One thing that you will find in the personal finance blogosphere is people who have gone through some pretty crazy situations. Some bloggers have found themselves in a mountain of debt, and documented their journey from a negative net worth to a positive net worth. Other bloggers document as they get closer to financial independence using a calculated regiment of frugality and investing.
And then there is me: I have never been in massive debt. I never looked at my bank account and saw $(1,500). And then only to realize my credit cards were maxed out. I would be lying if I said I have never had my share of sticky situations. But in each situation, I was able to step back and assess the issue at hand and work on getting back to my yellow brick road. NEVER massive debt. So what could I possibly share that is worth reading?
My parents, and particularly my father, taught me some very important financial lessons, if not life lessons. I have combined those lessons with my experiences that I have gathered from school and the workforce since I graduated from college. I have a very analytical frame of mind so I like to breakdown situations into consumable sections. And if I had it my way their would be a lot of numbers.
I hope some of you parents out there can use these lessons to connect with your kids. And if my peers never got these lessons, I hope some of you can also digest this information for your own benefit!
Lesson #1: Want is not need.
Photo courtesy of babasteve
I was not a particular needy child. When it came time to make a X-mas list, I would narrow it down to one or two things. Believe it or not, this was to the dismay of my mother, who loved buying me gifts. So, my itsy bitsy list wouldn’t stop her. And my love for tearing open gifts wouldn’t stop me. But once everything was opened, I would take the things that were actually on my list into my room and leave everything behind. The other gifts would sit under the tree in their lonesome, and I would play with the few gifts I actually wanted. Quirky? Absolutely.
But I was still a child. And as children go, every now and then I would see something I absolutely had to have. In fact, I NEEDED it. If my parents would have asked me, I could have written them a dissertation detailing all of the reasons as to why I needed the item and how detrimental it would be if I did not get it. Because of how little I actually asked for things, my parents could have easily rationalized this behavior to themselves and purchased me the item. No matter the infrequent nature of these outbursts, I am glad my parents did not enable this behavior.
My parents, from the time I was a young child to the time I was an adult, talked to me in a logical manner, though. A lot of parents often times feel like they don’t need to explain their reasoning. But, I think it helped me to learn the importance of smart decisions and logical conclusions.
A typical convo between a 14 year old me and my Dad would go:
Dad: So you need this $40 baseball? It seems the only benefit is that it clocks your speed..
Me: Yes! How else will I know how fast I am throwing?! I want to pitch when I get to high school!
Dad: Are you comfortable with your development? What about your coach?
Me: Yes, I am. And he says he is.
Dad: When you pitch, do you think you are better than a lot of the kids in your league?
Dad: Then what’s the issue? The batting cage costs $1, I’ll take you by a few times a year.
Me: Ugh, ok.
Notice one thing: My Dad did not say “No!” Why not? It would have led to a pointless argument. My Dad always believed that children are more logical than parents often give them credit for. And in my opinion, he was right. I give him credit for being patient enough to discuss all of these things with me. But what did I gain?
When I go to purchase an item, even though I haven’t had to clear purchases with my dad for a decade, I break the decision down into questions I know he would ask. Can I find a cheaper alternative (eg batting cages vs speed ball)?
To you this is a simple discussion. To a kid who is starting to develop his outlook on the world this is a very influential lesson.
Lesson #2: TINSTAFL, There Is No Such Thing As a Free Lunch.
Photo courtesy of D’Arcy Norman
Every now and then the aforementioned lesson would not work on me. But true to his nature, I would not receive a “No!” as a response. If we somehow got into a stalemate, that is where we would stay. There was no executive veto to end the discussion. I just knew one thing: He was not going to pay for it if he didn’t agree with it, so I needed to work for it on my own.
And that brings me to the kindling of my entrepreneurial spirit. When I was 8, I wanted a new bike. My Huffy wasn’t nearly as cool as the Specialized and Diamondback’s that my neighbors owned (If you aren’t a bike person, this is similar to comparing a Lexus to a Hyundai). I can’t really blame my dad for not getting me the bike now that I look back on it, though. I was going off of jumps in the woods and bending spokes left and right.
