I have become convinced that while credit cards have become a significant burden on the general public, they aren’t the biggest obstacle holding people back financially.

I used to think that outside of the personal behavior, the credit card industry was the biggest culprit to those stuck in a financial rut. The average college student has $2700 in credit card debt the day they graduate (in addition to an average of $17,000 in student loans). But over the course of the last couple of months, I’ve changed my mind and would now put the automobile ahead of the credit card.

I’ve been volunteering my time to help others with budgets and financial planning and recently, over lunch with the dean of my alma mater’s business school, pitched him on the idea of a one-day seminar to give the soon-to-be graduates some real-world financial advice.

Considering this was held on a Saturday, was voluntary, and only mentioned in a business school ‘happenings’ newsletter, I would have been happy to get 10 people to show up. Much to my surprise, there were 29 students who showed up, with one brought her parents along.

While I was jived at the attendance, my informal (and obviously non-scientific) survey results are what surprised me the most.

Of the 29 students:
first, the credit card debt and student loans were in line with the national average – no surprise there.
- 17 had full-time jobs currently or lined up post-graduation.
- 14 mentioned the first thing they plan on doing is buying a new car when they start working post-graduation.
- 19 owed more on their car than they had in credit card debt. Only 4 did not have a car payment.
- 11 had a car 2 years old or newer.
- Of the 17 who had post-graduate jobs already in the bag, 3 owed more (via debt or total due on the balance of a lease) on their car than their pending annual salary.
- 6 had a higher monthly car payment than their monthly rent.
- Of those with student loans, less than 20% were thinking far enough ahead to budget for their repayment plans.
- Only 2 had a monthly budget
- 4 did not have any credit card card debt, 1 as the result of a bankruptcy in September of 2005 (at 22 years old)
- The combined monthly car payment of the 29 students in the room: nearly $6700 – an average of $230 per person ($267 when you drop the 4 who didn’t have a car payment).

Now here is the lesson for you:
If those 29 students each took that $230/month and invested only that much from now (at an average age of 23) until they are 60; at a very conservative annual return of 8% that would result in a nest egg of $600,000 at age 60. At 10%, a cool Million and change, and at a historical market average of 12%, nearly $1.7 million.

Think about that next time you even consider heading in to the car dealership.