I’m a sucker for tradition. Actually, I am a fan of nostalgia – things that make you warm and gooey and bring you back to the days of your youth. When it comes to issues of personal finance, however, nothing I was taught (even the more “traditional” lessons) really panned out for me. While I’m a big believer in balancing the budget, following the law, and doing your share, I won’t teach my kids money lessons that are popular simply because they are old. Here are a few examples of lessons that are still being handed down from generation to generation – but that really needs to stop.
“Be a Company Man”
There are two problems with this lesson. First, there is no company “men”. Just as many women are pulling down a fair wage in today’s economy, and the occasional guy who spouts this lesson may also still think “women shouldn’t be in the workplace”. The second issue I have with this is becoming more obvious in this current economy. Companies try to take care of workers, but they can only do so much. Be a family man. Be a man of truth. Be a funny man. But don’t ever base your identity solely on the corporation that signs your checks.
“Always Pay with Cash”
This can be a terrible piece of advice that assumes we live in a one-size-fits-all world. It is also nearly impossible to abide by. If you use water, gas, or electricity that costs more per month than the deposit you put down when you opened your account, you are using credit. Unless you waltz in with a wad of cash and tell your utility manager that you would like to only use the amount you prepay every month, you are “charging” your bill for a short time.
Most should avoid credit until they have developed the ability to use it responsibly. (You may also want to apply for a credit card but put it in a freezer for the time being in order to build your credit profile.) But let’s call a spade a spade, shall we? This adage should never be given to your kids without a lengthy lesson on credit. It would be better if it were changed to “pay with cash if you aren’t good for your word of paying back the things you buy with credit.” You may also add in “credit rocks if you are good with your budget and like earning perks for the shopping you do anyway.”
“Don’t Spend it All in One Place”
This is one that many of us still hear. The thought behind it is that if you “blow” all your money on one purchase, you won’t have it for other things. But don’t we already know that? Similar to the “play the field” advice for relationships, it can discourage kids from setting, planning for, and committing to a financial goal so that they can one day buy a large purchase that would otherwise be unattainable. So yes, “spend it all in one place” – if that’s what it takes to make that mega purchase of a home, car, or college tuition.
“Time is Money”
Yikes! This is a true statement to some extent. If I burn minutes and hours waiting for a doctor that is late for my appointment and I’m missing time in the office earning a paycheck, then time is money. If I’m spending a day off from work (unpaid even) to visit my sick aunt in the hospital or to witness my daughter’s first volleyball tournament, then this is very simplistic thinking.
I can always earn more money, but I can never get the precious moments of life back. Most people can always spare more time for important things. Be sure that when teaching this to your kids, you are qualifying the value of time in units other than cash. You only get one life, and you can take none of your belongings with you when you die. (Both are traditional lessons that parents should be passing on to their kids!)
What lessons did you hear growing up that should be revised? Or maybe it should be left in the past altogether?
{ read the comments below or add one }
Thanks for sharing the post above. I agree with your point about “being a company man” being outdated. I had a different spin on this which is that you gain nothing from being a company man or woman. There’s no loyalty and this goes both ways between employers and employees. Instead, if you are an employee, evaluate all opportunities and sell others on your market value.
The other important lesson that I wish my parents’ shared with me when I was younger is not only to work hard, but to CREATE VALUE. People are not rewarded for how hard they work or how many hours they work, etc. They are rewarded for the unique value and impact they bring to their organization and their bosses. It’s a mindset shift that I quickly realized when I joined the workforce out of school.
“To a businessman, time is money. To the creative man, money is time.” That is, once you have saved enough money, you can afford to enjoy your time. I worked for lawyers for 25 years, and believe me, to a lawyer and anyone who works for a lawyer, time is money. And you will have lots of money but no time when you work for lawyers. When you are starting out to work in a new field, first ask yourself which you value more, money or time. Then make your decision accordingly.
Teach responsibility and do not use our politicians as an example of how to budget money!
I work in the oil field … the oil patch… and here minimum weeks are 70 hours … most work more up to and passing 100 hours a week. The phrase time is money….hits home… I was working nights, more money, and working all that I could even though I feel my mind body and soul failing. God has given many signs to reduce my stress from being in the hospital and the only thing they could figure out was causing the issue was stress. So, now I’m in the process of giving up some material things so I that I can have my peace and health back. Money isn’t everything but the least of things.
Also, the prohibition on being “a company man” is bad advice. One should not derive the entire meaning of his life from being a mindless company cheerleader, and things have certainly changed (no one expects to stay with the same company from hiring to retirement 20 years later any more). BUT, being a loyal, honest employee who does his best to support his/her employer both when on the job and off (sitting around the pub bitching for all and sundry to hear is classless). As long as your employer treats you (and his other employers and customers) with honesty, dignity and respect, then give it 100% Be a solid, committed part of the team. If you don’t have respect for the mgr/company, then find a mgr/company
Our utilities offer budget billing based on a monthly average of the last year’s usage. And yes, watering in a drought IS a necessity. If I have to sell my house, I’ll take a big hit in resale value with dead or unmaintained landscaping. Hello? Curb appeal. Secondly, over the years I have invested thousands of person-hours in sweat equity and thousands of dollars on perennials, shrubs, bulbs, etc. Last year we had record heat and record drought, and if anyone thinks I’d let my investment wither and die then they have pea gravel where their brains should be.
The problem with this article is that the core meanings of the sayings are all being misinterpreted. Time is money is just a way to tell you not to waste your time, or waste other peoples’ time, the same way you would not waste money.
“Time is Money” … I like this one because I’ve started using it to my advantage.
After all, if I max out my retirement account, in time I will have A LOT of money. 🙂
In order to decide whether or not advice is true, it is important to look at the lives of the people who are giving it. In this case, it is important to look at the person giving it as a representative of our current economic climate, Why, in all honesty should I discount or poo poo money advice from a generations of Americans who have historically been proven to be the most financially and economically successful generation in the history of the world? We’re talking here about age old, tried and true pieces of advice from the post war era, dating all the way back to pioneer days. The concept of money hasn’t changed all that much. The concept is relatively simple: If you spent more then you make, you go into debt. If you make more then you spend, you have a surplus. Interesting enough, the overwhelming majority of Americans just can’t seem to get this most fundamental concept through their govt. educated brains.
American society is so messed up now with it being so selfish, and unwilling to wait for ANYTHING that it is no wonder we have someone trying to write an article to give permission and cater to our current attitudes concerning money and what we THINK we know best to do with it. We are so arrogant in thinking that we know more then past generations and that we are the enlightened ones and have so much more all figured out. Yeah, right.
Not a fan of this article, I don’t have a problem with women in the work place, however jumping on the “all men are chauvinist pigs is a lame way to attempt to gain creditability. Also you should not put down women that do stay home with their children, I know several well educated women with high-paying jobs that went part time, or even took time off. Having a mom at home can make all the difference in the world between an average performing kid and a high performing kid. I believe their is a connection between more women in the work place and the rise of autism and obesity in children. We all know stress is bad for us, so do you think a woman already stressed out being from the trials of pregnancy is better off with the additional stress of work?
I’m not sure what you are talking about when you say ” don’t be a company man/woman” whomever you work for deserves 110% from you, you are not entitled to your job. If you are lucky enough to work for a good company I strongly suggest you do everything you can to be a part of the team, the company, in the end what you want is a good paycheck for your family, for your future, there is nothing to be gained from “going against the grain” at work.
I also hold issue with your ” don’t spent it all in one place ” comment, people that blow all their money on a house and are “house-poor” never really enjoy the house or their lives. When buying a house I suggest saving up for 20% down and keep payments that are no more than 1/5th your monthly check, I strongly suggest keeping enough in the bank to make payments for 2-3 years should you lose a job, once that sum is locked away, start paying it off early as your situation allows.
I’ve never heard the saying “always pay cash” though I understand the point – if you can’t afford it don’t buy it. I buy everything on credit cards, though I pay my balance every month, this allows me to track expenditures and I’m not walking around with a wad of cash that won’t be replaced should I lose my wallet.
Yeah, the whole blasting of the, “be a company man” thing was very tacky in how it went after the terminology. Be a company man involves BOTH genders. Don’t people know that historically, saying things like mankind were a way of including EVERYBODY? This nitpicking over the word man or mankind in describing people in general is tiresome and pathetic.
