Most of my relatives have divergent ideas about money and its place in our lives. By relatives I’m including the wide range from my wife to my parents to my in-laws, etc. I realized a long time ago that it is a trivial undertaking to pick out the flaws in other people’s philosophies or actions – while at the same time failing to recognize them in your own thoughts and actions. However, I still find it a fairly useful exercise to try and determine the how-and-why of people’s good decisions and bad decisions. Even more important is trying to understand the ‘why’ behind those decisions.
My mother’s parents (my grandparents), for instance, were always quite frugal. They were both raised on farms in the 20s and 30s and suffered through the Depression. My grandfather left home to join the Army pre-World War II, serving in the horse cavalry – and yes, it’s hard to believe the US still had a horse cavalry less than 80 years ago, isn’t it? Here are some of their views towards money that I think are interesting, both good and bad, and my take on them.
- Investing, a good habit. My grandfather was an early fervent believer in investing. Coming from a rural background and suffering through the Great Depression you might expect him to be very wary of investing, but he was quite the opposite. He invested heavily in the market, and on a schoolteacher’s salary did quite well over the years. He invested in the market although he had a state pension, and could have chosen to spend that money on other things. From him I learned a very conservative study-buy-and-hold approach. Although I didn’t know it at the time I learned it from him, his approach was basically the same as Warren Buffet’s. While it didn’t make my grandfather a billionaire, it did make him a huge ‘extra’ retirement fund on top of his pension and my grandmother’s.
- Never selling, ultimately a bad habit. My grandparents maintained an almost emotional attachment to some of their stocks and held them year after year, even in times of declining prices, shrinking dividends and their own advancing age and deteriorating health. They saved these stocks thinking that they would be passed on to future generations (for example, me). But as they moved into more and more expensive housing (nursing homes are much more expensive than regular apartments, obviously) until he passed away, it became obvious that all of that money would not outlive both of them. Had they moved it into a savings account paying 5% ten years ago they could have been earning steady income and perhaps avoided some of the market fluctuations that ate away at their net worth.
- Never really spending, good and bad. Although they amassed a modest “fortune “, during retirement my grandparents never spent much. They constantly talked of wanting to pass it on to my mother (an only child) and my brother and myself. They never traveled, although my grandfather dreamed of returning to see a peaceful France and Germany, where he had spent years during the war. They did ‘live large’ in some senses – they ate out frequently (albeit modest restaurants), they bought new cars for cash every few years while they could still drive, and they were extremely generous to everyone in their family. They gave us stocks, cash and other gifts for years. However, it is hard for me to look back on their 20+ years of retirement together before my Grandfather passed away and think that they never really did much after retiring. I know that part of that is my perception, since I love overseas travel, but I am not sure retirement was meant for watching TV and eating out. That’s a judgment each person has to make individually, I guess. But to view it in a more positive light, when my mom was younger and living at home they were very frugal, and even late in life my grandfather’s frugality could be amazing. A heavy, heavy smoker for his entire adult life, he quit cold turkey one day because he thought cigarette prices had finally gotten too high – and didn’t ever smoke again (17+ years). He never worried about the health aspect as far as I know, but paying $3 for a pack of cigarettes instead of $2 was apparently one dollar too much.
- Avoiding debt, extremely good. My parents and grandparents gave me one gift that I realize is invaluable after I read many personal finance blogs: the fear of debt. I have been convinced since an early age that going into debt is practically a mortal sin, a stain on your character, a flaw. While I think it may have been overstated a bit, this philosophy has made me somewhat unique in a sense: I have never carried a balance on a credit card, EVER. I have had only two debts in my life: a car loan one time and a mortgage on my current house. Other than that, I have never bought anything I couldn’t pay for with my existing funds. So debt has never been a headache for me, which is a great gift. Possibly the greatest one you can get, because with debt so little else is possible.
- Charity begins at home, mixed. I know this may run counter to many people’s beliefs, but another closely held belief of my grandparents was to take care of themselves and their own before others. This philosophy meant that there was no ‘automatic giving’ to charity until everyone in the family was taken care of. They gave generously to their church every week, but I am sure (without ever having seen it put to the test) that had I been in need for some reason they would have given that money to me, instead, for as long as I needed it, and forgotten the church. Give when you are able. Get your own financial house in at least minimal order before trying to help others. I do not subscribe to the Christian teaching that I should give ALL I own to the poor, and apparently from the number of late model SUVs and families in nice clothes I see in church parking lots I’m not alone in rejecting that teaching. It doesn’t mean you can’t give to charity – I certainly give to several children’s charities – but take care of your family first.
Those points are really just highlights. The important lesson to remember is that anything your family or your friends teach you about finance is valuable. Sometimes you may learn by avoiding their mistakes, sometimes you may learn by taking their advice to heart – but it’s all learning. From my maternal grandparents, I learned to save and to avoid debt but also that sometimes you need to spend money, too, because there ARE things and experiences in life worth the money. The truly important thing was never the money, it was the security the money bought, and being able to give back to their family, that mattered to them.
(another reworking of an article originally appearing on brip blap in 2007)