Back to Money Basics
I don’t fully understand how the US economy works and how all this talk about bailouts and recession will progress in the next few months. But from the little knowledge I have and from watching business shows in CNBC, I strongly believe that the US—the government and its citizens—went over their heads and ignored the basics about money.
At the end of the day, I still believe that the money lessons taught by our parents and grandparents are still the things to follow to achieve financial discipline and independence.
1) Never borrow.
Whether it’s good or bad debt, the rule of my parents is simple: masama ang umutang. In the US, people live off on credit card debts. In 2004, Motley Fool estimated that an average American carries a credit card debt of US$8,562. Hello! That’s a little more than PhP400,000 in today’s rates!
2) Live within your means.
It’s a time-tested money principle. If you can’t afford it, don’t buy it. It’s as simple as that. Unfortunately, there are many Filipinos who don’t follow this rule. Personally, I am overwhelmed and amazed that some acquaintances and online buddies can afford branded bags like Hermes or LV. Of course, I don’t know what they do for a living and maybe they really can afford it but I just find myself cringe at the thought of buying a P30,000-bag.
Sakit sa US ito. Americans buy the biggest house, the newest car models even if they don’t afford it. Housing loans are granted even if they are not able to put a down payment. Ito ata yung interest-only mortgage. Here in our country, I have never heard of banks granting a loan without any down payment.
My parents never knew how to invest in the stock market but they are living comfortably in their retirement years. The only investments they have are real estate properties, which are all fully paid, and a lot of cash in the bank.
They never bothered to learn stock trading but why are they living quite well? The answer is simple. My parents took the conservative approach and never bothered themselves with complications. To them, they just needed a roof over their heads—a home that they paid for monthly for 20 years.
4). Save, save, save.
My parents saved their money. Okay, my dad was the saver and mom was the spender. But over the years and later on in their lives, my mom has realized that they are no longer the young married couple they once were and so she has learned to save.
Some financial experts would say that people should not save in banks because the interest rates are so low. And whatever amount you earn will just be eaten by inflation. But my parents have always saved their money in banks, specifically time deposits, and they continue to grow their wealth. I’m pretty sure my parents don’t understand the concept of inflation but they really don’t care. To them, they just continue saving and saving.
5) Teach your children by example.
This is probably the most important thing you can do for your children (aside from sending them to school). Parents should always be role models to their children. The way they handle their money or any other aspect of their lives will rub off on their children so it pays to be attentive.
My parents opened my first savings account when I was 11. I never liked the idea of having my own savings account because I wasn’t allowed to withdraw from it but over the years, I learned the value of saving money.
By the time I was in college, I already have a separate savings account, which I funded myself. My friends were always surprised to see me with my ATMs because there weren’t too many college students that time, who have their own account.
And now that I have a family of my own, I am still a chronic saver. I save what little money I can from my salary and I teach my husband the values of saving (he is, after all, a compulsive spender).
In times like these, I strongly believe that we should go back to money basics and follow what our parents and grandparents taught us.
Do you have other basic money tips to share?