The Most Important Money Lesson I Learned from My Father

Posted by FrugalPinoy on Mar 7, 2009 in Frugality | 6 comments

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.

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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