Summary

The author reflects on the financial advice given by their father, acknowledging its wisdom and practicality after initially dismissing it.

Abstract

The article titled "5 Pieces of Money Management Advice from My Dad" recounts the author's journey from ignoring their father's financial advice to recognizing its value. Initially, the author viewed the advice as outdated and restrictive, preferring to spend money on immediate gratification rather than saving for the future. However, as the author matured and faced the realities of financial management, they came to appreciate the soundness of their father's counsel. The advice included starting to save money early, planning for retirement, avoiding unnecessary debt, not choosing a job solely based on salary, and creating and adhering to a budget. The author emphasizes that by following these principles, they have established a solid financial foundation, including an emergency fund, savings for short-term goals, and investments for retirement.

Opinions

The author initially perceived their father's financial advice as overly cautious and not aligned with living life to the fullest.
Reflecting on past financial habits, the author admits that forming a habit of saving from an early age would have been beneficial.
The author now sees the importance of saving for retirement early, rather than focusing solely on immediate financial goals.
They recognize the pitfalls of high-interest debt, such as credit card debt, as opposed to lower-interest secured debt like a mortgage.
The author advises against taking a job purely for the salary, as job satisfaction and other factors are crucial for long-term happiness.
They stress the necessity of a written budget to manage expenses effectively and avoid reliance on credit cards for unexpected costs.
The author expresses gratitude for their father's financial wisdom, which has allowed them to build a secure financial future through disciplined saving and investment.

Finance

5 Pieces of Money Management Advice from My Dad

The ones I wished I had listened to

My dad was always giving out advice. Between the jokes and working all the time to feed the family.

I know now that the reason he dispensed advice so freely is because it was stuff that he wished he either knew or at least didn’t ignore when he was my age. That is why he attempted (daily, I am pretty sure) to steer me in the right direction.

The thing is I didn’t listen to a lot of dad’s advice.

It seemed stuffy, shortsighted, and he lacked and capacity to understand what it meant to have fun and live life.

But, as it turns out, maybe he did have some pretty good points. As I find myself going to work (thankfully I have a job during these times) and estimating how long before I can obtain enough money to really do the things that I figured all grownups did all the time, I see that he had some pretty decent advice after all.

Start now

Yeah, yeah. Sure dad. But I need the paltry little sum I get in allowance to do the things I want to do. As soon as I get a job, I will start saving. Okay, now I have a job, but I need all the money I get to do the things I want to do…

You see the pattern, don’t you? I did too, but once a habit is started it is hard to break. Unfortunately, the habit I formed was spending all my money. If I had listened to dad, I could have formed the habit of saving my money — and that would be the hard habit to break. Point to dad on that one.

Save for retirement

What, 100 years from now? What about the big things I will need way before then, like a car and a house? If I am going to save, shouldn’t I be prioritizing first things first?

This one is linked to the first one somewhat. Once I did start saving, it was for things on my shorter-term horizon. I told myself that once I saved enough for a car, etc. But there is always going to be a bunch of shorter-term items to address. Meanwhile, that retirement date gets closer every day. I should have been slipping at least a little aside for retirement from the very beginning. Score two for dad.

Don’t take on debt

I am sorry, dad, but you have a mortgage, and don’t you have a credit card? Plus, my earning potential is so much better in just a few months when I get that promotion that is open.

Turns out there is a difference between secured debt, like a mortgage and unsecured debt like credit cards. It also turns out that the interest rate on a mortgage is in the low single digits, while credit card interest can be 25% or more!

While I didn’t go crazy on credit cards, even a little bit of spending beyond the cash I had in the bank took forever to pay off. It turns out the constant, “Don’t spend it if you don’t have it” mantra actually means something. Score three for the male parental unit.

Don’t take a job just for the money

Okay, now you are talking in circles father figure. Aren’t you non-stop spewing advice about how to save and not spend what I don’t have? Well, why not have it by getting a good salary? Plus, I can save way more now. You should be happy!

But it turns out that there are other factors more important than the paycheck every two weeks. Once that paycheck sheen wears off (in about a month), you are left with the other components of the job to deal with. A great paycheck will only keep you happy at a shitty job for a short time.

And then, when you quit the high paying shitty job you may find out that you can’t find other work paying nearly the same. Maybe a person can stomach a job for a while but be sure to not get used to the paycheck. In fact, when you take a high paying new job, save anything above what you got paid at your last job.

That way you are used to living on the same paycheck you can probably earn anywhere, plus you are able to save a lot. Losing out on excess savings by quitting a job is not nearly as painful as being unable to pay your rent or mortgage if you quit — meaning you have to stay forever.

Jeez dad, you are getting smarter with every letter I type.

Make a budget and stick to it

Well, mister know it all, I have a budget. Didn’t you say not to spend more than I have? I check my bank account every day, there is this thing called “technology” now.

I thought I had that one covered until I realized that my mental tally of what my paycheck had to stretch to cover each month, or every two weeks, was not perfect. That is how I ended up pulling out credit cards several times to cover unexpected expenses.

Then, I wouldn’t necessarily even be able to pay it off in the next pay period, so interest would be charged. I finally figured out that a written budget would help me keep on track. Plus, every time an unexpected expense came up, I would record that as well.

Over time I built a pretty good estimation of routine expenses, plus those expenses that didn’t happen every week, or every month, but could crop up every quarter, or once or twice per year.

There you go, Dad 5 — Me 0

Game set and match to the guy who tried really hard to give me good advice, even when I refused to listen.

Now I have things on a pretty good track. I have a budget, no credit card debt and I have an emergency fund, savings for both short term goals and retirement. I don’t have a lot going into each fund, but I am amazed at how quickly the balances add up over time.

My simple IRA investment account in several mutual funds is growing significantly, and I still have plenty of years left before retirement (even if it’s not quite a 100). The power of compounding makes it so I may be able to retire in comfort when I want, in spite of needing a few years to let dad’s advice sink in.

Thanks Dad!

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