Group Writing Project: My Family Financial History

by Kevin on July 16, 2008

PF bloggers group writing projectGood morning and welcome to the first monthly edition of the PFBloggers group writing project. As we aspire to become better bloggers, the PFBloggers group decided to follow the lead of other popular blog networks and write posts around the same topic at least once per month.

The topic we came up with for this month: discussing your family financial history; how you came to be the financial person you are today. You can find my partners’ posts over at PFBloggers.com.

A Brief History of Me

I was born an only child in Dallas, Texas. I was eager to get out into the world and survived being two months premature. (As a side note, the older I get the more amazed I am I survived when you look at the technology of the 80’s.) I was born to a happily married couple who decided to move back closer to home when I was 3 years old; my Grandmother was getting older and they wanted to be nearby to care for her in the future. I enjoyed the rest of growing up in that relatively small town in east Tennessee until I left for college.

Consistently Middle Class

We lived a consistent middle class lifestyle. Being the only child has its perks as my parents lavished me with all of their love, and any money to be spent on gifts or vacations was consolidated on me! I grew up playing soccer in a local league and enjoyed choir throughout middle and high school. Money never seemed to be too much of a problem, but we weren’t “rich”. There were kids at school who were, and I wasn’t in that group. However, I never lacked for anything and really enjoyed growing up the way I did. We took one major vacation every year or every other year. Thankfully, my parents had the foresight to not take me to the beach every year like some friends of mine. We went to varied and interesting places — a trip to Jackson Hole, Wyoming, a trip to Colonial Williamsburg, trips to D.C. and Disney World. School trips were never a problem, although I did help fund raise part of my way.

We did take one major three week vacation to Europe when I was 14. An incredible trip that I will never forget. (I only wish I was of age when we went to those Irish pubs!)

I was also lucky enough to have parents that saved for my education. Their savings combined with scholarships allowed me to not only graduate debt free, but they also gave me a gift to be used on a down payment on a home in the future.

All in all, I was very lucky and my parents sacrificed in ways that I’m sure I will never know. They wanted me to have every opportunity I could.

Hard Work and Dedication Will Pay Off

This is one of the most significant phrases of my childhood. I was raised to believe that if you work hard, study hard, stay dedicated to the task at hand, and put your best foot forward that you won’t fail in life. You’ll end up with a good degree and a good job and a good life. I agree with that statement somewhat, but unfortunately I get to see on a daily basis just how much networking trumps other qualifications in job searches (I work as a recruiter). Nonetheless, I grew up striving to be the best I could be… just like any other American kid.

The most significant personal finance phrase I can recall from my parents was “Save 10% of your income, and you’ll always be okay.” I started doing that at an early age… even while working as a projectionist at a local movie theater.

So, how did my parents afford these trips we went on? Some things I picked up on then and now:

  • We lived in a moderately sized house. It was nice for our area, but nothing like the McMansions of today. I don’t know the details of the down payment, but my parents paid off the house in 20 years or less. They also had the vision to buy the adjacent lot to our house. It is heavily wooded and provides a bit of a buffer from neighbors on one side of the house.
  • When my wife and I were going through pre-marital counseling, the topic of money was obviously very important. The book we were using asked us to talk to our parents, get some of their advice. My Mom told me, “If you can pay all of your bills off of one of your incomes, and enjoy life, save money, etc. off of the other… that’s ideal.” And I completely agree. We don’t do our budgeting in this way exactly, but it’s pretty close to being true for us.
  • We went on many vacations within driving distance. (Of course, this is when gas cost $1 per gallon…). We took several trips that included flying, but we took an equal amount that required driving. When we got to our destination, we never stayed in the Ritz Carlton. We stayed in safe, nice hotels and spent our money wisely.
  • My parents never wore extravagent clothing or drove extravagent cars. Lifestyle inflation did not count here.
  • They saved consistently. As I mentioned, my college was paid for by scholarships and my parents. They gave my wife and I a significant gift to put as a down payment on a house. I don’t want to give the idea that I had a silver spoon in my mouth, as much of this was a surprise. But it proves that behind the scenes my parents were saving, and saving, and saving rather than spending everything they had. They were future oriented.
  • Unfortunately one negative I have picked up on more recently is my parents are not as prepared for retirement as all of the articles on retirement would like them to be. This is still a way to learn a lesson, so we are taking steps to try and avoid this.

One Magazine and One Class Did It

All of the above points are true. However, I didn’t become truly interested in personal finance until I went to college. Two factors greatly influenced me towards personal finance during this time: my parents gave me a gift subscription to Money Magazine, and I took Finance 101.

The first finance class was really supposed to be about corporate finance. I guess the professor just had it on his heart to teach us about personal finance. I am grateful he did! For those in “the know”, there is a calculation you can do on a financial calculator (or in Excel) called future value.

Essentially you tell how much money you have now, whether or not you make any payments, how many time periods there are (months or years or…) and what rate of return you earn. It will calculate how much money you will have at the end of the last time perod. It’s a perfect starting tool for calculating how much you will have in retirement if you earned a consistent rate and consistently paid in the same amount. The numbers astounded me as he explained the difference between starting at 25 and investing for 10 years versus starting at 35. (Answer: if you invest the same amount and earn the same return, age 35 never catches up even if he stays investing for more time.)

Money Magazine seemed to be the icing on the cake; it reemphasized what I was learning in finance class with real world examples. Articles on rebalancing a portfolio, fixing a house, mortgage rates, and credit card use. I was hooked on personal finance and setup an Excel spreadsheet budget for the first time.

The rest, as they say, is history. This is why I write this blog… I can see the concepts very clearl and to me they are simple. Yet I know this is not the case for everyone. I think physics and chemistry are really hard, but to a chemist they are a piece of cake. I want to show people how to achieve their own goals using some of these techniques.

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