And like you, I agree with the stay at home mom part. I think women (or men) who stay home with their babies are showing an extreme amount of courage in putting their own lives and desires on hold in order to give their child as much of their time and attention as they possibly can. Believe me, it’s frustrating waiting for a child to get old enough to go off to school to begin their lives so that you can (FINALLY) get back in the saddle with your own!! Too many claim they CAN’T be stay at home simply because they mismanage their finances or aren’t willing to cut out junk they just don’t need. Also, many are just too d@mn selfish. That’s our biggest problem facing us today is downright selfishness.
Kinda of lame on several of these points. The cash/credit thing has been noted, but the last one struck me too TIME IS MONEY. Money is also time (if you earn enough you can take vacations or retire early). This is not bad advice, if you waste time you waste money. There is a opportunity cost to visiting your sick aunt instead of working and earning money. Nobody said you shouldn’t PAY it… but it is there. The mentality is still sound as long as you realize that money is also time… and you need to balance the two.
The authors problem isn’t with the time=money equation his actual problem is the exchange rate most people have ie they undervalue time with respect to money…
Not a fan of this article. I few issues. I don’t think the the term company man is supposed to be take literally, i.e. as a mysogonistic slur. It just means be a loyal employee. I do agree with the second half of the rule, more or less. I suppose Linsey also thinks that person-hole cover is a better term for those things in the street. Let’s not turn this into a feminist argument, yeah? Second. If you pay your gas bill with cash, you are paying with cash. At the end of the month you get a bill. Credit is borrowing someone else’s money to pay that bill. Thirdly, time is money. The time you work is money. Time of yours that someone wastes is money (e.g. your doctor). The reason someone pays you is for the work you do…and for the time you sacrifice away from your real life. Each minute you spend on yourself and with your family, that is time you are cashing in. Your employers are really paying to take you away from that freedom. Time is money because people need to be willing to pay you enough, your time is more valuable than many of the jobs out there. Value your time and make employers earn the right to pay you for your sacrifice.
I really think this is the most simplistic article I have ever, ever read. Not good.
Perhaps the author is not old enough — or experienced enough — to have lived and worked in a variety of fields and locations yet. Would he recommend to Steve Jobs not to be a “company man”? How about Steve Forbes? or A.J. Foyt? or Sam Walton?
Dear Linsey Knerl: On the flip side of the coin what parents should teach seems much more important than what not to teach. Case in point: So few young adults know how to correctly count change back from the amount of purchase. How annoying it is to be handed a handful of money and hear the clerk say ” Here’s your change”! ie: 23 dollar purchase; Give a $100 We should hear something like this: 2 makes 25 and 5 make 30 and 20 makes 50 and 50 make s a 100. Where have all the teachers gone? Some old money ideas never go away.
‘Always pay with cash’ is a moronic trope spouted by morons. The fee of 1-3% that credit cards charge to EVERY retailer is built into the price of everything you buy. If you don’t take advantage of that by actually using a card, and stand their buying armfuls of supplies for your bomb shelter with trusty tattered money from under your mattress by all means be an idiot and subsidize me. Always use credit because: Pushing you entire cash cycle out by 30 days is free money (i.e. you pay cash for everything this month, I put that cash in the bank, earn interest, and pay the whole bill when it comes, making money in the process); also, credit cards come with amazing things like points, cash back, travel rewards and hefty travel, medical and insurance benefits (ever called your cash to ask for 1,000 because your luggage is lost? Thought not. Derp.
Here’s a money lesson for 2012 — the best place to work is in Switzerland, where salaries are the highest in the world and — if you live there — you are protected by banking secrecy. From wherever you live and work now, you can find a top job at major multinational company. Once in Switzerland you have access to the best financial services in the world, (with Singapore running in second place).
I firmly believe before adding funds to provide children with art, music, religious studies, schools need to add a program where kids are taught the truth about money. For far too long, kids have learned their money habits from their parents bad habits and the cycle repeats. This sick culture, for which I blame the government for not fixing, creates workers and spenders. Kids need to be taught that whenever you buy something on credit, they need to take into account not only the interest, but the hours needed to earn the money and taxes paid, to pay off that interest.
This article is terrible! Always Pay with Cash! Shouldn’t be taught. I say you’re wrong, paying in cash means you can’t go above your means. Also if there a storm and the ATM’s and credit card machines are down, cash is the way to go
“Credit” : don’t spend money that you don’t have. Simple as that.
The rule applies universally, with surprisingly few acceptable exceptions (i.e. buying a house, if taxation and inflation work out and I understand the risks).
Unfortunately, many (especially American) adults have never grasped that simple concept. Don’t spend money you don’t have. Only six words, why are they so hard to understand for a whole nation.
The one thing I wish my parents had done was actually talk about money. They were so secretive about their income, the cost of their home, monthly bills etc. They struggled at times with money, but I never understood why.
It drove me crazy listening to my mom negotiate with the utility companies to ensure our service were left on. I wanted to understand, how the heck I could avoid those type of conversations in my future.
I have been able to avoid the struggles my parents faced. I think part of it is due to always being aware of my parents struggles and as well to talk about money. I seek thoughts and advise from my bank, trusted friends and colleagues who I know are good with money. I am not traditional, or old school and demand the best rates from my bank, even if it means paying penalties up front. My parents always seemed to be at the mercy of their bank, and that is one thing I refuse to do.
I use credit cards ALL OF THE TIME, to get points, but never carry a balance. Points are a fantastic benefit of credit and give you cash, travel or merchandise for free, just for buying the things I would already be buying.
Your last statement isn’t true to some extent. It’s entirely true. Every hour you spend not earning money you are spending money. You get paid for working and you pay for time off. I do agree with you though, vacation is worth the money you pay for it.
There is nothing wrong with credit as long as you can pay the monthly re-payment, without a credit history you will never be able to buy a house.
Although it’s not money advice, it is two of my mom’s ideas of “life lessons”, when I was a child my mother ALWAYS said “Children are to be seen and not heard”, “As a child, speak only when spoken to”. I believe these should be eliminated from any “life lessons”. A child can not form the ability to speak his/her mind if they are not allowed to express themselves.
Best advise from my dad was “Learn to sign checks on the back”
Number one was great. Numbers two through four were garbage. Anyone who says that using credit is the only way to survive is clearly not good with money. Do you know what my credit score is? Zero. Does it matter? No, because I spent several years paying off my debts (including my house) and saving extra cash. Here’s the only lesson you need: spend less that what you earn while not using credit. Your welcome.
1. It is almost impossible to be a company man today so kinda irrelevant.
2. Don’t spend it all in one place is more of an expression than advise and really means the money you just got unexpectedly don’t waste it. Which is good advise.
3. Time is money is an outdated concept, but it points to the more important fact that time is valuable and not to be wasted.
4. Always pay in cash… well on face value it is stupid, if you pay with a credit/debit card (no fee) and receive points and ALWAYS pay off the balance every month you actually come out ahead. But the real advise is don’t spend money you dont have. There are times when taking a loan is almost impossible to avoid (house or a new car) but otherwise paying interest on a new pair shoes or a night out drinking is usually foolish (unless for example you need those shoes for job interviews).
So the face value of these old sayings are outdated, but except for the company man BS there is a truth rolled within that matters.
You pay with cash IF you cannot pay your financial responsibility on time. Time may be money but, true, you only got one life. Live happily. You could still earn money the next day or so.
I admit, I was so pleased to see how many people disagreed with this article. It means there really ARE people out there who make sound financial decisions and can think!
Every single point in here is still valid, with the exception of ‘Be a company man.” and that is only because the company doesn’t care about you. The feeling should be neutral. Not because the term ‘man’ implies that if you are not ‘man’ you should not be a part of a company. Female police officers, or as they were known in yesteryear, ‘policemen’ (because that’s what they were called) were rare, but not because of the ‘man’ in the word ‘policeman’. Female mail carriers were mailmen, because that’s what there were called. Being a funny man, though, is okay to say, according to the author. Why not a funny woman, or funny person?
Go to University is another good one from the old days.
