Tuesday, April 8, 2008

This Future Millionaire's Drive to Save

This post has been sitting in my draft box for quite some time. I’ve been hesitant to post about this because it’s a little of an over share about my family life but I’ve already mentioned a few times about how my family’s money management has shaped me and I’m over sharing about everything else on this blog so I figured I’d go all out and actually post my family’s financial warts and all. So here it goes…why I’m so adamant about being financially responsible and saving…

To understand my drive for saving I’ll start before the beginning of time. Okay, maybe not quite with Adam and Eve but I will start before I was born. In past posts ( Income vs. Goals, Is everyone in Debt?, and Family and Finances) I've talked a little bit about my family so you probably have at least a picture of what my family is like but this is the post where I’m going to lay it all on the table, the good, the bad, and the ugly.

I come from a family headed by a divorced single mother who’s a school teacher. Growing up we were middle class surrounded by extreme wealth and McMansions, but felt like paupers in comparison. We lived in one of the wealthiest counties in the country; in fact my mom who still lives there recently sent me an article about how our county is the 8th wealthiest in the US. I really think my mom’s and our family’s outlook towards money and possessions would have been a lot different if we’d lived in a different area, but the schools there are some of the best and they paid a lot better than the surrounding areas so it was a win-win for both my brother and I for education and for my mom with salary.

My mom in contrast comes from a very privileged and wealthy background. Growing up her family was one of the prominent families in her town; they belonged to the country club, lived in a very large home and drove corvettes (yes – sickening as it is her first two cars were both brand new corvettes). My mom continued this lifestyle through college and her early career years thanks to the support of her dad. I don’t know how long this support would have continued but we’ll never know because my grandpa passed away when he was 51 and my mom was only a few years out of college. While he was a smart money man, a banker in fact, he did not leave anything specifically to my mom, rather everything was left to my grandma B who has her own money issues.

My grandma B then stopped supporting my mom, my mom thinks this was because my grandma B wanted all of the money for herself – which knowing my grandma B I can believe, but my mom was a grown woman at that point and should have been taking care of herself financially anyway. Over the next 20 years my grandma B proceeded to use up every last penny and then some of the money my grandpa left - the man passed with considerable savings his liquid and portfolio estate was about 6 times what I plan to have saved to retire upon plus he had a pension. After the money was gone my grandma B got into substantial debt, her mother, my great-grandmother “Nanny”, who was on her last years bailed my grandma B out of debt and started supporting her lavish lifestyle (yes that’s right my 80+ year old Nanny started supporting her 60-something daughter) and eventually my grandma B inherited 80% of my Nanny’s estate, my mom received the other 20%.

Unfortunately, Nanny’s estate didn’t last my Grandma B long either. Just before my Grandma B passed away she had to declare bankruptcy because she had a 6 bedroom house filled with purchases, in fact all of the rooms, including her very own bedroom you could hardly move in let alone find a place to sit because she’d had them piled with purchases she made but never used. After her death my mom was the beneficiary of her life insurance (to be honest I’m really impressed she kept up the payments on the life insurance). Because of the life insurance my mom was able to pay off all of her debt and have an emergency fund.

All growing up I saw my mom’s struggles with finances, primarily because she didn’t account for that fact that her income was less than her wants. And I saw the effect of over consumerism first hand, we had a house jam packed with stuff while my mom struggled to juggle bills each month and stretch the last of the milk by adding water or other odd little tricks when the week before we’d just eaten dinner at a 4 star restaurant – it was always one extreme or the other. We never lived the “poor” life by any means, there are so many people everyday that truly struggle to make ends meet, our family’s issue was just wants not meeting income.

I think my mom kept getting into debt because I don’t think she ever could quite accept that this wasn’t going to be her future lifestyle no matter how much she wanted. She could never quite accept that it couldn’t be a self-sustaining lifestyle when you’re a single parent on a teacher’s salary with occasional child support payments. While I think my mom could have help this situation I realize its very difficult for her to let go of how she grew up and I’ve come to accept this as a fact of life. I will give her credit thought for trying; growing up each year it felt like we were getting poorer because expenses would be trimmed each year in an effort to make our lifestyle closer to what my mom’s income was but it was more like a diet instead of a life style change and one big splurge was all it take to start the binge back up.

When I was a child I always had the cutest designer clothes – it was one of the things she took great pride in, in fact she still harps at me if I’m wearing nice/cute no name shirt instead of a “real shirt” as she calls it. I admit when I was younger, maybe even as late as middle school I benefited from my mom’s spending ways, we’d go to a store and I’d pick out a toy or whatever and ask for it and my mom would always consent and some times even want to upgrade what I’d chosen. After I became conscious of the consequences then it was a different matter. I would beg my mom to put back some of her purchases because I knew the stress and heart-ake she’s have later over this when the credit card bill would come or time to pay the HELOC used to refinance the first CC debt pay off attempt.

While my mom was heartbroken when her mother passed about a year and a half ago, receiving the life insurance from my grandma B was a wonderful new start for my mom and she was so excited to finally get out of debt because she did realize the burden it was placing on herself. A similar thing occurred after Nanny passed away and my mom received her estate but my mom assured me and herself that this time it would be different. However to date my mom’s back in consumer debt because she still hasn’t adjusted her wants to her income so in her words she just can’t make ends meet. I know all the intimate details of my mom’s finances primarily because I try and help at her request with budgets, financial planning etc and I know if she scaled back (as in only go shopping once a month for clothes and not every week or cut back from the $200 cable package with all premium channels she doesn’t watch to the $75 family package) she could make ends meet. My mom is close to retirement, in fact she could retire next year and receive her full teacher’s retirement benefits however she won’t because there’s no way she could support herself let alone continue to pay off her new debt.

I truly love my mom with all my heart, and I know this post seems a little harsh on my mom but to honestly answer the question about why I save I have to tell you about my mom because I save because of her. I don’t want to end up like my mom financially (in all other aspects I would love to be like her, in fact honored to be like her) and I don’t want to end up like my Grandma B either. I don’t want to have the financial stress that my mom had, I don’t want to be embarrassed to have people over to the house because its so filled with stuff you can’t move, I don’t want to be forced to work as I start to reach retirement years because I didn’t save enough or am so in debt that I have to keep working to make ends meet.

The future I seek is one of financial freedom and to have financial freedom I have to live below my means, continuously save, be debt free, and be happy with the lifestyle I’ve chosen. I am very happy with the life I lead, I take great pride in my home and how its clutter free, I take great pride in seeing my bank account grow rather than the growth of my home or possessions, and I take great pride in knowing that if I continue on this track I can retire early, if I want, and without worry. I also take pride in knowing that I’m doing this on my own - I put myself through college and have never received any financial aid or support from anyone. With the life style I’ve chosen I may never have every single consumer good people dream about but I will have peace of mind --- to me the only thing I’m sacrificing is stress.

So in a nutshell that’s what motivates me to save, I hope this post provides you a little more insight into who I am. What motivates you to save? Don’t worry you don’t have to lay out all your family dirt to answer like I did.

1 comment:

E.C. said...

I'm very lucky that I grew up in a financially stable family. When I was young, my parents didn't make much, but they were frugal and we got by.

I grew up listening to stories about my father's childhood, which was nothing like my own. He reminisces about when his family finally crossed the poverty line: his mother was working full time, his older sister was working part time, and he was a high schooler with a full-time job and a paper route to help support his family. His father was a spendthrift who, like your mother, never adapted to a sustainable standard of living after growing up wealthy.

I've absorbed the message that a lack of money means insecurity and struggle. At the same time, I sometimes feel guilty for how easy I've has it.

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