Have you ever had one of those moments where you had to admit to yourself that your parents were actually right? And perhaps beyond that even that they were really smart (or if you’re from Boston like me, “wicked smahht”)? It’s humbling…I have one of these moments at least once a week if not more often. And as much as I may hate to admit I might be wrong about something, I’m so grateful that I’ve had my parents to show me the way (financially and otherwise).
As I reflected on what I wanted to write about this week, I’ve been thinking a lot lately about exactly what it was that my parents taught me about money and life that have made such a difference in how I was able to build a strong financial foundation that has afforded me financial freedom and choice in my life. I also thought it might be helpful to share what they taught me so that you could not only learn from what they taught me, but also understand why it’s so important for me to teach others how to plan for their financial futures and use their money efficiently and effectively.
While there were many lessons that my parents taught me, I’ve boiled it down to 3 key lessons that have impacted how I handle my money and to a larger extent, my life.
Lesson #1: Failure to plan on your part does not constitute an emergency on mine.
This phrase was (and still is sometimes!) one of my Dad’s favorites. Any time I used to try to rush him to do something that I needed quickly (a ride to the mall, a decision about something I wanted to do, etc.), this gem of a statement would pop up. And while it annoyed me when I was younger, I’ve come to appreciate the importance of looking ahead at where you want to go and establishing a roadmap on how to get there.
From a financial perspective, this lesson also applies. I’ve had clients in the past who tell me “so-and-so did this” or “so-and-so wouldn’t let me XYZ” and that’s simply putting the power in someone else’s hand when perhaps you didn’t take the time to plan financially in advance on your end. When you understand your “money map” and know how your money is being used, you can use money as an effective tool to live your life and avoid situations where someone else has control over the decisions that you make.
Plan ahead, and you’ll be less likely to run into an emergency where you’re dependent on someone else! As I say to my clients all the time, focus on developing your own personal economy and you’ll understand what true freedom and choice is all about!
Lesson #2: Live within your means
This one may seem obvious, and it’s said often by lots of financial experts, yet I find that the true lesson in these words is often missed since they are repeated so often (and people get tired of hearing the same things). While both of my parents used this phrase and lesson often, since my Mom was in charge of the family finances it was primarily her who taught my sister and I what this really meant, both in word and in reinforced action.
Let me share a story from when I was about 17 or 18 years old. (PS – My Mom doesn’t remember this story, but I absolutely do because it taught me powerfully about living within my means.) At this point, I had a license and my parents had given me a credit card that was an extension of one of their cards. This was as much to learn how to use a credit card responsibly as it was for my parents’ convenience for me to be able to buy certain things on my own that I needed (with their approval in advance). One day, my mother told me I could buy new basketball sneakers for the upcoming season and I could spend $80. I headed off to the mall after school that same day and found a pair of sneakers that cost $100.
I rationalized to myself, “what’s another $20? This newer brand and color looks better so I’ll go with the $100 pair.” Time went by, and a few weeks later my mother showed up at my bedroom door holding her credit card statement and said “do you have $20?” I looked at her funny and said “yes, I do – why?” She said “if you want $100 sneakers then you can pay the difference from the $80 I asked you to spend since you work and earn your own money.”
Now, this might seem harsh to some of you but I have to tell you it was one of the best lessons my parents ever taught me about money. It wasn’t about the fact that my parents couldn’t afford the additional $20 (they totally could). This was a lesson that taught me the importance of planning and sticking to a plan because without one my parents would not be happily and successfully retired in their early 60s with the opportunity to spend several days a week watching their 2 beautiful grandchildren. Those small $20 differences add up over time when you start to think about the freedom that our daily choices can provide for us, don’t they?
Lesson #3: Always be ahead of the “financial 8-ball”
While my mother didn’t necessarily explicitly teach us this lesson, her financial habits and actions of sitting down each weekend at the kitchen table to pay the bills and attend to financial matters showed us everything we needed to know. Sometimes it was simply writing checks and paying the bills, sometimes it was following up on charges that didn’t make sense (i.e. medical bills, odd charges on monthly bills), or perhaps even transferring money into a savings account. No matter what she was doing, it usually involved about an hour to 90 minutes of her time and for the most part we never saw her sit down with the checkbook and the bills again until the following weekend.
I use this habit with my clients all the time, and I call it a “money date!” It’s amazing how impactful and freeing it can be to sit down just once a week and handle all of your financial matters for the week ahead. You stress less about money knowing that you have set space aside to pay your bills, transfer funds between accounts, and look ahead to make sure you’re always ahead of things that you need to address.
So what does all of this boil down to? Having a plan, living within your means and being ahead of the “financial 8-ball” doesn’t just happen without some effort on your part. In my mind, having a cash flow plan (a.k.a. “budget”) that helps you to be in control of your money is a critical piece of being on a path toward financial freedom and independence. But here’s the catch – you have to start somewhere, yet many people were never taught and don’t know how to develop a plan that works for their life.
If you’re looking for a place to learn how you can get started on your own path, make sure you take advantage of the FREE CALL this coming Tuesday to get the information you need to move beyond financial overwhelm and stress into a world of financial peace!!