Thursday, March 05, 2009

My Father's Wisdom--3 Financial Rules to Live By

This is one of my rare completely non-writing related posts.

Talk about the economy is everywhere--the radio, the television, newspapers, the internet, the local coffee shop. You can't get away from the sense of fear pervading the US now. It's as if everyone is waiting for the other shoe to drop.

I am worried, not so much for myself, but for my parents and in-laws. They are all retirees who worked hard, saved and invested, played by the 'rules' and find their nest-eggs painfully depleted.

I am also worried for my oldest son, a high school sophomore, who is starting to think about college. I hope that by the time he graduates, he will be able to find a job--both one that allows him to support himself and that brings him professional satisfaction.

These are uncertain times. And most of my peers have neither had to face this kind of downturn, nor do they have direct family memory of the depression. I do. Because they had me late in life, my parents are essentially old enough to be any of my friends' grandparents. And my parents grew up during the depression.

My father taught me 3 rules of financial life that I have followed since I was a child earning babysitting money. I don't know if he ever sat me down and dictated these rules to me, but I know I grew up with them always in the background. They are pretty simple:

1--Save first
2--Live below your means
3--Look at item cost in terms of hours worked

I have followed those rules as a kid earning pocket change, as a grad student, as a newly minted physical therapist in her first paying job, up to today with my family.

No matter what my income has been, these rules have applied.

I only failed to follow these rules (and the corollary of don't buy on credit) once when I was 22 and starting my first job as a physical therapist in NYC. I had an apartment but no furniture and used my new credit card to buy what I needed. While I knew I would have the money to pay the bill in fairly short order, when my father found out I was carrying credit card debt, he freaked out. And so did I when we did the math and figured out how much that furniture ended up costing me after interest.

I live in a fairly affluent area and many of the people I know have spent decades living up to and beyond their salaries, relying on the annual bonus, and expecting the double digit rates of return on their investments. There have been times where I felt twinges of envy for a bigger home, a newer car, a glitzier vacation. When my kids were younger, they complained about what their friends had that they didn't have.* But no amount of envy would push me to violate my dad's 3 rules.

It seems to me that if everyone followed these rules, then it would be harder for greed and senseless consumption to become our culture's guiding principles.

*True story. When my older son was about 10, he complained that his friend had no limits on his TV/game/computer time and that this friend was "so lucky" because of it. About an hour later, said friend was at our house when I was baking bread. I overheard him saying to my son "you are so lucky, you mom makes you homemade bread." That was the last time my son complained about how 'deprived' he was.


  1. I agree with your father's advice completely. Saving is so important.

    However, the government doesn't want you to save. And they will create inflation to *make* you spend.

    That's the problem.

  2. This is an excellent post, Lisa, and so, so true. My parents were of a similar mindset, and their wisdom helped me avoid a lot of pitfalls, even when I was young and new to credit cards. Your son will certainly benefit by having this great advice passed down to him :).