A couple months ago, I took my annual tour through our finances, seeing what we had, what we owed, and if we were moving toward our goals.
Things looked good.
So good, in fact, that I started thinking about what I’ve learned about money and where. I have an MBA, with courses in finance, accounting, and economics. I’ve read some books on personal finance. But the biggest influence on my thinking about money is probably the biggest influence on you, too.
My mom and dad were dairy farmers when I was growing up in Wisconsin. They also raised hybrid seed corn, crossing strains that they’d harvest, process, package, and sell to other farmers to grow for their cows.
They modeled for me a lot of wisdom about money. If they hadn’t, there would have been great consequences. Big debt. A crop failure. Losing the farm. We heard stories of other farmers falling by the wayside.
But my parents did alright. And by learning from them, I’m now doing alright, too.
Here are the big lessons I think we all need to learn:
Live within your means.
This is the most basic and also the hardest. You have some money, but you need to not spend all that money. In fact, you need to spend as little as possible. This is profoundly countercultural but makes a world of difference. I even had to buy my own Nintendo. But it’s clearest in cars—my parents only bought quality used cars for cash and drove them until they drove no more. I now do the same.
Life has risk.
In farming, it’s drought, flooding, hail, frost, and the market. There are ups and downs. No matter where life has you, you need to consider the risks, acknowledge them, plan what you will do when things peak and crash, and stay the course. Counterintuitively, this decreases worry and fear, because you’ve considered the possibilities and have a plan. This helps you to live within your means and to avoid costly mistakes driven by negative emotions.
Cook your own food.
While I do remember eating frozen pot pies occasionally, it was usually something served out of mom’s pots and pans. So it’s not strange to me that my wife and I tend to cook from scratch and eat simply. Our month grocery bills are something like $350 for our family of four. That’s about $3 per day per person, or $1 per meal per person. Put that on the dollar menu!
There’s a corollary, too—you can make do with things or do things yourself. My parents rented a big rotary sander to re-do the wood floors in our house. It probably would have cost five times as much to pay someone else to do it.
It was a big deal when we went to K-Mart. Enough said.
Use the library.
I remember going to our tiny local library when I was a little kid. But in the summer, once every week or two we got to go to the “big” library over in Appleton. My sister and I would come home with about 20 books each, hours and hours of entertainment and learning. (I remember always getting science and magic books from the 50’s, wondering where I could get lye, borax, asbestos, and other ingredients.) Yesterday, my kids went back to school after their summer/Christmas vacation here in South Africa. What did they do for the last couple weeks? Read a pile of library books, of course!
Think very long-term.
Farmers have to think months and years in advance. My parents knew where they’d rotate the crops next year to improve yields and soil quality. They’d know that the bucket tractor was going to need a big service in a year or two. And they’d be watching for a deal on a used silage blower as theirs wasn’t going to last much longer. You have to keep your eyes up to save money and to get where you want to go.
Exploit the miracle of compound interest.
Beyond living within your means, I think this is the second most important lesson here.
Let’s say you invest $1000 today. This money earns a reasonable 7% annual return through low-cost index mutual funds. Through the years, it loses an average of 3% per year to inflation, for a real return of 4%. In 30 years, you would have $3,313! (That’s actual buying power in today’s dollars.)
And if you were able to save just an additional $100 per year, you would have $9,094, despite having deposited just $4,000 through the years.
Giving is good.
My parents were generous to their church and had an extended family member down on his luck stay with us for a while. When you’re wise about money, you get to help others and do good in the world.
Teach your kids all of this.
Obviously, I learned a lot from my folks, and I’m now trying to teach my kids the same lessons. A few small lessons make a tremendous impact on financial stress and success over a kid’s lifetime.
Thanks, Mom and Dad! I love you!
What good lessons did you learn from you parents?
Or what are you trying to teach your kids about money?
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