Third sentence and I knew a liberal woman wrote the article, learn some English , in our language the masquline includes the feminine.
Time is better than money.
you never loose money on a house
Time is money. Even if you are visiting a sick relative in the hospital or attending your child’s sporting event. The distinction that needs to be made is the relative importance of that money. Whether I am sitting on my couch playing xbox, helping my son with his homework, or visiting grandma in the hospital there is still an opportunity cost associated with the time I am spending.
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The author states, “Companies try to take care of workers, but they can only do so much.” This is the understatement of the year. It would be more accurate to say that for several decades US businesses have been sytematically shedding social responsibilities toward their workforce. This is part of a general impoverishment of the American population for the benefit of a tiny minority of plutocrats, and is much more far advanced in the US than elsewhere. It is the dominant US and world economic trend of the late 20th and early 21st centuries.
If you get good grades and work hard in school, you will get a good job and earn a decent living. Uh, not so true in 2012, mom and dad.
Well, let’s put it another way: if you don’t get good grades and work hard, you will get squat. So, what’s better? Definitely getting nothing, or maybe getting something? Sure just because you work hard and get good grades doesn’t mean you’re guaranteed to get a good job immediately, but in the end, your education and skills will create room for you.
“Time is money” is still a relevant lesson. You are confusing the meaning of this adage with “Money is time”. It’s like how squares are rectangles but not vice versa.
This is a poorly reasoned (and written) article. The adages are taken out of context, oftentime to make points that are not even very good. The strawman sexism argument is lame, yet the author thought it a worthy starting point. The debate about the meaning of the term “credit” in the comments is absurd, but it is necessary because the author does not seem to understand the concept at all. I am thrilled to read so many comments to this article that show the world still has folks that utilize good judgment and common sense.
“Never carry cash on holidays, and never carry more than $100 at any one time; especially in cities you’re just asking to be mugged if you carry large amounts of cash.”
Hogwash. I carry up to $1000 on me, and I’ve never been mugged, despite living in large cities. Do you think muggers have x-ray vision?
My number one lesson to my kids has been spend your money on things that last. The second is be prepared to wait for what you want. Impatience begets poor choices.
The absolute most important money advice is:
Regarding the use of Credit: Always pay your credit card balance in full, every month. Otherwise don’t use the credit card.
Regarding Time and Money: Time IS money but money is not the most important thing in life.
Um, I think the author is misinterpreting “Don’t spend it all in one place.” It’s not supposed to be taken literally, and it’s usually said jokingly in reference to the bank robber cliche. You know, how in old movies/TV shows, whenever the bank robbers/stagecoach raiders/counterfeiters/etc. get together after the heist, divide up the loot, and then the boss, whoever is the “brains of the operation” (not literally brainS, since the boss is likely human and has only one brain), tells the idiot underlings “Don’t spend it all in one place” because if they do, they will attract suspicion with a large amount of money and then the cops/sheriff will start nosing around (not literally with their noses).
Thus, people jokingly tell people “don’t spend it all in one place” much like they would advise someone who makes a fool of him/herself accidentally to “lay off the vodka” (when it was obviously just klutziness) or “lay off the cigs” (when someone is coughing due to a cold).
Just ’cause a phrase has “spend” in it doesn’t mean that it is a financial advice rule.
Hmmmm … Seems your article is mostly just a poorly worded thesis based on semantics and poor logic. but in the end you mostly agree with the lessons you say are outdated.
Kind of like saying “an apple a day keeps the doctor away” is outdated because apples don’t have a broad range of nutrients, however eating a variety of fruits is good for you.
You article would be considerd good – for a fifth grader. Did you wake up and realize you had an article due at noon?
This is such a stupid article written probably form the looks of her to be maybe mid twenties at most. Probably has always had someone else handling her real expenses anyway. She knows very little about the subject matter.
What is this horse….. About paying utilities you are not paying cash, well you have to use the utility first idiot then pay the bill for the amount you used. Thats not credit. What an idiot.
“I can always earn more money”?? How? What I make at my job is pretty much set; if I miss a day of work and don’t get paid, I’m out that money. You don’t get to decide how much you earn and it doesn’t change based on how much money you need or what you earned yesterday.
It’s easy to give financial advice when you have an endless stream of money, but for most Americans, we are working for every cent we have and any lost wages are actually lost and will provide a hole in our budget.
What you should say is “I’d rather miss work to enjoy life’s ‘precious moments’ becasue I make way more money than I actually need, so losing a day’s wages won’t impact me at all.” Most people in this country don’t have that luxury.
It’s hard to say much more than, “Sigh…” Credit means financing through a loan, and has nothing to do with utility bills, gasoline, and restaurant meals. If you think that “90 days same as cash” doesn’t have the interest built in, then I have a bridge…
I’ve seen (and even taken advantage of) same-as-cash offers that were actually the same as cash (except later).
In every case, the seller simply had the purchaser sign papers provided by the finance company (the evil younger brother of the banks) and washed his hands of the deal. The ones I talked to said they were paid full face value, so the finance company was hoping the purchaser would slip up and have to pay the finance charges.
And the contracts are all different. Some require monthly interest payments, but then when you reach the maturity, if you pay the principal minus the interest, the interest payments you’ve already made magically convert to principal (that is, no interest). Miss one, there’s interest at 38% or something like that. But another one requires equal monthly payments of $x (whatever would pay it off over 2 years, or 5 years, or whatever). If you pay it all off on the due date (including the monthly interim payments on or before their due dates), all your payments are principal, no interest. If any payment is late or missed, then you have to pay interest for the whole period. At their ridiculously high interest rate.
I know lawyers who’ve been fooled by these contracts. It’s a royal pain in the behind, all you’re saving is the interest on your purchase (at your investment rate, probably a conservative low rate, maybe .10%, maybe 2.5%, maybe even 5% [unlikely, because we’re talking spending money, not investment money]). But if you make a mistake, which is more likely than you think, because the contract is not only complicated, but also downright tricky, you run the risk of paying 38% and maybe penalty fees. The risk-reward structure is just wrong for this transaction.
Of course, the finance companies do this not because they hope to trick you into making a mistake, but because they know that a certain percentage of their customers will end up “deciding” to not pay off their contract but simply continue making their monthly payments, whether through inability to come up with the money to pay it off, ignorance of the cost of continuing the contract, forgetfulness of the month they need to pay it off, or simple inertia. If people who know better make mistakes and get caught too, well, that’s just an added bonus.
What can I say that hasn’t already been said? From the feminist drivel in the “company man” section, to the electricity, water, etc – an awful article.
I hope the author has another day job
Agreed.
The biggest one I was taught is patience, and never rely on other people to handle your money for you. But I got taught a lot – I grew up in a low-income family that fell out of the debt tree and hit every branch on the way down so I learned a lot of lessons the hard way.
Firstly – if you’re going to invest, you have to be patient. It could take 10, 20, 50 years for your investment to get anywhere. The longer you wait, the more you get in the end. But you have to be able to wait. Most people can’t. My advice? If you have an investment, try to forget about it. Don’t look at it, and you won’t obsess over it. (Shares and stocks are only worth it if you’re willing to gain the knowledge needed to make smart trading decisions. Otherwise, you’ll get into trouble pretty fast.)
Secondly, never let other people handle your finances. As much as possible, handle everything yourself. Keep a close eye on all your accounts (ESPECIALLY if you shop online) and don’t lend others money, ever.
Thirdly, only use credit if you can’t carry cash and only use it if you can pay it off when you get home. I would never buy, for example, a car or a TV with cash – it’s too risky to carry that amount with you. But if I’m going to buy it on credit, I’ll pay it off online the second I get home. (EFTPOS can be an option, but be aware that some banks have fees and charges associated with it. Always check out fees and charges before you sign up.) Never carry cash on holidays, and never carry more than $100 at any one time; especially in cities you’re just asking to be mugged if you carry large amounts of cash.
BUT. Be well aware that some shops and small cafes do NOT have credit or EFTPOS facilities so you will need to have some cash on-hand at all times; $10 and a handful of small change should cover you for most purchases.
