So many of our thoughts regarding financial goals stem from our parents and our experiences. Some of us run toward the money blueprint our parents set before us; some run away from that model, seeing its faults. My perspective has been shaped by three people: my mom, my dad, and my best friend's mother.
My parents had completely opposing views. Both my mother and father were raised by parents who lived through the Great Depression and who were very frugal. My mom learned how to be extremely frugal herself. She'd never fulfill even her deepest desires when we had money, wanting to save it away like her family had done. It was difficult to buy her a gift, as she would always be so critical of the money we spent on her—even if was for something we knew she really wanted.
My dad, on the other hand, wanted to fully enjoy life, so he purchased many items on loan, like vehicles, boats, and motorcycles, and he did not mind using his credit cards or loans. While my dad did buy too many things on credit, some of his purchases were smart, even if they were on credit. For example, I have amazing childhood memories of fishing and waterskiing with the family on our boat—memories I am not sure would have occurred if he had waited until he could make in purchase in cash.
As a family, we never had a time when bills weren't paid, so growing up, I never considered the negative sides of credit. Credit was more like a tool, a resource; it was there so we could realize our dreams today.
However, while my dad was not scared to spend money, he went through much of his adult life with a significant credit card balance and did not achieve a zero balance until about a few years away from retirement. He always had a certain amount dedicated towards his retirement, but in adding up all the interest he paid over the years on various other purchases, he could have saved a tremendous amount of money for retirement.
Finally, my perspective is shaped by my best friend's mother, who was a lovely and amazing person. She raised my best friend single-handedly, but was still able to save up a considerable sum for her daughter's college. She had specific financial goals that she kept and was fully engaged in a financial plan to make sure she would be set during retirement. In addition to saving for retirement, she was also saving for a wonderful once-in-a-lifetime trip that she could take with her daughter upon her retirement. But two years away from retirement, she died unexpectedly.
My Own Blueprint
I see the different sides so clearly now.
In looking back at my family, I realize the hidden costs of the use of credit. While my dad did save for retirement, he didn't have an emergency fund. If something unexpected came up, we had to scrimp to pay all of the bills.
Because there was no safety net, my mom was even more apprehensive about spending money. Fights over money were constant. My mother was constantly scared that if a rainy day occurred, we would have nothing to fall back on and she yelled when my dad bought nice gifts for others in our family. Yet, I'm grateful that he made some of the purchased he did, like the boat. Purchasing a boat through a loan led to amazing family memories. My best friend's mom scrimped and waited to create such lifetime memories—a day that never came when the music stopped too suddenly for her.
So how do I apply all of these life lessons to my life? From my best friend's mom, I've learned that nobody is promised tomorrow. From my dad, I've learned that we must enjoy life and make memories now that will last, but not to take this philosophy too far or become so comfortable with credit card debt that I use credit for too many things that are unnecessary and that I will not remember in 20 years. But from my mom, I've learned that we need a safety net and we must be careful with credit cards and loans; too much debt in a family can lead to uncertainty and strife.
Taking these competing values have shaped my financial goals: I want to pay down debt and have a nice financial safety net, but I want wonderful memories while my children are still young like a family vacation.
Putting Theory into Practice
Taking my monetary philosophy and personal values, it's time to turn to my month's log of purchases to see if my purchases are keeping these principles in mind:
- $26: Dinner at Steak and Shake: This was mixed. Although we went to treat the family as a reward after my daughters had a wonderful dance recital, I should have cut back and just taken the kids for shakes and sat at the counter. Sitting at the counter drinking ice cream shakes would have been as much of a treat.
- $29: Lunch at local sandwich place for the four of us: no, this was not keeping our values and principles in mind. I felt too lazy to make lunch at home, but it was not memorable and we could have made items at home for cheaper.
- $18: the Hunger Games trilogy: yes, this was a good, relatively inexpensive purchase that kept my principles in mind. I enjoyed the books, knew that I'd want to read them now, re-read them, and let my daughters read them when they are old enough. In addition, I shared them with four other friends and we had such fun talking about the books and planning to see the movie when we all finished the books.
- $7: personal novels just for myself: no, this was not keeping my values in mind. I should have borrowed the book from the library. Although it was cheap, it was a one-time use and did not contribute to special memories.
- $35: a variety of children's clearance books: yes, I bought the books for the same price I can sell them for in a fall children's boutique sale so even though I purchased the books when I could have borrowed them, I can keep them longer and still get back as much or more money on this.
- $62: two swimsuits: yes, this is keeping with my values because my swimsuit from last year did not make it and I have no swim suits. Our children want to go swimming a lot this summer so this purchase will permit me to make nice family memories for a reasonably low cost.
- $212: camera: I should not have bought the camera. I thought that this camera was needed for our family vacation this year, but in hindsight, I have an older camera that I still could have worked.
By creating a fiscal value log where I've evaluated the purchases I made last month, I've learned that I could have saved an additional $261 in one month.
My current fiscal log has only the purchases that I made. However, in applying those values to my purchases, I realize that I haven't considered the purchases I was sorely tempted to buy but didn't. In looking at how to save money, I want to expand my log to include items that I was strongly considering purchasing but didn't. This will help me by giving me gold stars when I resist the urge to spend and will better help me to fully understand how I make purchasing decisions.
What are your philosophical monetary priorities and how did they develop? Keeping those in mind, has your spending habits been consistent with your philosophy?