Lessons from Dad: A Father's Day Guide to Best Financial Advice from Our Dad's
For good or ill, our earliest financial teachers are our parents. Good financial habits are a valuable gift that lasts a lifetime. On the flipside, hiding the finances from kids is among the worst things parents can do. In good times or bad, teaching moments are abound with money.
Since Father’s Day is here, we asked folks for the best advice they ever got from a father figure.
“Diversify today to avoid a headache tomorrow” was the philosophy on risk management in investing that Conor learned from his dad. It’s great advice, but you’ll avoid more than just headaches if you diversify. In 2000, the stock market crashed because investors decided the “dot.com” bubble was style over substance. Eager speculators lost everything by going all-in on tech stocks. When tech startups imploded, so did the stocks. Avoid that by mixing up your portfolio. Pick promising risks, but also play it safe with low-but-consistent long-term returns from hedge funds, money markets, and tested stocks.
Where dads shine is with pithy wisdom, and Jax’s father was no exception, making statements like, "Never cry over money because money isn't going to cry over you." Not crying over money is a good start when a big financial shock kicks your feet out from under you. Lamenting about it won’t help – instead, react and plan. What could help your bottom line right away? Work some overtime, sell some investments, contact your creditors with a proposal – but don’t be complacent.
Jax’s dad was also on the money with “It's not a sale if you don't need it." The “psychology of selling” is a hot book topic. Businesses know how to suck you in and make you spend. As a shopper, you feel empowered by “a good sale,” but you’re getting played. Buying what you don’t need just hurts your finances and is a road to clutter and complication. Ask yourself “is this a need or a want?” When it’s a want, say no, or at least wait a few weeks to see if it’s a passing fancy or something you’re set on.
Some dads love to state the obvious, but it doesn’t make them wrong. Morten listened well when his told him to always live within his means. Flashy restaurants and hotels might be out of your means, but you can still live well. Learn to make your own steak and find a good butcher rather than crippling your budget at steakhouses. And you don’t need a 5-star hotel for a great vacation – creativity and a great attitude can make memories for a lifetime. Make your budget go further by traveling where the American dollar is strong.
As a banker whose dad was an accountant, Mark understands credit well. He says, “Having a credit card and not really using it does nothing for your credit. You must use it and pay it off monthly, or at least the minimum owed. This shows usage on your credit report and gives you an R1 rating on the card.” Remember, credit card companies are businesses. They don’t want you using your credit card only for emergencies. When you use it regularly, they make money off merchants – and they like you to pay a little interest too.
In fact, more than a few respondents answered the best advice they ever got was to “never carry a balance,” but that’s misguided. In fact, you can boost your credit score just by carrying 25 to 30% of your credit as a balance. The question is whether you think paying some interest is a fair trade for the higher score. If you’re thinking of getting a mortgage in a couple years, it might be wise.
Ann, a New Yorker, has traveled the world without a home base for over a decade. Her dad taught her that credit cards are for convenience, not for buying what you can’t afford – again with that “live within your means” wisdom. Today, more than ever, credit cards are for convenience, especially with smartphone electronic wallets like Apple Pay. Such apps aren’t just convenient, they’re more secure.
But it’s the sage advice Jono got from his dad that we all should have followed: Buy waterfront. Didja hear? Financial growth is just that easy!
Software developer Duane’s dad wasn’t very chatty. His idea of a financial talk was handing his son a copy of the money classic The Wealthy Barber. Today, Duane’s a Canadian living on the coast of Spain, so he thinks the book worked.
Similarly short on words was Gregg’s dad, who merely said the most “Dad” thing ever: Listen to your mother. Luckily, Mom was a certified general accountant.
Not all of us got lucky with savvy moms and dads, but Duane’s dad was onto something – it’s easy to read books packed with financial wisdom. Often, financial mistakes come down to two things – ignorance or bravado. If you understand the credit system, you won’t be ignorant about using credit to build your financial empire. Until you have that financial empire, any smart dad would tell you – it’s not time for bravado.