Dad on Money: ‘Do as I Say…’

Over the span of a lifetime, we learn more about saving and investing from personal experience than from any expert.

In my case, the most formative experiences have been the lessons learned by watching my parents with their money, especially later in their lives.

My parents are the first to admit that when it comes to handling their money, they haven’t been great role models. They rarely thought about their long-term finances and allowed credit-card bills to pile up. When regular paychecks stopped, they were trapped, especially later in life when it became harder for my dad to land a new job.

That said, there were positive lessons, too. My father is a natural contrarian, and I’ve seen the benefit of being willing to take opportunities others overlook.

On this Father’s Day, and with Mother’s Day not too far in the past, Encore will take a different format. I’ve asked my parents to share their real-life lessons, which they pulled together in a jointly written email.

My parents, Tom and Julie, are both well into their 70s. They have been blessed with good health, a son and a daughter and five beautiful grandchildren. They are both whip-smart and share a curiosity about the world around them.

Immigrant Grandparents

As it does with me, my parents’ experience begins with previous generations. Three of their parents arrived in this country as small children and one in his late teens. Their families had the classic American immigrant experience of pulling themselves up by their own bootstraps. My father’s grandmother, Concetta LaVenia, not knowing how to sew but equipped with a good sense of design, hired a couple of women to make fine dresses in her home and used the profits to buy houses.

My grandparents’ attitudes toward money were strongly shaped by the Depression.

My dad’s father, also named Tom, was a barber with his own small shop in Brooklyn. My mother’s father, Sam Friedman, worked for the post office until retiring with a pension. “Barbers were always needed; government work meant job security,” my parents say.

“Our parents were very careful with their money,” my parents recall. “When department stores initiated charge accounts our parents sometimes used them but paid the bills the next month.”

Their parents did the budgeting and saving for them. Prior to getting married, my dad gave his paycheck to his mom. She put most in the bank and gave him a “living allowance.” When my parents married and moved to the suburbs, the house was bought with help from their parents.

My parents, however, were products of the post-war boom. “We are the ‘charge it’ generation,” they say. “Marketing and PR probably hypnotized us.”

By no means were my parents loose with their money. Our cars were driven until they fell apart and we were the last family I knew to get a color television.

But credit-card debt is easy to rationalize. “A large purchase is needed for the home,” my parents recall thinking. “OK, let’s charge it, we can pay it off. Another important item is required. Charge it. Emergency repairs to home and car…charge it.”

Of course, that works only as long as the paychecks keep coming in and keep getting bigger. When I was young, my father was unhappy with his job so my parents went into business with a franchise that left them deeper in debt. But they sold off some of our property to raise cash, my dad found a new job and they stayed afloat.

“Unfortunately we still hadn’t learned to systematically budget and plan ahead,” my parents say. “When jobs are lost, life insurance and pension funds are usually cashed in and eventually that happened again.”

Compounding matters, my parents ended up selling their home, an apartment at the time, into the depressed real-estate market in the early 1990s.

It’s one thing to lose a job when you’re younger, but as you age the prejudices against hiring older workers make it harder to land a job. And frankly, the older you get, the pickier you are about what you want to do. Eventually, my father landed in real estate, where he had a knack for spotting good investment opportunities for others, but not enough to dig themselves out of debt.

Spotting a Real-Estate Deal

It was his contrarian eye for real estate that provided the biggest positive lesson for me. In the late 1990s, real estate was still moribund and the stock market was booming. But my father helped me see an opportunity to be an owner and a landlord in a quiet Brooklyn neighborhood. A decade later it paid off both for me and my children far better than any mutual fund.

In the meantime, my parents continued to be hamstrung by their credit-card debts. Eventually, my sister, Debby, and I were in a position to help dig them out. Today, they live with my sister and help take care of her young children.

In many ways, the lessons I’ve learned from my parents are pretty basic. But they’re the foundation on which more complicated financial thinking can be built.

“Plan far ahead,” my parents say. “A 10-year plan is of no avail. A 20-year plan is insufficient. A 50-year plan is what you need, and ignore the ‘charge it’ and ‘cash it in’ impulse. Teach your children to do the same.”

Tom Lauricella, Wall Street Journal

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Full article and photo: http://online.wsj.com/article/SB127698583369708445.html

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