I’m once again pleased to present another guest post from my good friend, Paula Pant of Afford Anything â€“ the blog that believes money should never hinder your dreams. If you get a chance, stop by her site and check it out — you won’t be disappointed.
Since good â€˜ol Mom and Dad didnâ€™t launch their lives in America until they reached their 40s, they flouted traditional personal finance advice, which says youâ€™ll be in big trouble if you donâ€™t start young. They were solidly in their mid-40s when they opened a retirement account and bought their first home. So by all accounts, they should be suffering in retirement. But theyâ€™re not. Why?
Old-fashioned personal responsibility saw them through. Here are seven money skills my immigrant parents taught me:
7. Never Assume Someone Else Will Bail You Out
They had no family or friends to bail them out if times got rough. Theyâ€™d have to rely on themselves. So priority number one was a hefty emergency fund. They didnâ€™t call it an â€œemergency fundâ€ â€“ theyâ€™d never heard that phrase. They simply knew that if their car broke down, they couldnâ€™t go to work. Then they might lose their jobs. That was not an acceptable option, so above all else they prepared for the unforeseen.
6. You Donâ€™t Need to Leave the House to Be Entertained
Iâ€™m still surprised when I see families eating at restaurants or taking vacations together â€“ we never did that. Yet we never felt poor or deprived. It simply didnâ€™t occur to us to do that (at least, it never occurred to me) because we were having so much fun at home. Most evenings weâ€™d just sit around the dinner table, long after the meal was over, talking late into the evening. Sometimes weâ€™d play board games. Occasionally weâ€™d watch TV. When we left the house, it was to play at the park. Restaurant meals were reserved for birthdays, when we went to the nearest budget franchise.
5. Donâ€™t Buy Depreciating â€˜Assetsâ€™ Unless You Absolutely Need Them
My parents shared one car for years, an impressive feat in a car-dependent city like Cincinnati where public transportation is slow and bike lanes are nonexistent. My dad rode the bus to work while my mom would run errands in the family car. When they finally did cave and buy a second car, it was a pragmatic choice: safe, reliable, and without a single bell or whistle.
4. A Nice Home Is Different From an Expensive Home
We never bought more home than we needed. Our first house, which we bought in the mid-1980s, is ranked by Zillow.com to cost $90,000 at todayâ€™s prices. That would have been $45,000 in 1985 prices, minus any appreciation on its value. Yet we knew the difference between a costly home and a nice one. We planted flowers in the front yard and hung a birdfeeder in the back. My mom kept the inside spotless. We invited the neighbors over for dinner regularly â€“ nothing brightens up a home more than guests.
3. Spend Lavishly on Whatâ€™s Important
There was one item on which my parents spent lavishly: my education. From Day One, I attended the best private schools money could buy. My dad hired professors from the local university to give me one-on-one math and science tutoring. When I won a scholarship to a reputable private high school, my parents encouraged me to reject it in favor of paying full price to attend a more prestigious high school. This idea is unpopular in personal finance circles, which question the â€œROIâ€ of your education. But my parents believed that education is priceless. They never viewed it as a financial investment but rather as the foundation for a well-rounded life.
2. Work As A Team
My parents approached the world as â€œwe.â€ When one personâ€™s income faltered, the other person stepped up to the plate. When one person became extremely busy, the other one accepted additional errand burdens. No one kept score. Their union was one of constant give-and-take.
1. Know Your Limits
While my parents were the King and Queen of Frugal â€“ clipping coupons, growing vegetables in the backyard â€“ there was one money-saving tactic they refused to do: buy used fabrics. Used cars and books were standard â€“ my shelves were stuffed with pre-tattered Baby-Sitters Club books. But they drew the line at wearing used clothes or sitting on used furniture. As an adult, I donâ€™t share that bar â€“ all my furniture is used â€“ but the broader point remains: know your limits. Decide your minimum bar and stick to it.
Photo Credit: Conspiracy of Happiness