Financial Wisdom From My Grumpy Old Man Side

January 13, 2017

Sometimes I like to have some fun and adopt a “grumpy old man” persona for a bit just to keep everyone around me on their toes. My kids have started to say “OK, Grandpa…” when I get into my grumpy old man role.  Sentences starting with “back in my day” or “when I was your age” or containing the words “poppycock”, “shenanigans”, and “new-fangled” are standard when I’m talking as that character.

The funny thing I noticed this morning as I was playing this part is that a lot of what I say as that person is absolutely true. The principles are valid and while I may be joking around and having some fun, there is some real timeless stuff that I wish more people in today’s world would implement as a part of their lifestyle. Here are some of the top nuggets of wisdom from my grumpy old man character:

Back in my day, if you didn’t have the cash, you didn’t buy it.  I have seen more people get themselves in trouble financially through excessive use of credit cards than for any other reason. As credit card debt mounts, so do minimum payments as well as stress. I can’t count the number of divorces and therapist visits that people have attributed to credit card debt.

When I was your age, I always saved some money for a rainy day. Having an emergency fund, whether it’s a “starter emergency fund” of $1,000 – $2,500 or a 6-9 month cash cushion, is a great way to ensure that your financial life won’t get blown to smithereens in the event of a job loss, injury or illness. An emergency fund is the #1 barrier to unwanted debt.

What’s with all the shenanigans of picking all these stocks? Don’t put all your eggs in one basket. This is a time honored principle that the folks who worked at Enron or MCI WorldCom wish they had reinforced by senior management. The best way to “get rich” in the stock market is to find the next Apple or Google and put all of your money in that stock, but finding THAT stock is a lot tougher than it sounds and you’re more likely to find one that ends up going nowhere. So spreading your risk out among many different asset classes is a great way to participate in the whole stock and bond markets rather than concentrating your risk (and potential reward) in one area.

Who needs all these new-fangled gadgets that you spend so much money on? Another principle that works every time it’s tried is spending less than you bring home. So many people I talk to are very excited about the next iPhone that is coming out or 4k televisions or new and cool technologies that can make people say “wow.” Those things are fun and cool, but they can improve your quality of life only very slightly and they are usually pretty pricey.

By holding off on those purchases, along with driving lower priced cars and living in reasonably priced housing (the things Americans tend to vastly over-spend on), there will be plenty of room for savings and taking on debt will be a thing of the past.  Think about the last “cool” purchase you made and how quickly the cool factor evaporated. Wouldn’t it be cooler to save that money and be able to retire a year or 5 earlier?

Part of the reason that I can act like my grandfather and use some of the phrases I heard as a kid is that the wisdom in those phrases has withstood the test of time. Just like 2+2=4 was true when I was in elementary school and is still true today (although the way it’s taught is different now), these little financial nuggets were true then, they are now, and they will be when my kids are grandparents. (This BETTER be in a long long time!)