Fourthly, learn to separate what you want from what you need. Write up a budget that prioritizes what you have to buy or pay for – rent, bills, food, fuel or bus tickets, insurance. Be aware of what the minimum you need to have in your account is to cover that, and then add $100. Whatever is left over, that’s your disposable income. Learn to stick to your budget.
Fifthly, never expect to stick with your first job. Most people’s first job is in fast food or retail. When you get to 20 or 25 you’ll want out if you didn’t already. Never expect any job to last forever.
(As an addendum, research companies before you go for jobs. If they have a high turnover rate and you’re not looking for a short-term job, don’t touch them. High turnover is for a reason – either they’re treating their employees badly enough that they leave, or there’s something else going on to make everyone leave. The only exception is retail and fast food, which do tend towards high turnover regardless.)
Sixthly, be aware that buying a house is a pretty big deal. Don’t jump in with both feet. Do research, check out the property, the area, and the bank. (Equally with renting.) Always, ALWAYS do an inspection, and check everything during the inspection – it could save your life, especially with older houses where faulty wiring can cause fires or rotting floors can give way. Check out similar property prices in the area too, and judge if it’s in the average range; if it’s lower, you’re probably getting an inferior property (granted, sometimes sellers can get desperate and keep dropping prices to try to attract buyers) and if it’s higher you’re probably being ripped off. Only buy what you need as well – if you’re a single person living alone you don’t need a 3 bedroom house; a 1 bedroom apartment is enough. Unless you have plans to start a family (or have one) you don’t need a big house.
Seventhly, shop around. If you can find it cheaper elsewhere or online, go for it. Wait for holiday and end-of-fiscal-year sales if you can. Get store cards wherever you can if they allow you discounts.
Eighthly, online shopping is not evil. And you can get some stupidly good deals online. Use a good anti-virus and firewall to protect yourself, and if you’re really concerned ask your bank about pre-paid debit cards, which are not attached to any personal details and that can be topped up as you need. (These are also great for trips overseas or to areas where you’re worried about credit card fraud or theft.)
Ninthly, take ‘skinflint’ as a compliment. If you don’t have to spend money, don’t. Why pay someone to do things for you? Do it yourself where you can. Make your own (especially when it comes to food; home cooking is cheaper than takeout) and mend. Invest in a good sewing machine (goes double if you’re an unusual body type or clothing size; then it’s essential) and find some free classes in your area to learn alter your own clothes. (And you do not need new clothes every week. Only buy it if you actually need it. Nobody will notice or care if you wore the same pair of jeans to work as you did two days ago.) And pay the extra for high-quality goods; they last longer and won’t have to be replaced as soon.
And lastly, take nothing at face value. Do your own research. Never listen to companies, they just want your money. Do your own research and draw your own conclusions.
(On the subject of cars – again, research research research. Speak to mechanics or enthusiasts; mechanics especially can tell you what makes and models they see a lot of and what they don’t. Never buy brand new cars either – if you have to get a newish car, buy an ex-company or ex-fleet car. They’re about 1/3 of the price, usually last year’s model or the year before, and have barely done 10,000 miles at the most.
Never buy what you don’t need either. Unless you’re doing offroading or towing a caravan, you do NOT need a four-wheel drive. Unless you’re a tradesman or carrying a lot of equipment daily you don’t need a pickup. You don’t need an SUV either. Most people cope just fine with a sedan. Unless you really need the extra space, invest in a 4-cylinder hatcback – they’re stupidly easy to park as well as being even more fuel efficient than 6-cylinders. (If you live in an inner-city area or your drive is 10 minutes or less I wouldn’t bother with a car; you’ll get further in less time by walking or cycling, and you’ll get fit at the same time.)
Learn to drive stick-shift and learn to do it properly. They’re more fuel efficient than autos, and being able to drive stick opens up your options in what models you can buy. It isn’t that hard; I learned to drive stick and still do. Once you’ve been driving stick for a couple of weeks it quickly becomes second nature.
Don’t stress over minor scrapes and scratches. Nobody cares or will notice. Pay the extra money for good-quality oil and take the time out to learn how to handle simple maintenance yourself; oil changes aren’t complicated, just tedious. Change your oil and have the car serviced religiously, it makes all the difference in both running costs and lifetime of the car. You should be able to run a car for 20-30 years if you take good care of it.
And keep your car. Unless it is unroadworthy or damaged beyond repair you don’t need to replace it. If you seriously feel the need to have a new car every year, don’t buy, lease – it’s cheaper. It is very true that the second you drive that car out of the dealership, you lose easily 2/3 of its value, so you will never break even re-selling a brand new car.)
Good advice, for the most part. A few quibbles, though. Buying or renting more space for yourself can be advantageous if you, say, choose to run your own business and need storage space for inventory or an office. It can be cheaper and more convenient than separate office or storage space and save you in travel costs (fuel and time).
As for cars, it can be good to buy new, for some people. Depending on how much you make per hour, the extra time and money spent on repairs for a used car can balance what you’d save in that area by buying new. That is the case for me, since my hourly consulting rate is fairly high. Even if it weren’t, sometimes the convenience is worth a little extra expense. Plus, some of us simply don’t have the ability to do our own car repairs. My own hands are not strong enough to manage engine maintenance, so I get someone else to do it. You need to balance your own abilities against the risk of doing damage 🙂 And again, the value of your time. If I make $90/hour working, I’m not going to waste 3 hours attempting to change my own oil when I can pay someone $20 to do it for me.
Also, newer automatic transmisions can be more fuel efficient, especially in city driving. And some of us don’t have a choice. I have a disability and handicap parking, but with restrictions on my license that disallow driving manual transmissions.
If you live in the snow belt, having a 4WD can be a good thing. Also, having a larger vehicle or truck can save you money if you’re doing lots of home remodeling or if you have a business that involves transporting a lot of stuff or mailing loads of packages. And some people simply don’t fit into smaller cars (my 6’6″ brother will attest to this fact).
All in all, this article misses a lot opf the points. And really, no financial advice is one-size-fits-all. People who can use credit responsibly can make out quite well with credit card rewards. Don’t forget, also, that most credit cards offer protection when you purchase things and are protected against fraud losses, where debit cards and cash are not.
One of the best bits of advice I can give people is to master their own destiny. This speaks to the whole “company men” debate. Don’t depend on an employer to manage your career. Expectations have changed on both sides of the employment equation. It’s not that companies don’t care about their employees, it’s that the markets don’t allow them to do so. Treat yourself as a commodity. Know your value and be sure you maintain it by keeping your skills fresh and taking charge of your career path. DOn’t depend on others to do it for you.
Credit is bad. We didn’t learn enough? We want to pass the burden on to our children? Keep speaking the company line, keep talking for the bankers. I’ll be living large with my cash lifestyle, thankyouverymuch.
Buying with credit to earn the perks is just another lie from the credit granting agencies. You have to spend so much to earn that cash back figure in the interest you have to pay them for that $1 not worth it.
Not true Kurt. I have not paid a single penny in interest to my credit card company in the past year, yet I have collected cash rewards checks totaling more than $600. It is true that you must pass a large amount of money over your credit card for it to amount to much in terms of rewards, (I get one point for every dollar I pass over my credit card and $500 cash back for every 50000 points I accumulate) but as long as you pay your entire balance due and do not allow any balance to roll over into the next period, you do not accrue any finance charges (interest). So I pass everything I can over my credit card (I have the cash in the bank) and then pay the balance in full each month before the due date and so I’ve never been charged one cent in interest….yet I walked away with over $600 in cash back rewards.
I’m not saying it is the right (or easy) approach for everyone. You must be disciplined enough to only charge what you have the cash on hand to pay, and also to then go in and pay it on time every single month. But if you do, it can work in your favor. Of course, the banks “bank” on the fact that most people are not this disciplined (and most people aren’t) so they don’t really worry about people like me because they more than make up for it on people who are less disciplined. But…it can be done.
The author obviously doesn’t understand what a being a “Company man” means. It means (or meant) to find a good company to work for, and stick with that company, rising through the ranks. It is this that is foolish advice (and not her off-orbit “women in the workplace” rant) for a variety of reasons, not the least of which is that loyalty to a company is rarely rewarded in today’s economy. Most companies only value you if you move around (sort of like how a guy becomes a hotter commodity with pretty women, when he is already with a pretty woman, not when he’s single). As such, moving around is also better for you, in that your wages will rise much faster if you move around every couple of years, than if you stay in one place for a decade or two.
