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The 1990s gave us the Spice Girls, Beanie Babies, and the “Rachel” haircut. But not everything about the decade was dope.
We used student loans and credit cards a lot more, just for starters. Some mistakes were so bad they still affect us today. For those people who remember the ‘90s, check out these four money moves that were phat—NOT!
1. Paying with student loans
Tuition rose fast. The amount of cash we borrowed to pay for school rose faster. The National Center for Education Studies reports the average annual cost of a four-year college went from a little more than $12,000 in 1990 to $16,000 by the end of the decade.
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But the Pew Research Center states the average student debt went from $9,600 to $18,000 by 1998. People either borrowed for a school that was too expensive, or they spent extra during those years for a false lifestyle that crippled them right after graduation. As a result of the big monthly payment, they couldn’t pay the debt off for years. That’s why many people still have loans from the Bill Clinton era!
Related: 5 Ways to Pay For College Without Loans
2. Increased usage of credit cards
We kicked credit card spending into gear in the ‘80s, and we shifted it into overdrive in the ‘90s. Credit card debt tripled to $600 billion by 1999. We used plastic—and paid interest—for vacations, gasoline and even groceries. We probably thought we were beating the plastic companies at their own game by using their product and “their” money. In the end, we were just beating ourselves.
No one should be down with that.
Related: 3 Signs You're Giving Your Credit Too Much Credit
3. More spending and less saving
The economy was humming, and the Dow Jones Industrial Average went from around 2,750 points to 11,500 in the ‘90s. Rather than saving more, we started spending more. The Federal Reserve says our personal spending outpaced our disposable income almost every year.
To boot, the average savings rate of U.S. households plunged to less than 1% by 1998. When you save so little and spend so much, it’s no surprise you end up more broke than Billy Ray Cyrus’ achy heart.
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4. Day trading
This type of investing flared up in the late ‘90s because of the stock market boom. Some people thought they could buy and sell their way to big money by playing individual stocks over short periods of time.
The only problem? Most of us aren’t stock brokers. We just got caught up in the excitement. In fact, professors Brad Barber and Terrance Odean at the University of California, Berkeley did a study and reported 80% of active day traders lost money, and only 1% of them could be called “predictably profitable.”
Since trading is a guessing game—not too different from the roulette wheel—a bunch of people lost money faster than they could say “oh, snap!”
No matter the decade, you must make smart financial decisions every day. Don’t use credit cards, stay away from debt, save more, and spend less. You’ll grow some serious wealth that way, and when you do, you can buy all the Beanie Babies you want.