The Most Important Money Lesson I Learned from My Father

The following article is a guest post by Jun Sanchez, a Frugal Pinoy reader. If you want to send in your own guest post, use the contact form to submit your ideas.

- - - - - - -

Written by: Jun Sanchez

I’m a middle-aged man who was born to a lower middle class family. Although our parents worked very hard, they never earned enough to attain the kind of financial security that many hard working people do. They may not have been successful in making a lot of money, but to me, they are peerless when it comes to making the most of what we had.

Ever since I can remember, my father always reminded me and my sister of the importance of stewardship. This is the most important money lesson I learned from my father; he always told us:

“Whenever we buy something, whether it’s a big ticket item or not, take very good care of it because if we ruin or lose it, chances are, we may never be able to buy another one again.”

Long married and with kids, looking back, I am certain that I have imbibed this credo. Though, obviously we have replaced our TV sets and other household items more than once since my boyhood, most of our belongings outlasted their life expectancy simply because we took very good care of them.

I have a 12-year old stereo that still works almost as well as when I bought it. I’m typing this blog on a personal computer that, many say, has already seen the light days. I own a nine year old car that my friends say looks more pristine than many cars half its age. I can go on but I think I have already made my point.

Although my father never finished high school, I think he unknowingly taught us a very important lesson in Economics, the concept of Opportunity Cost. As defined, opportunity cost is the value or benefit a person foregoes (I’d rather use forfeits) for making a certain economic decision (in many cases, it’s the decision to buy something).

Money, being a scarce resource, always presents us with a challenge on how we should use it.

For example, if a lady spends her money today to buy, let’s say, a new cell phone, she can no longer spend that money to buy a pair of shoes and a handbag. She forfeited the shoes and handbag for choosing the cell phone.

If later, she’s still intent on buying the shoes and handbag that she forfeited in order to buy the cell phone, it’s either she focuses on earning and save for a month or two or… sell (or forfeit) her cell phone as a secondhand unit to buy the shoes and bag.

You see, buying doesn’t only mean acquiring, it has a downside: it also entails forfeiting!

Before spending, especially on something I can probably live without, I always remind myself that money spent, is money gone, and often, I decide against it. Economists love to say that “you can’t eat your cake and keep it too.”

But what if you live by the credo that my father taught us? What if you take care of your essential possessions to make them last twice or even just 1/4 longer than their life expectancy?…

Spending will be delayed at least… avoided at best. And you will have money either to save, pay off debts, invest, acquire other assets or pay off essentials like your kids’ tuition. Otherwise, you will have to forfeit all these options if, say, you are scrambling to save for a new TV set because the one you had lasted only three years when you could have used it for five or six years if you just took good care of it.

Take very good care of your possessions and you will minimize the cycle of spending and forfeiting.

Remember that in creating wealth, earning well is just half of the equation. Need I say more what the other half is?

Image by Vivek Chugh from sxc.hu

Money Myths: Frugality means sacrificing fun

Why don’t you just enjoy your money?

This is something people ask me when they hear about my frugality. Whenever I hear this, it seems like people have the following misconceptions:

• that I deprive myself from enjoying life,
• that I always choose the cheapest products,
• and that I can’t pay for the things I want.

The thing is, I do enjoy my money. I get to spend my money on hobbies like carpentry, gardening, model airplanes, and art. I also have the money to travel for more than a week at a time, and to splurge on ingredients for culinary experiments here at home.

Still, I consider myself frugal because I try to get a bargain whenever I can, and I shop wisely. I also know that if I had zero income (and had no emergency fund), I can support myself and the 4 people living in my house for under P10,000/month. But obviously this doesn’t mean I’m not having fun.

Frugality is about achieving balance between your enjoyment of the present and the security of your future. It’s about ensuring that you can afford financial emergencies, retirement, and big purchases such as a house or a car. In other words, you have to prioritize.

What I’m actually doing is saving on the things that are less important to me and channeling them to my hobbies, travel expenses, emergency fund, and retirement fund. Here are some ways that I practice my frugality:

• I buy only food items which I know I’m going to use.
• I only dine out when necessary.
• I don’t buy signature clothing.
• I don’t call or text more than I have to. (Also, I don’t buy expensive cellphones.)

In other words, spend less whenever you can and don’t spend on something that isn’t important to you, or something you don’t need. If you’re not a photography buff, why spend P20,000 buying a new camera? If you only have two children and don’t plan on having more, why buy a 5-bedroom house?
Another way to be frugal without destroying your “fun” is to trim extra expenses rather than eliminate them completely.

If you find that your coffee habit is costing you over P1,000 pesos a month, you don’t have to quit cold turkey. You can cut back on one cup a week, then two, until you find the number of cups you can drink which allows you to get a caffeine without overdoing it. In fact, you might want to try brewing your own coffee at home, if you have the time. These things may seem like a sacrifice, but it’s nothing compared to quitting your fun habits completely.

You don’t have to give up the things that you enjoy or that make you happy. After all, your hobbies, favorite food, activities, and trips should be a source of enjoyment and not a source of financial stress.

Of course, I’m not telling you what to do. I’m just demonstrating that yes, it is possible to enjoy your hard-earned money without sacrificing your financial independence and security. It’s up to you to find your own way of doing that.

How do you balance frugality with enjoyment? 

Image by Richard Sweet from sxc.hu

More Frugal and Inexpensive Valentine’s Day Ideas

Around this time last year I wrote a post about some frugal Valentine’s day ideas. I pointed out that this day should be a day of relaxation and fun, instead of a stressful day where lovers are fussing about dinner reservations and expensive out of town trips.  Here were some of my suggestions:

• Cook a meal together.
• Handpick and arrange flowers yourself.
• Take a walk together.
• Watch DVDs.

To read the entire post, click here.

This year, I’m adding more tips to that list.  After all, given today’s economic climate, most people can’t afford to splurge on Valentine’s Day.  Here are some other frugal things you can do with that special someone:

Moonlit stroll.  This is an offshoot of my “take a walk together” suggestion.  The twist is that you drive somewhere peaceful with a romantic view, such as in Antipolo or Tagaytay, and take a walk at night.  You can end the stroll with a bottle of wine, or even a picnic.  I won’t be a full moon on the 14th, but it will still be bright nonetheless.

Have a DIY spa date.  You can both get a romantic spa date in the comfort of your own home.  Get your massage oils ready, light some scented candles, and play relaxing music.  Here are some additional resources that can help you out:

• Yummy body scrub recipes (you can use brown sugar and oatmeal with vegetable oil to make your own body scrub)
• How to massage (instructions)
• How to have your own spa day

Give a scrapbook or memory box.  Look for the mementos that are relevant to your relationship, such as old theater tickets, wrapping paper from your partner’s Christmas gift to you, etc.  Put these into a scrapbook, and be sure to include some photos.  If you don’t want the trouble of gluing things and laying them out, you can just look for a nice box and put all the mementos in there.  Feel free to include small chocolates and petals in the mix.

Go on a group date.  If you have other friends who have significant others, or if you’re single and want to go out with your other single friends, then you can go on a group date.  If done right, it will be cheaper than a one-on-one date, especially if the group orders dishes meant to be shared.

Do you have other frugal Valentine’s day suggestions?  Go ahead and share them in the comments section

Photo by G & A Scholiers

Next Page »