Always Pay with Cash” that’s the best way to pay! If you pay in cash you get into debt!
It’s this simple: if you pay interest, it’s credit. If you don’t, it isn’t.
The title of this article drew me in. The content was drivel. Obviously the author never learned these lessons, only how to wordsmith them.
Couldn’t agree more michcm. I almost closed it when she went off a tangent because of “men” in the phrase “be a company man”. Seriously when I read a financial article, I don’t need or want to be taught political correctness. Should have followed my gut and stopped reading. Calling a water bill credit? Seriously? Other than stretching the definition, it also completely ignores the intent of the advice. Now I do disagree with it like she does but for better reasons. Credit transactions are easy to track and budget… cash is not. A lot of credit cards offer rewards… cash does not. What a waste of time!!!
Credit is NOT necessary (Except in one or two major circumstances – think house and car), and it’s not good. A person who manages their money carefully, it’s not necessary at all. Properly managed finances mean you have the cash you need to buy the things you need. The existence of debit cards means that things you must have a credit card for (such as airline reservations, or hotel reservations) can still be taken care of.
We don’t need credit. The idea that credit is a necessity is one reason our economy is in the toilet. Credit encourages us to overspend.
Don’t finance a car. Pay cash. Interest and depreciation kill you. Take the bus, ride a bike, or beg a ride while you save up. Buy used. Yes, you may have to deal with the inconvenience of more repairs, but the total cost of ownership is still way lower than buying new.
Mortgage is the only “good debt”, and that’s arguable.
What you did here is really only twist the meanings of those cliches and then explain why the twisted meanings are wrong. The basic concepts of all of those are fine. Except maybe the first. But the reason you spend the most time speaking to on that one is not germane. The reason you might not want to be a company man is not because there are also women, or because companies really really do try to care for their employees, but can only do so much. It is because there is no longer an expectation of loyalty from your company. By and large, if a company can eek out another 2% profit by wacking some staff, they will send you to the unemployment line without a thought for where that decision places you or your family. So you should give them the same benefit.
As for always paying with cash, the meaning of ‘cash’ may have morphed a little bit. But as others have pointed out, the idea is simply not to go into debt. Using credit as a tool as you suggest, is not the same as not paying cash, based on the spirit of this cliche.
Don’t spend it all in one place… is exactly meant to convey what you outlined. Save your money for those big purchases. When you are ready to make those purchases, make them.
Time is money is perfectly true. The assumption that you are making there is that money is inherently more valuable than everything else. I don’t think that’s the case. To me, the gist of this one is that you should consider how you use your time. Be aware that your time is valuable and spend it in ways that add value to your life, either by building upon your financial success (networking, working, planning, etc.) or by enriching your family / personal life, as you suggest.
In short, I think this post seems to be just very poorly thought out.
That inflation is caused by vendors raising prices. Inflation is caused by the Fed creating more money, making the money in circulation worth less. The politically-well-connected who get the new dollars first are the only ones who benefit. It’s ultimately how the rich get richer and the poor get poorer.
This is a poorly reasoned article.
1. Paying in cash is more of a necessity now than ever. Don’t take on debt. These are uncertain times. Never put anything on a credit card that you can’t pay off entirely at the end of the month, unless it is an actual emergency.
2. Don’t spend it all in one place means don’t make purchases off of impulse, when you don’t know what you might need the money for later. It has nothing to do with buying a home or other such milestone purchase. It simply means manage your money and be prepared.
I do agree that the advice about being a “company man” is outdated, but not for the absurd reasons listed here. The sad truth is that companies just don’t care about their employees anymore. 25+ years ago, it was not unheard of for people to spend their whole life working at the same employer. They were given a pension when they retired, and their health insurance was paid in full. Now the employee bears more of the cost, and the employer is likely to lay the employee off at the drop of a hat, or give them a less than friendly push out the door when they hit their mid 50s. The company has no loyalty to you, so do your time, and move on to better things.
It is always a better idea to pay with cash. Otherwise, you are just perpetuating a lie told to us by the CC companies and banks who are reaping the interest and fees.
c: “Always?”
Let us say that you will pay the exact same amount whether cash or credit, but using your “rewards card” will earn you airline points , and you always pay off the entire balance each month (thus incurring no interest charges), and THEN taking a free trip on such points a couple of times a year? My wife and I have done this for years.
Terrible article.
“Be a company man” refers to staying with one employer rather than bouncing around. This is very sound advice in this economy. Focusing on the word “man” in the title is as stupid as saying the “peace for all mankind” is a sexist term.
“Always pay with cash” means don’t pay for things you can’t afford. It means don’t pay for a fancy meal with a credit card unless you have cash in the bank to cover the meal. It’s sound advice that is still applicable to today.
You “don’t spend it all in one place” is just stupid. If you have $40k in the bank don’t buy a $40k car.
Finally, you clearly don’t understand what “time is money” means. It means your time is valuable; using your free time to create a business, visiting a sick aunt or putting in extra hours at work is a good use of your time. Reading this article is not.
One of the biggest hoaxes still being pushed by retail banks are children’s savings accounts. The teller at my bank saw me with my four-year-old, and was pushing the idea. I asked, “what does he get out of that?”
What she wanted to say was: “I get ten dollars for each account opened, plus the person in this branch who opens up the most accounts before the end of the year gets entered in a drawing for a trip to Hawaii.”
But she stuck to the company line: “A savings account teaches kids how to save, and how to manage money.”
Huh? Saving at 0.4% interest when inflation is at 2%….. is not managing money. It’s called donating money to a bank.
Or how about that buying a house is always better than renting? Look at the effects of the 2008 housing bubble for proof. I know this comment will inflame some readers but the return on investment for a house is actually surprisingly low when you consider the cost of maintenance, renovations, buying and selling costs, interest and adjust for inflation. For many buyers in todays highly mobile world buying a house doesn’t make sense. In some cases renting can be cheaper than buying. It depends on the individuals circumstances.
Heres a link to an interesting calculator
http://www.nytimes.com/interactive/business/buy-rent-calculator.html
For all those who say, “Pay by cash,” here’s I do it: I charge everything I can on a rebate credit card. I like the ones that pay cash, not airline miles or whatever. The card is set on automatic payments so the balance is paid in full from my checking account each month. I keep enough in the checking account to make the payments. I get a 1-5% rebate on everything I charge. Just follow this simple rules:
1. Don’t buy stuff you don’t need or can’t afford.
2. If you are too stupid to follow rule #1, cut up your credit card.
Renting seems to me to be cheaper too. Maybe buying a rental property is the way to go but not an individual home. I don’t own my own home and when I pass on, my kids will not inherit a house. I think it would be nice to pass on something so substantial to them but maybe I’m just too sentimental.
The only thing that worries me about not owning a home is how the heck do you pay your rent when you retire?? At least if you own a house you SHOULD own it by the time you retire. I.e. no more mortgage.
I just thought this was kind of a silly article. I mean, it abandons the “spirit” of the adages for the literal translation of each one. Perhaps I am just more reasonable than most, but I wouldn’t take it out of context and interpet someone’s advice to me, “Time is Money” to mean that I ought to neglect my family, forego once in a lifetime events, and choose to “work to live”. In its proper context, I have a responsibility to my boss to be as efficient with my time as I can be when I am on his clock, and that is appropriate and right….and in that context, it is true that wasteful use of time can cost my employer lost revenue opportunities. But I also have also drawn clear personal-work- life balance boundaries and in exchange for committing to that efficiency within the workplace, I don’t answer his calls when I leave the workplace. I don’t bring work home with me at night or on the weekends. I don’t worry about asking for a vacation day to see my son play in the worst soccer game I’ve ever seen in my life because I know that I can never get that moment back. Just because “time is precious” and “time is money” are not mutually exclusive statements.
The issue is all about balance and context. The same holds true for the article’s handling of the other adages mentioned. To the author’s credit, I think she tried to touch on the balance issue. And of course, if it had been entitled, “Money lessons that should be taught to your children in their appropriate, well defined contexts and evaluated based on their balanced application to life’s varied situations and with respect to one’s own personal values and goals” it probably would not have gotten many click throughs either.
