Lately, I did some reading and of which, I began to realise that our upbringing in the past plays a significant role in shaping how we earn, manage and also invest our money today. This is because we tend to get our first exposure to money by witnessing how our parents manage theirs at home.
As I reflect, I discovered that my financial life today was influenced by my father and our shared experiences. Hence, in this article, I’ll open up and share 5 main money lessons I had learnt from my father and how they have shaped how I am earning my income and managing my finances today.
Lesson #1: Job Security Does Not Equate to Financial Security
My father is a retired flight attendant.
He flew with the national carrier for 30+ years. I recalled, when I was in primary school, the airline grew as it introduced new routes to new destinations. During that period, my father was promoted and received his pay increment. However, things began to change when I entered secondary school.
The airline reported a string of losses. Routes were cut. Pay cuts, layoffs and job uncertainties became realities to my father. He has expressed his insecurities at home by being frugal. Fortunately for us, my father was spared from being fired and was able to work and retire shortly after the airline was being restructured.
His fears did not materialise. However, decades of pinching pennies did not add financial security to him, despite its contributions to his retirement funds. Thus, I have become interested in financial matters and developed a passion for it as I believe that financial education is the antidote to financial insecurity today, and not just solely by having a job or having money itself.
Lesson #2: Don’t Rely on One Main Source for Income.
This is a continuation from Lesson #1.
My father had relied solely on his vocation as a flight attendant for his income. I believe the norm for him and people in his generation was to seek employment with the Government or with Government-Linked Corporations (GLCs).
It seemed logical in his time, but the idea of sole reliance on an iron rice bowl is one that lost its appeal to me and I became interested in learning and exploring ways to build myself multiple sources of income. Since graduation, I have learnt and gained experiences in running a few online businesses for business income, building a stock portfolio for dividends, investing in real estates to collect rental income and publishing books for royalty income.
Presently, I am still learning what I could to improve on my ability to earn, grow, and expand all of the income sources listed above. But here, I recognised that it all began with my father’s financial insecurity, which stemmed from his inability to replace his main income source with other sources of income.
Lesson #3: Don’t Increase Expenses as Fast or Faster than Income Growth
My father is very slow to increase our family’s living expenses. This is regardless of how much he earns and his current financial status.
In our case, there is little correlation between his wealth and his diet, the mode of his transportation, his fashion wear and his overall lifestyle. He doesn’t occur to him to change a fancier car or have some blinks after receiving a pay raise. In that sense, I believe this trait had rubbed off over me.
This trait has served me well financially in two ways.
First, it allowed me to raise capital for investments quickly and thus, catapulting me in my personal wealth. Second, it had sustained me in testing times, such as COVID-19, because I had kept my living expenses and debt commitments at low levels before the pandemic. Hence, I would say I owe this trait of survivability in my finances to my father. If I live a high life, perceiving that I am immortal when it comes to money, I think I would be so messed up financially in COVID-19.
Lesson #4: Don’t Buy Stocks Out of Greed and Speculation
It was the mid-90s and the Malaysian stock market was booming.
It seemed to my father that many were profiting from trading the stock market. They include his relatives, his churchmates, and the passengers on his flights. In pursuit of such easy profits, my father opened a stock brokerage account and in an instant, bought himself a couple of stocks. Shortly after, they fell and thus, in an instant too, my father lost his capital and was disappointed by it.
There are many lessons to be learnt from this experience. But here, I would just say that the surest way to lose money in the stock market is to do what my own father did in the 1990s, which was to buy stocks without knowledge, purely out of greed and speculation, and in a mania. This experience alone had shaped me to be conservative in stock investing where I would invest in stocks that are into businesses that I understand and would like to keep for the long-term.
Lesson #5: Use Debt Sparingly and Pay Your Debt Installments Promptly.
My father is careful with debt and he makes sure that he settles them promptly without fail.
This is evidenced with his debt repayment behaviour. He had a mortgage, when its interest rate hit 10+% a year in 1998. At that time, my father would make his mortgage payments as usual but none were used to pay off his loan principal as all of them were interest income to the bank.
So, here was what my father did when he knew about this.
He almost doubled on his monthly mortgage payments.
Even after the mortgage rates had fallen to single digit levels, my father kept on with his doubling of mortgage payments until he paid off his mortgage in full. In doing so, my father had saved quite a fair bit on its interest costs. Years later, he bought himself a family car and had his car loan settled within three years. Ever since, my father has no debt commitment and had some financial peace.
Personally, I admire my father for his impeccable debt repayment records and it is something that I will emulate for myself. Also, my father is conservative when using leverage as he kept his debt-service ratio (DSR) at low levels at all times in his working years. In that sense, I believe I am a chip off the old block for I think it is prudent for all to keep a conservatively low DSR at all times.
But, as I write, doubling mortgage payments is something that I wouldn’t do. As of now, my mortgage rates are 2.9%-3.0% a year, not 10+% a year in 1998. So, if I have excess cash to double my mortgage rates, I would choose not to do so. In my case, I would prefer to have the excess cash invested for better returns.
I would not say my father is the best when it comes to money matters but what he did had certainly impacted the way I looked at my financial life. I have picked up some useful financial habits from my father that had truly served me well. In my case, I became financially interested and will aspire to learn and improve on my financial life.
So, once again, here are 5 money lessons I learnt from my father:
1. Job security does not equate to financial security.
2. Don’t rely on one main source of income.
3. Don’t increase expenses as fast or faster than income growth.
4. Don’t buy stocks out of greed and speculation.
5. Use debt sparingly and pay your debt installments promptly.
So, how did your father impact your financial life today?
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