Money lessons
On the tail end of the baby boomer generation, I have made many money windfalls and mistakes. Every year I have filed my own taxes and done my own investments. I’m sure a professional could have navigated the course with much more precision, however, the knowledge I have gained is priceless.I am not quite sure where I heard or was exposed to one simple statement that made an impression on me in my early years. The simple concept that no one will care more about my hard earned money than me. That does not mean I had to figure it out on my own. It simply meant that I must be as careful choosing investments and advisors as I would choose a babysitter or spouse.
So what has been the most important lesson along the journey? Live within your means. In this day of leverage and exploiting other peoples’ money (OPM), too often I have been burned by simply stretching the budget or counting on a guaranteed payout that never materialized. Let’s be clear, I am not risk adverse. There have been times I have gambled and won – won big!
Live within your means has more to do with creating a solid reserve to cushion downturns and mistakes. Sure there is a budgetary component to living within your means. However, it has more to do with earning the right to place bets or get into the game rather than arbitrarily engaging. If you find yourself with too much month left at the end of the paycheck, then you have not earned the right.
I am on my third rise from a fall. The first had everything to do with social immaturity and not picking a good life partner. When that ended, so did my financial health. The second came from trusting a Blue Chip company that had me locked with golden handcuffs. On paper I was a millionaire. When the company filed for Chapter 7 bankruptcy, many of us were caught blindsided. Despite what you may hear from your politicians, there is no such thing as too big to fail in a capitalistic society. I have once again dusted myself off, repaired my bruised ego, and set a course for financial freedom.
This time my wife and I have made a commitment to buy stuff with cash. No more mortgages, no more car payments, no more credit cards. We will live within our means. Our credit is great but our expenses are high. There was a time when I was looking for every angle to leverage buying power or finance something I could not yet afford – not anymore. If I can not pay cash for it, I will not buy it.
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Mmm, I can understand where you’re coming from Mitch. Definitely.
I came from that line myself.
I prided myself in being a “risk taker”, convinced that “nothing ventured, nothing gained.”. I bought stuff with intention to make big money, but most of these “great ideas” often fizzled away to nothing.
Today, I’m scarred financially.
Yet, I’d like to push this idea to you: the greatest managers and leaders are those with the deepest and largest and longest scars on their bodies.
Everyday, it is because of my financial scars that teach more to tread cautiously, but I keep learning, keep believing, and now, I’m earning more than ever before. My financial scars of my past didn’t stop me from venturing, from learning. I don’t use my credit cards as much as before, and now I’ve learnt to rely on my wife to hold the finances, and I focus on making and increasing wealth avenues, as well as the accountant to ensure all’s in check.
Learn from it positively. And it’d serve you well too.
Another thing I learnt was to segmentalise my money into “packets” which included money to be used, money to be saved and money to be invested. It works. Follow it strictly.
Living within your means is so important and I find it’s the unwillingness to do this that starts the snowball of money problems. Nice article!
George,
Many of us are trying to live the dream life, but lack solid financial foundation to do just that.
I am all about cash.
One of the Gen Ys (I call them Gen Whines, because they tend to whine if they don’t get it all NOW) at work asked me about car financing and said “I paid cash for my car” and she seemed very confused. She kept asking me about financing and I kept saying “But I just got a certified cheque from the bank and bought my car.” Then I explained to her the day I bought my car was the day I started the “new (used) car in 2017″ fund. More confusion.
I avoid lifestyle inflation.
I make about $33K (Canadian) and while the Great Recession did not affect us as much here, the industry I used to work in was completely destroyed and the jobs are never coming back. So I work in a not so good job for $33K a year. I get yelled at by stupid people all day but I get raises, bonuses, health benefits and a pension so while it’s not great, it’s also not bad. There is some room for advancement within the company but that might take a few years. With each raise, or bonus, I maintain the same lifestyle, and put that money away in savings/retirement.
Avoid Accumulation
I have not bought new furniture in years. I get stuff from the freecycle in my building. I bought a 20″ tube TV last winter when my TV died. I don’t feel the need for a big flat screen when I watch 4 TV shows a week. The TV is for watching sports or the occasional movie. My 7 year old microwave started shooting flames last month so I did buy a new one. I follow the one in, one out rule. New jeans? Better be because the old ones are full of holes. Same for shoes, shirts, and any other article of clothing. This rule also helps me control my weight as well as my finances. I am not going to buy new jeans cause the old ones don’t fit!
Embrace Boring
I am boring and I like being boring. When you are boring, there is little room for drama. I despise drama. Sometimes hanging out with you friends on the balcony is just as much fun as the uber expensive white water rafting trip with your friends.