I read this because I thought it would be interesting. It wasn’t.
What I would teach is manage your debt. If one does not manage his debt then he becomes a slave to debt.
About being a “company man” — my advice has been — run it or own it or be on a track to do either; if that is not what one is doing, then find a situation where you are doing one or the other.
Lastly, when one buys things on credit, find a way to have someone else pay for them. For example, purchasing a house. I would ask anyone… “Would you buy a house that everyone agrees is worth 200k if it would only cost you 40k cash? Most people say yes, yet they wouldn’t buy that 200k underpriced rental house that someone else would pay for.
But above all — manage your debt
“women teachers in western society, intentionally leaving boys behind and the like” What on earth are you talking about? What teachers are leaving boys behind??? Behind what??? I strongly disagree that women are being “favoured” in ANY schools! I think you feel threatened by women because of some kind of inferiority complex! I feel that women are finally starting to get some of the respect they have deserved for many years! I am a seasoned professional male who works among women every day! My division director is female and she performs her job as well or better than the string of men who held the position before her! I take my orders from her no differently than I did from my previous male director. Enough said.
I teach at a college and have for years. Yes, women are entering and graduating at higher rates than men. No, there is no affirmative action involved. It’s more that young women are more likely to do the work that is needed to stay in school and less likely to be kicked out because of poor grades, conduct violations and the like. My colleagues…including men, who are still present at the faculty level in solid numbers…have noted this as well. There are losers and stars of both genders but if you look at who skips class, who studies at the last minute, who throws a paper together half-heartedly, who gets brought up on alcohol or marijuana possession, it’s disproportionately men.
Angela, you claim that men aren’t doing so well in college because they skip class, do half-hearted work, and are more likely to be disruptive and in trouble with the law. Has it occurred to you that this might be happening because all through grade school and high school their teachers – almost all of them female – are denigrating their potential and pouncing on their every mistake, all the while lauding every achievement of their female classmates? Girls get encouraged to build their self-esteem, boys get dosed with ritalin and called potential rapists – is it any wonder that some of these men get to college with nothing learned but how to fail?
Wow Gary – where did you grow up? I have never, ever seen anything like this happen. Boys and girls are treated equally where I am and I agree with Angela in that there is a much higher number of boys who are just not mature enough to put the work in to GET to higher education and if they do get there then they don’t complete it. I’m not saying all boys or that no girls do this but it is definitely a higher proportion of boys than girls and it has NOTHING to do with boys being belittled or held back.
The issue of higher education stands out to me. Once upon a time a college degree was practically a ticket to a middle-class life. Even a barely functioning alcoholic could coast by in a cubicle for 8 hours a day doing minimal work and take home a decent paycheck. Now that the cost of tuition has skyrocketed, the market for white-collar labor has globalized and the barriers of racism and sexism have been torn down, it’s an indisputable fact that there are not nearly enough jobs for every qualified worker. Due to this glut of qualified professionals, it really doesn’t make good financial sense to pay the full cost of college tuition unless you tailor your educational plans to target a specific field in advance (I would urge my kids to study chemistry, physics, and engineering, or accounting if they prefer the financial field). The days when a liberal arts or generic “business management” degree will pave the road to success are far behind us.
I’d say learning a foreign language is pretty useful, too. I’d encourage my kids to double-major in two different languages as well, especially from different geographical regions. I’d encourage French, Spanish, Chinese, Russian, Hindi, or Arabic as the most potentially “lucrative” ones, but there are others like Japanese, Portuguese, German, etc. that would be good to have as well.
How about not teaching children the outdated idea that ANYONE contributes enough to society to deserve several million a year in income. A CEO does not contribute as much to society in one year as a thousand regular working people: skilled craftsmen and teachers and farmers and shop keepers.
So a CEO who earns $5,000,000 for creating a business enterprise (or running one) that educates, or employs craftsmen or farmers and shopkeepers, meanwhile donating 10% of their income to worthy causes doesn’t deserve that luxury? The vast majority of CEOs are where they are due to a combination of things, not least of which is luck, but never is it the main factor. Rarely will you find someone who’s simply inherited such a position, and in many cases when that does happen, the inheritance has brought with it a lifelong grooming towards the position. Now don’t see me as naive, I know there are ridiculously overpaid executives and CEOs out there, but don’t be so cynical as to say that none afford their earnings. As I’m sure you do, I applaud Meg Whitman for taking on the helm of HP for $1 per annum. She’s got the option of using her very lucrative existing bank account to buy some shares pre-allocated to her at market value in the company, and if she has good faith in her capacity to drive the value of the business up, she’ll buy in (I think she will, if she hasn’t already). This to me is a noble, risky act, but could well be the first of a succession of very smart business decisions she makes with HP (Lord knows she made some whip smart ones in the past, so this should be no exceeption… and not to be sexist, but there has to be a decent CEOess out there).
Meg Whitman can afford to take a $1 salary per annum and purchase stock at market value in her new company because she is already a billionaire. Her salary, if she took one, would be taxed at a higher rate than her capital gains for investments (including stocks). Taking a $1 salary and using stock options in place of salary is a pretty well-known tax dodge in tax accounting. Please don’t act like Ms. Whitman is any kind of saint for doing it.
Now, creating and running Ebay, and making a mint off it–THAT’S admirable. That shows remarkable business sense (and a bit of luck as well, true). But her current “benevolence” in taking a $1 salary is just smoke and mirrors.
Seems to me the notion that is outdated is socialism. Why aspire to better yourself if all you have to show for it is a cancelled check made out to the IRS?
Here’s a bit of outdated money advice: a college education is one of the best investments you can make.
Well, once upon a time, perhaps. Today, young people are graduating (or not) with staggering amounts of debt, $100,000 or more for a bachelor’s degree is not unheard of today. Ironically, a college degree is so widespread that it has ceased to be a differentiator now. One could argue it’s become a mandatory checkbox, but even that I’m not so sure about. Far better to have taken a small amount of directed coursework, and describe it as such.
Wow, I’m not seeing this in Central Florida. I’m female and gotta fight just as much as the boys. Most guys seem like they are entitled to be in school and I am just taking up their space. I let my grades speak for me.
It’s hard to believe the author’s “personal finance and budgeting tips have been featured in TIME magazine, All You, Shape, Christian Science Monitor, Woman’s Day, Family Circle, First For Women, and various web publications.”
Definitely one of the worst financial advice columns I’ve read this calendar year. Thank goodness many of the commenters understand the phrase “time is money” relates to the time value of money concept. And the writing about not spending your money all in one place, really misses the mark. Does the author have any financial credentials or formal financial education? I must admit the first thought – be a company man as it relates to loyalty in this day and age – is one young adults have already realized is not in their futures. Working with an organization for 10, 20, or 30+ years is highly unlikely. However, the actual words the author wrote do not translate to a money lesson. The words speak more to intrapersonal (and to some extent interpersonal) well-being. The always pay with cash I believe was taken to an extreme and to some degree out of context. There’s more to that line of thinking – pay with cash – but there’s no need to beat a dead horse. Bottom line: if you read the article above, please seek out other reputable sources to help you reflect on your thoughts/behaviors regarding money as well as resources to help you with your financial decision-making and planning.
I think this is a completely useless set of arguments. You took the literal interpretations of popular idioms and tried to prove them wrong on that standpoint alone. Figurative language, lady, figurative language…
Please don’t ever give me, my family, or friends any financial advice whatsoever. Or perhaps ask your parents to explain these ‘lessons’ again so that you can understand them properly before you provide such strange interpretations.
Dude, really? It’s not like she’s actually AT YOUR HOME, FORCING YOU TO LISTEN TO HER. You read the article, you don’t agree – fine. Move along.
Uhm, he/she has every RIGHT to criticize the article. No, he/she wasn’t forced to read it. Yes, he/she has a right to denounce it.
I don’t know how old you are, but the “you can always make more money” only applies to younger people. Investment strategies differ depending on your stage in life. Your kids have plenty of time to make the money back they lose in a risky investment, you don’t. I don’t have another 40yrs to get back what I’ve earned if I lose it. Enjoying each day to the fiullest is good advice, but not if it means being foolish with your money.
