How I Learned to Handle Money: Do the Opposite of My Fiscally Irresponsible Parents
How I Learned to Handle Money: Do the Opposite of My Fiscally Irresponsible Parents
Ironically, by being so utterly horrible with money, they taught me some great life-lessons.
For the audio version of this article, read by the author, go here.
My parents were absolutely terrible with money.
My mother worked for the same company for more than twenty years, and unfortunately, she invested most of her retirement money in that company; when it went bankrupt, she lost almost everything.
And when she died suddenly at age 62, my father no longer had her salary to help pay their two mortgages. They were already behind on their payments and within weeks of her death, he had to declare bankruptcy, losing the house entirely.
My parents had decent, middle-class jobs, but my childhood memories are of constant financial stress: my parents always arguing about bills and spending, and occasionally, the fear we would lose our house to foreclosure.
This article isn’t about blame. I know my parents made sacrifices for me and were trying to do their best.
They were who they were.
When I hit adulthood myself, I had two choices:
Emulate my parents, living the kind of precarious financial life they had modeled for me.
Or do the exact opposite.
I chose the latter, to do the opposite of my parents.
Here are all the things they inadvertently taught me not to do:
Spend more than you make.
My parents weren’t into self-denial. My mom wanted a new couch and new outfits, and my dad wanted a new car, a CB radio, and more camera equipment — their bank balance be damned.
I understand why my parents were the way they were, especially my mom. She had a terrible childhood: her family was poor, and her father abusive.
For her, material possessions became a way of showing she was no longer a poor, frightened little girl.
My father was better, and initially, he tried hard to reign in my mom’s spending. But it didn’t work, so he gave up and started buying everything he wanted too. If she wasn’t depriving herself, why should he?
But their chronic overspending meant they could never get ahead. Rather than make them happy, it was a source of constant anxiety.
As a result, as an adult, I have always spent less than I made, even when I didn’t make very much at all. I pinched pennies and lived with way too many roommates. For a long time, I didn’t even have credit cards.
Save nothing.
When I was fourteen, my dad was fired from his job. Financially, things were so dire that my grandfather had to step in and give my folks enough money to keep making payments on the house. But even when my dad finally found a new job, my parents still didn’t save anything for future setbacks.
My mom died at 62, and my dad died seven years later, completely broke, with nothing except for Social Security and some help from Brent and me.
Meanwhile, for one of my first real jobs, I earned $16,000 USD a year, which wasn’t much, even in 1990. But even so, I immediately started building a small emergency fund, and as soon as I became eligible for our company’s 401k plan, I invested the maximum allowed.
Caveat: I was lucky to be a single man with no children. I know not everyone’s situation is as simple as mine was.
If you get a windfall, spend it all right away.
Lots of people have a bit of financial good luck at least once in their lives.
In my parents’ case, my dad won a $110,000 casino jackpot.
This is it, I thought happily. This is the break they need to finally get ahead!
The $110,000 jackpot could be paid out over twenty years, and given my parents’ history, I wanted them to choose that option. Instead, they took the $67,000 immediate lump sum.
That’s okay, I thought. They can still invest it in retirement accounts.
But no, my mom promptly bought new furniture and even more new clothes she didn’t need. My dad bought expensive new camera equipment for his already-failing photography business.
In months, the money was all gone.
During our thirties and forties, Brent and I were lucky enough to have one large financial windfall and one small one, and we immediately invested both.
It’s a big part of the reason we’re financially comfortable now.
Don’t diversify.
I mentioned earlier that my mom invested all her retirement money in the company where she worked. It wasn’t entirely her fault: her employer gave her annual bonuses in company stock.
Nonetheless, one of the most basic rules of investing is to diversify — spreading your risk over lots of different financial vehicles. Then you’re protected if one or two go bad.
My mom’s company did allow workers to transfer their company stock into other retirement accounts, and I repeatedly begged her to do just that.
But she said she believed in the company and thought that would be disloyal.
When they finally did go bankrupt, my mom lost 75% of her savings.
Not surprisingly, Brent and I have always ensured our investments are diversified.
Take on debt. Keep financial secrets from your spouse. And don’t pay your taxes.
Okay, now it seems like I’m just piling on. But, yes, my parents also racked up huge debts, including massive credit card debt.
And if I was hard on my mother before, I should point out that at one point, my father stopped paying their taxes — and didn’t tell my mom. Years later, when the IRS finally caught up with them, my mom had no choice but to cash in what remained of her retirement investments to pay the back taxes and financial penalties.
Suffice it to say, I don’t do any of this.
I’ve always been really reluctant to take on debt. I moved home after my first year of college rather than take out student loans. And with Brent, I did finally get credit cards, but we’ve always paid the balance in full at the end of every month.
I don’t want any of this to sound like bragging — and I’ve dumped on my parents enough already — so let me end with the most important lesson they taught me not to do:
Expect that money and things will bring you happiness.
I said before my parents never denied themselves anything.
Despite that, they were still almost always miserable, especially my mother. She loved buying things, but once the thrill of buying something new wore off, she then needed to buy something else. It was an addiction, and she needed her fix.
I know she was dealing with her anxiety about her unhappy life the only way she knew how.
But it never worked. No matter how many nice couches or new outfits she bought, she really couldn’t buy happiness — especially not with the drama that resulted from her overspending.
I never tried to buy happiness. I looked for it elsewhere — specifically, in my marriage, my friends, and in interesting life-experiences.
Maybe that’s why I took so quickly to the nomadic lifestyle. I don’t miss material possessions because I never cared that much for them in the first place.
I’m truly sorry my mom and dad lived such unhappy lives. But at least they ended up teaching me how to have a much better life.
And for that, I’m weirdly grateful.
Michael Jensen is a novelist and editor. For more about Michael, visit him at MichaelJensen.com.
The story of your parents sounds eerily familiar. Starting a family at the ripe old age of 18, with 3 kiddies by 24, I lived your parent's (and mine) story, til I got that one windfall, but used that to change my financial trajectory, and from the age of 30 never got in debt again, and with Fred for some 35 years, have never owed anything to anybody other than 30 day bills, which as you say are paid at the end of the month. The feeling of being debt free is almost euphoric.
Excellent article. I, like you , grew up in similar circumstances. My mother had a magic dresser drawer where she put bills and notices and they "disappeared" What bills, what past due notices? And, like you, I did exactly the opposite of my parents and I am the only one of 7 children who never declared bankruptcy. I'm not wealthy by any definition, but at every moment I know exactly the specifics of my financial situation. My husband and I are comfortable and happy and part of that I attribute to knowing about money.