My parents raised nine children on a single income, so careful money management was a priority. I don’t recall them ever formally sharing money management lessons. Rather, they instilled good money management habits through their example and casual conversations. One of the ways they taught us good money management skills was by a allowing my sisters to make some of our spending decisions at an early age. The lessons I learned include:
- Spending for one thing means less money for something else. When I was about 13, my parents decided to give us each $20 per week allowance. In 1972, $20 was a significant amount of money. In fact, it is equivalent to about $130 today. The catch was that the money had to cover all of our discretionary spending. We were free to pack lunches for school, but if we wanted to buy lunch, it came out of our allowance. We were also responsible for buying our own clothes and paying for movie tickets and other recreation. We learned to manage money and make hard decisions. If I wanted a new pair of shoes, I might have to pack my lunch for a whole week.
- Shop the sales. My mother was a master shopper. She watched sales and clipped coupons. I have seen her leave a department store with multiple shopping bags of clothes for which she paid less than $20 in total. She loved to search the clearance racks for a blouse or sweater that everyone else had overlooked, and she loved the challenge of finding the perfect skirt or pair of slacks to go with it. She would go to every clothing store in the mall in search of what she needed to ensure that she got the best bargain. Mom knew what month to shop for appliances or furniture, and she knew when the “white” sales (linens) would be going on. She loved to shop the after-Christmas sales, and she often bought outfits in January which she would give to us the following Christmas. With four daughters born in a 4 ½ year span, she knew one of us would be able to wear the skirts and sweaters she bought.
- Buy quality and keep belongings until they wear out. My mother believed it was worth spending a bit more to get better quality. She bought traditional styles that would not go out of fashion, and she wore her clothes until they were worn out. Similarly, Dad taught us to keep cars until the costs of repairs exceeded the car’s value. He and Mom purchased a car when they married in 1955; my middle school principal purchased the car from them in 1974. They added a second car in 1965, as I was starting first grade. I drove that car until my junior year of college, when I was rear ended while driving it.
- Save up for major purchases. I don’t recall my parents ever taking out a loan to purchase a car. Of course, a new car was a true rarity in our household. I do recall, however, a couple of occasions when my father borrowed cash from his life insurance policy to cover a major purchase. He explained that the interest rate was very low, and he was, in essence, paying it back to himself.
- Balance your checkbook regularly and know where your money is going. Balancing the checkbook before we had computers could be a time-consuming activity. My mother always sat at the kitchen table to balance the checkbook. Canceled checks were returned to the payer in those days. Mom would tape the canceled checks to the check stubs in a large, three-ring binder. She would mark them off on the bank statement and determine what checks she had written that had not cleared. Mom balanced the checking account to the penny, and she was never satisfied until it balanced.
- Count the true cost of debt. My parents bought their final home in 1971 for about $35,000. The monthly payment of $238. I believe the interest rate was 7 ¼%. Mom marked off each payment on an amortization schedule. When there was sufficient money, she would make an extra principal payment or two. I remember her explaining to me that when she paid extra money toward the principal, she was saving more than one payment, as the balance went down and less interest accrued from then on. I also recall multiplying $238 by 360 payment and realizing that, if they made each payment as scheduled, the $35,000 house would cost them about $86,000. This was an eye opener and provided an ideal opportunity for us to talk about homes as investments that would increase in value, whereas a car would lose value over time. My mother paid off the house in about 13 years. While my father appreciated not having a mortgage payment, he did fuss more than once over losing the tax deduction of the interest.
- Establish credit early and manage it well. When I graduated from high school, my parents bought me a sewing machine. Mom then declared that I needed a sewing cabinet, which I would have to buy myself. We went together to the Singer store and picked out a cabinet. I believe the price was $125. She instructed me to put $25 down and helped me apply for a credit card. When the bill came, I paid off the balance in full. At the age of eighteen, I had established some credit of my own. I never used that credit card again, but it was the key to allowing me to get a Sears card a few years later.
These money management principles have served me well. Steve and I have tried to instill them in our own children. I hope that they will help you to manage your money better and have less financial stress in your life.
For more money management tips and information on creating budgets, please check out my other blog posts under the Finance tab. For those desiring a better understanding of Biblical principles of money management, I have written a book Honoring God with Your Money. It is available on Amazon and from Barnes and Noble.
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