Father Knows Finances
The world celebrated Father's Day on Sunday (or is it just an American thing?) and it got me thinking: What's the best financial advice your dad ever gave you? My father was never big on dishing out guidance, although when I was in college he did tell me it was always a good idea to nurse a beer rather than chug it.
When it came to money, I only remember two things:
When I got married, my father told me to keep an envelope in our safe-deposit box at the bank with a few hundred dollars in small bills, “just in case.” We did it.
A few years back he sent me a check to pay me back for some online shopping I did for him, and the check only had his name on it. I asked him, and he said, “It's my secret account. When my veteran's check comes, I put it in this account. It's always good to have a little stashed on the side.” Hmmmm. I haven't done that (or have I?)
I did a little crowdsourcing on both my personal Facebook and the Get Rich Slowly Facebook community, seeking Father's Financing Advice. Some turned out to be platitudes, some were hilarious, and some were right on the … wait for it … money.
Dads' best advice
Take advantage of every offer for savings, especially 401k with matching funds from employers. This is great advice, and one that lots of folks don't take, although often not on purpose. According to a recent article on Forbes:
Different employers have different ways of figuring the match—that is, how much your employer contributes to your 401(k) account. The problem is that depending on the match formula, employees can lose part of the match. Most employers do it on a payroll basis, contributing a little bit with each paycheck, “matching” the amount the employee saves out of each paycheck. A common formula is to match 50% of employee contributions up to the first 6% of salary. If you're saving just 3% of salary, you're missing out on half of the potential match. Many employers automatically start employees at a 3% savings rate if they don't opt out or elect otherwise. Don't be fooled thinking your employer has your best interest at heart; it costs your employer to provide the match after all. Bump up your savings rate to 6% to grab the full match.
When I asked why a particular family had nicer cars and more vacations than we did, my Dad would say, “Some people spend all their money, and some people save their money.” Save your money! Great advice. But then … how much?
So there's the 50-20-30 rule: The first 50% of your budget goes towards necessities, including shelter, food, utilities, transportation, clothing. The next 20% of your budget goes to long-term savings and extra payments on any debt you may have. The last 30% bucket is for your “life” — things that you WANT but don't NEED, like vacations, entertainment, gym membership, hobbies, pets, eating out, cell-phone plans and cable packages (wait, what?).
There's money ratios: This is based on the book by Charles Farrell, in which he lays out eight ratios (tools) to use to figure out how much to sock away for your retirement. Personally, I was exhausted just reading about the eight tools, but this is apparently quite popular.
And the Financial Freedom Calculator: This was created by Rob Berger, and it is designed to quickly estimate how long it will take you to achieve financial freedom based on the percentage of your income that you save. He says “the spreadsheet assumes that financial freedom occurs when we've saved 25 times our annual spending. For example, for a family spending $75,000 a year, they would need to save 25 times this amount, or $1,875,000 to achieve financial freedom.” Yikes.
Thou Shall Not Pay Interest (if at all possible). If you must pay it, only accept a low rate and pay it off quickly. Always pay more than the minimum payment. Save your money and be your own bank! R. Nelson Nash and others have turned the phrase Infinite Banking Concept into a little industry unto itself. He says: “The whole idea is to recapture the interest that one is paying to banks and finance companies for the major items that we need during a lifetime, such as automobiles, major appliances, education, homes, investment opportunities, business equipment, etc.” You somehow do this through life insurance. I found some long and complicated explanations online but I fell asleep halfway through, so I am going to take this dad's initial advice as “don't take out too many loans and don't load up the credit cards.” Lots of dads said pay off the credit card in full every month.
Never loan money to family or friends: Financial guru Dave Ramsey doesn't think you should ever lend money, especially to family members: “It ruins relationships.If you have the money to help then give it, don't loan it.” But if you don't listen to Dave and decide to make that loan, the best advice is make it legal. You can download a promissory note online and have it witnessed and notarized. Make sure it spells out specific repayment terms that are agreed upon by both parties. Then, if it gets nasty, you have a leg to stand on in court. But do you really want to take your sister or your best friend to court?
Now for the not-so-serious
Go ask your mother, she handles the books.
Stay single and get a nice car instead…
Marry for money. If you marry for money, you can always fall in love. If you marry for love, you can't always fall into money.
If it's free, it's for me!
Put some money in your shoe when you go out on a date. That way you can get a taxi home if you need to.
My dad swore like a sailor so one day he suggested we bank on it and created a swear jar. We went to Disney that summer baby!! God bless the swear jar!
Oh Dads. You gotta love ‘em. What's the best financial advice your father ever gave you?