Financial Lessons From My Grandparents
- Use physical cash – My grandparents never owned a credit card, or a bank card. They got cash out once a month and that was it. If you ran out, you ran out. A recent behavioural economics study showed that bidders at charity auctions allowed to use a debit card will bid twice as much as those only allowed to use cash. Physical cash is harder to part with. If you are trying to manage your money better get cash out of an ATM once a month and use that. It’s easier to keep track of.
- Don’t use credit – My grandparents made a pact that they would never use credit, apart from a mortgage for their own house. True, credit cards did not exist during the early years of their marriage, but store credit was widely available and widely used. When they bought their first house, they had purchased brand new gas appliances but didn’t realise that gas wasn’t connected to the house. They didn’t have the money to connect the gas. So they waited 6 months and saved the cash. In the meantime they used a wood stove and a copper boiler. Make a commitment to not use credit, you will find a way without it.
- Take care of your stuff – Grandad always had the car serviced on time. Tyres kept pumped up. Tools were always oiled. Painting was kept up regularly. Clothes were washed properly and repaired. Grandad used to have his collars turned around on his shirts when they were worn out and he would even have new elastic sewn into his underwear when the elastic went. If you take care of your stuff, it’s going to last longer and save you money.
- Buy good quality – They didn’t buy things often but when they did they bought great quality. Consequently everything lasted. Their washing machine is still running 45 years later. Their fridge lasted for 30 years. Buy much less, but buy great quality.
- Second hand is fine – They bought their cars at auctions and the furniture in their house, I found out after they died, was left there by the previous owner. They used linen my Nanna bought at a hotel liquidation auction. The good news is it’s much easier to buy second hand these days with eBay and Gumtree.
- Keep your fixed expenses as low as possible – A fixed expense is something you can’t cancel. They only ever had one car and lived a non-credit-dependant life. This insulated them from financial problems if one of them lost their job. If you’re leveraged to the hilt and something goes wrong, you don’t have any wiggle room. You may have to sell your assets in a hurry and for less than their worth. To disaster proof your finances, reduce your fixed expenses.
- Fun can be frugal – They preferred a BBQ with family over dinner at an expensive restaurant. The BBQ’s were never fancy affairs either, some rissoles, potato salad and whatever soft drink was on sale. They never bought books, always went to the library. They were involved in community activities; choirs, tennis clubs, church. You don’t need to spend a lot to have a lot of fun. Focus on people and relationships.
- Values – My grandparents had their values a little different than many people today. There was a time when if you held down a steady job, paid your bills on time, had polite children, a modest house in good repair, and a good reputation you could hold your head high. Now too many of us derive our value from the things we own. We need a bigger tv, a new car, or bigger home. Too often we pay for it with credit.
- Teach others – I used to go to my grandparents after school. They would make me Sao’s with tomato and a Milo and we would sit at the table. They would get out a notebook where they’d written down everything they’d spent that day and make sure it added up with how much money they had in their pocket. They encouraged me to get a job as a paper delivery boy. They taught us how to manage our money. Make sure you pass on good money habits.