This is not a good article. Time IS money. Always pay with cash is not so that you don’t use credit. Its so that you always make your payments with cash backing. Don’t spend it all in one place doesn’t have anything to do with financial goals. Finally Men can be company men, women shouldn’t be company women if they ever want to raise a most healthy family.
When it comes to saving money, Time is money and I preach it to my kids all the time. They are young and the sooner they begin saving the bigger the return in the future.
Poorly thought-out article, nonsensical points. Who would ever have interpreted “Don’t spend it all in one place” as advising one to not purchase a home or car? Silly thinking, not at all the way people actually use and intend these sayings. And I seriously doubt that hearing this phrase would prevent someone who is savvy enough to save and plan for larger goals to stop doing that because they might end up spending it all on one thing – like a house!
Interesting that in the first paragraph, the author states “nothing I was taught (even the more “traditional” lessons) really panned out for me”. Looks to me that may have been because they didn’t understand the lessons to begin with! Sadly, I don’t think their financial experience equipped them to write this article.
I have to agree with Travis. In addition if you somehow think that you should use credit to buy more water, electricity, gas, than what you have in cash or earnings to back those purchases up with. You will run into debt problems… Maybe the next logical step would be to elect you to congress. Good luck with that advice.
The statement you can always earn more money is only true if you don’t become disabled. Appropriate disability insurance should be as important as life insurance.
This is just a terrible terrible article. Your points are just all over the place – being a company man doesn’t mean literally being a male – what is wrong with you? It means to stand by your work (I know in this instance I’ll have to spell it out for you – when I say work I don’t mean company, I mean what you personally produce) and pick an employer that you respect and respects you – don’t jump ship at the slightest bit of discomfort at work.
Your credit argument is just ridiculous – you are not running up credit every time you turn on the water. Its called Usage Based Post Billing and it’s all around you – from pumping gas to eating in a restaurant to turning on your water.
I can’t believe CNN linked this article…
I believe in the idea of using credit responsibly, as you point out. I think, however, that the biggest reason to avoid using credit, is to avoid having to pay interest. In the case of the couch example, you wouldn’t be paying interest on the couch if you paid it in full upon delivery, right? I want my kids to know that buying on credit is a responsibility, but I also want them to know that if they buy something before they’re able to pay for it, it will cost more.
I think we forget also forget to explain the means of tracking and reporting credit and why and how they yield bad consequences. We wonder why our economy sucks…show me one high-school or even college that offers simple and basic required credit course. Yet its a core foundation of our society. It’s negligence in its purest form.
Thanks for your comments; I’ll take them all under advisement. But all “expert advice” generalizations need to be tailored to individual lives and circumstances. And, your definitions of certain terms are not universally correct. “Company man” means different things to different people. It means one thing to me as a 66yo retiree and something entirely different to my 29yo son.
But you do make some good points worth a modicum of consideration.
I agree about not spending in one place. I hope others agree. Example is the most effective way to teach the children.
KM – You are so right 😉 Teaching by example is the most difficult — and the most effective — way to show our kids the right way.
I’m always amazed by how much kids learn by observing us..show them more than you tell them, and they should come out okay.
When and where I was growing up, we didn’t have these problems of credit, working too much (Europeans notoriously work to live, not live to work), or spending too much (not really a lot to spend on, unless you want to buy expensive food) since consumerism was nonexistent. The way I learned about finances is from watching and listening to my mom. Although she didn’t actively teach me anything, she also didn’t hide anything. Granted, our culture was simpler than in the US (but not anymore), but I still think the best way to teach kids is by example. If your kids see you spending a lot of money on even more clothes, they will not listen to you when you try to explain to them that your belongings don’t come with you when you die. I practice good money habits and with a bit of active teaching and a lot of setting an example, I hope that my kids grow up the same way.
Europeans work to live? Ha. I’ll take twice as much vacation any day they want me over there.
One other thing I find interesting to the conversation is the origin of the word “credit” – Middle French, from Old Italian credito, from Latin creditum something entrusted to another, loan, from neuter of creditus, past participle of credere to believe, entrust
I believe that one of the best definitions of today’s use of the word credit comes from http://dictionary.reference.com/browse/credit
a. the practice of permitting a buyer to receive goods or services before payment
b. the time permitted for paying for such goods or services
So, under this definition, the couch would qualify for the “credit” I’m referring to. Thanks again, Jane!
Uhh – the meaning of “pay with cash” is that you are not risking the payment of interest and penalties. Everything else is irrelevant – including the meaning of the word credit. Regardless, the meaning of the word would depend on the terms and conditions of the agreement on which you obtained credit and thus has nothing to do with middle french or what you ate last week – but everything to do with paying much more for the item than what it would have cost otherwise. If you are paying off your balances and not incurring interest and penalties, then you are following the credo advised in the many thousand year old wisdom “Pay with cash”.
“Many thousand year old” is a bit odd. Typically, in ancient times, people would arrange a commercial arrangement of quid pro quo, such as I’m a cattle drover, you’re a slaughterhouse worker and he’s a potato farmer, let’s pool our resources allowing each of us to eat all year around, even though we don’t all have the means to exist solitarily, but symbiotically. Pay with cash, except over the rough times is silly, because many people and companies have massive seasonal disparities, even month in month out.
That’s what saving-up money is for. If you save, you don’t need credit.
Some societies consider credit to be immoral and will not use it – ever.
Credit is thousands of years old. Read history. Money, bankers and loans predate history – which is easily thousands of years. Bartering is most probably older – but by no means extinct. People in every country continue to do it. Some communities still survive on the concept.
Lessons are primarily learned at home. If one grows up in a household that goes to every sale in the malls because of the “discounted” items. Then expect “over spending”. Hence, credit cards are a do or die in these households. USUALLY, debts and eventually collection agencies get involved within a year or earlier of paying down the debts (credit incurred and not paid). Consider the number of family members with credit cards spending at every sale.
We grew up trading essential food items for our bellies with neighbors and friends and “collecting” our cash for a down payment or payment of essential appliances and tools.
Avoid the temptations of the malls, the movies, the concerts, the sales , with much discipline and surprise yourselves with cash saved “for a rainy day”, special celebration or a real emergency.
I SUPPORT THE OLD -FASHION WAY–pay as you go; an almost impossible way to live in these times.
Agree 100% … pay as you go.
That is what I learned growing up. If you can’t pay cash (or don’t have enough money to pay cash if you wanted to), then don’t buy.
I use credit cards for most everything … for convenience. BUT I pay off the card every month in full.
The only time you should HAVE to borrow money is for buying a house.
Actually, there is no credit for the purchase. It’s all included in the mark-up. Then there is the double whammy when interest and penalties have to be paid.
Credit may, in part or whole, be covered in the mark up. I owned a retail store for many, many years and can say only in rare cases do costs of this sort get shifted entirely to the customer. In some cases it benefits the consumer, in others, it does not. The key is to avoid the sort of over simplification found in both this article and many of the comments. The only solid rule i know of it that I’ve never seen anyone benefit from letting interest on debt compound. That is to say, don’t carry a growing, compounding balance on your credit card or any sort of revolving credit account. Most of the”nevers” above may be perfectly appropriate under the right conditions.
Thanks for your comment, Jane. I agree that it’s not a traditional way of thinking, but try to see it as a positive way to encourage money responsibility. It would be ridiculous to counsel our children to eat a dinner at a fancy restaurant and then walk out without paying because they didn’t budget for it, or they didn’t have the cash, wouldn’t it? The same can be said for using credit lines in the same fashion. Many people charge up their cards to buy things they think they need at the time, and then they either default or decide not to pay off those cards when money becomes tight. Is it really any different? To consume or use a good or service before payment is made assumes trust. There is still a morally and often legally binding contract to make good on that payment, however – regardless of whether you intend to pay for it 30 minutes after consuming or 12 months with no interest financing.
Fine. So tell your kids, “Use credit only to smooth small bumps in your cash flow. Don’t misuse it to buy things that you cannot and will not pay off promptly. The one exception is for a house, because mortgage interest is deductible and you also eliminate the landlord middleman, but try to minimize the size of the mortgage and try to pay it off as quickly as you can.
