation. That's why we have created a checklist. If you go to money.com/resources
, you can see our home buying checklist. And it actually goes to eight steps or eight things that you ought to go check out before you make this big, heavy decision, to make sure you're doing it right.
Alright, now let's talk a little about auto loans, Brian. Because I think that in your 20s, you can kind of get away with a beater. All you really need is something to get you from A to B, and that's okay. But in your 30s, some different stuff comes into the mind. You know, maybe I've got kids now, and I've got to think about safety features, and I need room, I need more space. So, it's not uncommon that at this stage and age of life, we do have to upgrade our car. Not necessarily because we're trying to get a nicer car to impress our neighbors, it's just a fact of life that our situation necessitates a different automobile. That is not a bad thing. What can be bad is how you approach making that decision.
Yeah, and that's why I do love 20/3/8. We get a lot of press on that. We've got a lot of you guys in the financial, you know, content creation space that love using this rule. But we were like, hey, you know what, it's one thing to talk about, it's another if we can actually give the tool or the resource that helps with this. So, I would encourage everybody, if you go to moneyguy.com and you just look, we have a nice search bar up there, just type in 23/8. If you type in 23/8 at the top of our Money Guy website, you'll see we have a hub, a 20/3/8 Hub
that's actually got a calculator built into it. This thing is going to help you out tremendously as you're trying to start this process and working through and making sure you're making the right decision.
And then when you think about this affordability, how much car can I buy, where should I be? I want you to keep this because we talk all the time about 20/3/8. We've walked through that 20% down, three years financing, eight percent of gross. But there's another piece that's so, so important that folks in their 30s, you can't miss this. When it comes to your auto payments, you cannot let the amount you are paying for a car exceed the amount you are saving for the future. You need to make sure that your monthly investments are greater than your car payment. If you're not in that situation, there's a really good chance that you're doing it wrong. So, make sure you do an honest self-assessment of where you are and how much car you're in.
And then, the last category we want to cover is, of course, credit card debt. Because I think lifestyle creep is completely real. You know, you think when you graduate high school you're equipped with all the peer pressure stuff. But no, it happens when the neighborhood you live in, when you start having children and their birthday parties. Don't use credit card to be that bridge to nowhere. Remember, credit card use is okay, but credit card debt? No way, because it is a complete trap. And I don't want to see you make that mistake. So, if you are there, if you have credit card debt, get out of it. To thine own self be true. Understand, am I a responsible credit card user, or am I literally someone who needs to cut it up, freeze it, get rid of it, not do it? And be honest with yourself, so that you're not robbing from your future self.