But I was determined to get a new bike. I needed it (you’ve heard that one, haven’t you?)! I began to advertise my services to my neighbors. What kind of services was I offering? I would shovel snow, cut grass, rake leaves, pull weeds, take out trash, or help with any other job they wanted assistance on. Whether they actually needed work done or just admired my entrepreneurial spirit, the neighbors started paying me to do work. I was cleaning out gutters (first story), helping with gardens, doing snow removal during blizzards, and more. Most of the stuff was hard work and they got a great deal. I expanded my business to the food & beverage industry. My neighbors apple tree supplied me with the supplies to sell fruit, and my dad made me the lemonade. I paid my dad back for the “costs,” but I am pretty sure he subsidized me big time. He must have just enjoyed seeing me work so hard towards a goal. My lemonade stand did teach me one important business lesson: Location is everything. Our street had no road traffic. So I went door to door. (Note: This was a neighborhood where everyone knew everyone and my dad stayed outside as I did it)
After a few months my goals started to change. I started to realize how hard it was to earn a few bucks, so I wasn’t about to blow it all on a bike I was going to beat up when I already had a free one. After 6 months of working hard and raiding the laundry, I had enough money for the bike. And that bike would have been SEXY.
So, my dad bought me the bike? No. So, I blew all my money on the bike? No. I got gun shy in a major way. I realized spending 6 months of hard earned money on a single possession that I would use to skid around (kill the tires), go off jumps (kill the shocks and spokes), crash into curbs (warp the wheels and bend the spokes), and otherwise just ruin it. I decided I wanted to save the money for something more deserving of my money. I kept my Huffy.
My dad did not make me work, he gave me the opportunity to work for something I wanted. By working I realized the value of a dollar and looked at purchases in a different way… even at a young age.
Lesson #3: The best time to plant a tree was 30 years ago, the second best time is now.
Photo courtesy of woodleywonderworks
I am very happy my Dad followed up my last decision with a trip to our local bank a few days later. I got a joint savings and checking account with him. He told me that only I would deposit and withdraw from it, but he had to be a joint user because I was a minor. My Dad probably had a lot to do with getting me to open the account, but I recall it being my idea. My Dad always went to the bank, so I wanted to mimic him after he explained the concept of banking to me. The draw of a “more secure piggy bank” was incredibly appealing to me. Accessible, but only to me! :)
I opened up the account. For 8 years, I would either go with my Dad to the bank or give him money and a deposit slip when he went. And that is where my life diverted into the world of personal finance. At the age of 8.
I never thought of my bank account as a spending account, though. My dad constantly reminded me that I needed a cushion. “What happens when you want a car in high school?” Because of the TINSTAFL lesson, I thought it was completely reasonable that I would not be getting a free car. He wound up springing my sisters old Dodge Neon on me much to my surprise. The ol’ man wasn’t as tough as he seems, eh? All I had to do was pay for gas and insurance. Even then, I think my dad was subsidizing my insurance payments. But as the rest of this post goes, the ideas was that he wanted to make sure that I understood that nothing was free.
I was continuously educated by my dad that I was ahead of the game and that everything I did now was worth tenfold down the road.
How well did these lessons carry on?
Once I got my car at 16, I worked part-time all through high school. I worked at a restaurant as a dish cleaner, bus boy, and waiter and Best Buy as a salesman after that. At this point I was earning actual money (as in a sizable amount), as opposed to the money I was making shoveling neighbors driveways and selling lemonade door-to-door. I was never perfect with my money; I did buy an $800 sound system for my Neon (at my employee price for Best Buy!).
But I continued to work and continued to save.
When it came time for college, I applied to a bunch of different schools. I got into schools that would have cost me $50,000/year. I wound up choosing a state school, the University of Maryland. Why? It was ranked in the top 20 for my intended major and I wanted to pay my way through school. I found accomplishment in not having to ask my parents for money.
Just as I did with high school, I worked throughout college. The main bread winner for me was a job where I ran an exterior painting company. I made enough money in just two summers to pay for 3 years of school plus a two month bicycle tour across Europe. On top of all of that, I got jobs with other companies for the other two years of school. One company I worked for was UPS — UPS was HARD work but it looked great on my resume.
Oh, and what am I riding driving? A 2004 Hyundai Accent with 90,000 miles on it. Even after being in my career for a few years I have not caved to the pressures of my neighbors with Specialized bikes co-workers with brand new Mustangs.
I would say these lessons were pretty influential, what do you think? Did your parents teach you anything that you would add to the list?
This post is a modification of a guest post that I originally wrote for Frugal Dad titled: The Three Most Influential Lessons My Parents Taught Me.