I agree. It’s certainly not “great if you are good with a budget”. It’s pitiful slavery – and nobody is a psychic. Emergencies only.
Richard, while you quoted the first half of the author’s statement, you paid no attention to the second half, which is wherein the real financial advice lies. The author states: “credit rocks if you are good with your budget **and like earning perks for the shopping you do anyway.**” This is certainly true. My family hasn’t used cash for anything in years. We put everything on a credit card that we pay off, in full, every month. We ONLY purchase that which we KNOW we can pay for (either through monthly salary or savings). In return, we haven’t paid for plane tickets in years. This has SAVED our family literally thousands of dollars. We have not paid a dime in interest, late fees, etc. (We got out of that cycle a while ago now). It is for us, basically, free money. How is this pitiful slavery? For the majority of people, who (especially in this economy) do not have a salary or savings enough to guarantee complete payment of a credit card every month, it is certainly not a good idea to use the card as we do. However, it is not inherently a bad idea simply because of your old-fashioned views on credit.
Bankers have been around for thousands of years, credit has been around for thousands of years. The advice has been around for thousands of years. The WORLD is in a financial crisis spawned by the evils of credit. It will never be old fashioned advice.
Well, bully for you then dearie. Most people cannot pay off a credit bill. I agree with those that say use it only in cases of emergency. But I will add that if you do use it in non emergency cases make sure it is something that you have the cash in the bank to pay off before the bill is due.
Absolutely. But this is for the rare person who actually budgets and is disciplined. We have done this and it worked well. We got tired of the extra step of “balancing” the credit card statement at the end of the month with our budget. So we stopped. But yes … this is using credit to your advantage because you are able to budget and be restrained and pay bills on time (something few Americans are able to do!).
Jay, what you describe is essentially paying with cash, just using a credit card to do so. The point is not to use credit and pay interest. That’s where the slavery (borrower is slave to the lender) comes in.
@fsilber: good points, but the landlord is NOT a “middleman”, unless he got the property for free! He is an investor who has to pay taxes,(several) interest, insurance, and maintenance, and put up with some terrible clients. Is he an ogre to expect a return for investing and working at his “stock”?
This is unlike investing in stocks, where you throw you money in and wait with bated breath that another fool will pay more than you did.
One way or another somebody is going to pay the taxes, interest, insurance, maintenance. People earn management fees, which you can save, and hopefully if you own your own home you don’t have lousy “tenants” living there, tearing up and messing up the property.
I get the desire, but I’ve never understood the necessity of home ownership. A mortgage ends up owning you. You end up a debt/wage slave… ‘or else.’
I have friends who criticized me for being a dedicated renter, that I was ‘paying someone else’s mortgage.’ But in the end, I have no roof or plumbing repairs, no property tax (yes, they’re all included in the rent, but I have no ‘surprises,’ if you get me). That means no stress, & it also means I can tell a crappy employer to take a flying leap.
The bonus: the Great Recession barely touched me.
I agree. Home ownership is over-rated.
A lot of it depends on what market you live in. In many places, renting just costs less, and is easier. And the flexibility is an added benefit.
Home ownership is best for families. And especially if they know they are settling down for a while. It’s nice to have ‘your own place’ to develop and change and make ‘homey’ over time.
I think it is largely a matter of personal preference. For me, I wouldn’t give up home ownership for anything. I love that I no longer have to worry about when the landlord is going to raise the rent (or by how much), or when he is going to make me move because he wishes to sell the house. Nor do I have the hassles of apartment living like noisy upstairs neighbors or worries that my kids are being too loud. Plus, my kids have all had the same friends since they were 2. It really gives me peace of mind that I know my kids’ friends and their families so well, especially my teenagers who I can no longer watch every minute. To me, renting was just too much stress. It also helps that I pay less to own then I would to rent an equivalent place, but I would be willing to pay more if necessary.
Hmm… I think you got this all wrong. “Time is Money” = time is precious. Every action we take has an oppertunity cost. One example: It is for people to think about their actions, such as when they line up for hours for a sale that will save thema few dollars, or driving across town to hit up multiple store sales to save a few more dollars. The cost of doing all of those things in terms of time.
I don’t think you understand the topic to much depth in your article. This is the problem with the internet.
Your take on what is buying on credit vs. buying with cash is interesting. If you eat at a restaurant and don’t pay until after you finish eating are you also buying the meal on credit? If you buy a sofa and you only pay after the sofa is delivered to your apartment are you also buying on credit? You seem to be saying that buying with cash only occurs when payment is made BEFORE the good or service is delivered to you. This is a thought provoking idea, but it twists the way we ordinarily distinguish between cash and credit into something readers would not recognize. If you make up new meanings of words, you can’t use them to analyze the way those words were used when they had a different meaning for people. (“Tom can’t be gay. He’s sad all the time.”)
The distinction I see between meals at a restaurant/purchase of a sofa and the utilities example is knowing the ultimate price of the goods. You know how much the sofa is at the time you agree to purchase it, and (with the possible exception of alcoholic drinks where price is not listed) you know what the cost of your meal is going to be (with a reasonable addition of tax and tip). But the true defining point is that you know that your “usage” of these items cannot make the price go up. Meanwhile, your electric bill can go up due to an unexpected heat wave that requires the A/C to work harder, your gas bill can do the same for a cold snap, and your water bill may go up in a drought where you need to water your lawn more. You don’t know exactly how much you will owe because your consumption is variable.
But that distinction could have been made more clear in the article, to your point.
Uhh – the meaning of “pay with cash” is that you are not risking the payment of interest and penalties. Everything else is irrelevant. Ner.
Exactly.
1) paying with cash means not paying interest. Means paying when you get the bill, and if this is rolled into a monthly credit card bill that is paid in full, it’s still basically the mentality of paying with cash.
2) this leads into the true meaning of pay with cash. Other than for buying a house, you should HAVE enough cash to make any purchase. Then, you have the ability to pay cash or maybe borrow if the terms are favorable. this ability gives you flexibility and freedom. That is the main point.
Credit is trust. Period. And allowing someone to trust you more than you should be trusted is not always desirable.
Being shocked at the interest charge is an undesirable consequence of credit, but by no means is it the only one.
Another consequence of credit is overspending.
For those who think a usage-based post-paid bill at the end of the month is not credit, think of it from the seller’s perspective. Many phone companies will have a *Credit Limit* for you – significantly exceed it and they will ask you for an interim payment in the middle of the month. Since they think of it as credit, so should you.
While post-paid billing involves no interest if you pay on time, it can definitely lead to you spending more than you intended to at the beginning of the month. That is another gotcha with taking credit, as opposed to paying cash.
You need to water your lawn in a drought? This has become a need? One that is more important than conserving water for you and your family in case the tap runs dry?
My thought exactly. The lawn is not a need. Water conservation is a responsibility, and the lawn be darned.
If you’re worried about wasting water, you’ll end up wasting something more expensive: your time.
Gee, sorry my HOA voted to enforce lawn maintenance after I moved in to the neighborhood. If I let my lawn die, I face serious, financial repurcussions. maybe you do not. Sorry I don’t fit into your one-size-fits-all world view, your Highness.
Saving the lives of beautiful trees, bushes and even lawn IS valuable. Cutting back on showers may be a better way of “saving” water, if you feel you should or must.
I use my bathwater to water my garden. That takes time (shlepping it outside) but it enables me to stay clean and have a garden at the same time.
>Janet Kasten Friedman said: I use my bathwater to water my garden.
That’s a great tip – thank-you!
Way to go! Excellent way to make your water go further.
And I love gardens. They rock!
You know many cities have ordinances requiring that you maintain your lawn to a certain minimal standard, so that it doesn’t become a nuisance for your neighbors?
Consumption can be rationed. You don’t NEED to run the AC. You don’t NEED to heat your home with additional BTUs. If I know the wattage of a lightbulb, how many hours I’m going to run it and the cost of electricity then I know exactly how much money I’m spending to turn on that bulb. That ‘distinction’ under your own argument is that the cost of a meal at a restaurant can’t go up due to “usage” such as you’re still a little hungry after the meal so you order a piece of pie on the way out. That’s exactly the same as it’s a little warmer outside, so I’ll turn the crank up on the air conditioner.