The look on the man’s face was one I’ll never forget. Five seconds prior, his wife unleashed a verbal blast heard around the world.
Fine, it was just my office.
“As long as we don’t end up like his parents, I’ll be happy,” she levied with a steeled focus.
Then, silence. A preparative inhale was next, as the man collected his thoughts on the cusp of an angry retort. But it never came. She was right. His parents were a financial disaster.
John, we’re going to call him John, had a front-row seat to a poorly executed financial life, yet until he was forced to step back and examine its lessons, he had no idea he was tangentially involved with such a financial atrocity.
“My dad was the sales director for a regional electrical component company, and my mom was a high school guidance counselor. My sister and I never wanted for anything, but once I got to college, I began to see serious cracks,” John admitted. “I’m embarrassed to say, but I went from idyllic childhood to buried in student loan debt. And when I began to ask questions, I realized my parents were drowning.”
As reductive as this idea is, when we were kids we assumed our parents knew what they were doing with money, simply because they had more money than we did.
Some of our parents were poor, and presented that way. Some were wealthy, and they presented that way. And of course there were those parents who were wealthy and acted as though they had few resources, and there were the poor parents who decided they would outwardly appear well-heeled. I’m not judging, just observing.
What was your family’s reality? Was it one of the four I just mentioned? And if your parents were able to run an okey-doke on you, how long did it take for you to learn the truth? My fear for anyone is a misrepresented financial truth could have unduly influenced your small, watching eyes. Now you’re forced to redefine your views of money, scarcity, and abundance.
The best way to retroactively evaluate your family’s relationship with money is to determine whether or not there was an evolution. In the event they were still alive as you grew into adulthood, did their relationship with money change? Most people learn from their mistakes. But not all people.
As an adult now, it’s okay for you to deeply study your parents’ financial mistakes.
Start with retirement. Did they or can they retire successfully? They had some ingredients, they had a recipe, but did it taste good? If it did, you need to know why. If it didn’t, you definitely need to know why. The strange part about this is if they did successfully retire, absent a pension, it’s likely because they made good decisions when you were a small child.
If you’re able to, ask the people who raised you what they would have done differently when they were your age. You can ask this of an older close friend as well. If their advice is still pertinent today, act.
Examine your family’s relationship with investments and savings, debt, and material possessions. At an arm’s distance, do their decisions make sense? Think about what you would do differently and how those different decisions might have changed the course of your personal history, good and bad.
What kind of housing decisions did your family make? How about transportation decisions? They may have made sense to a younger you, but now you should take a moment to observe the additional color time has provided. However, to be fair, Americans spend money much differently than we did some 35 years ago.
From the latest available data from the Bureau of Labor Statistics, you and I spend 9% more of our annual total household expenditures on housing than Americans did in 1984. We also spend 72% more on health care, 11% more on entertainment, and 79% more on education.
Our day-to-day challenges are different than our parents, but our obligation to create stability remains the same. By observing how your parents were able to deal with the challenges of their time, you will better be able to gain perspective on how you’ll overcome your challenges. If your goal is to emulate your parents’ experience, learn from their decisions. And if your goal is to do the complete opposite, be intentional about it by understanding why they made the decisions they made.
Peter Dunn a.k.a. Pete the Planner® is an award-winning financial mind and a former comedian. He’s a USA TODAY columnist, author of ten books, and is the host of the popular radio show and podcast, The Pete the Planner Show. Pete is considered one of the foremost experts on financial wellness in the world, but he’s just as likely to talk your ear off about bass fishing.