2 Powerful Pieces of Advice My Dad Gave Me for Life”
My very first job came after I finished incredibly well in grad school. Like everyone else who had spent a significant portion of his life as a student in this American society, I believed salary would mean a lot of money. Having graduated with very little debt, I have made up my mind that I am going to have an opulent apartment and buy a new car.
What made me stop to think about the grand new apartment and the cool new car was a conversation with my dad. According to him, one needs to have money set aside for emergencies. He said I’m at a stage where I no longer make instant decisions about finances. From now, everything counts.
Here are two of his tips that saved me from living paycheck to paycheck.
1. Save at least 20% from my income
That was great advice. When I was younger, I had little debt, and my obligations weren’t great, so it only made sense to store up as much as possible before real life took over. It’s something I even now, more than a decade later, make sure I prioritize. I dove into setting up an emergency fund, as well as opening an IRA as part of my savings toolkit.
This is how you find yourself living paycheck to paycheck: ignoring this advice. A tiny bit of truth: I am very much scared by the notion of living paycheck to paycheck. The truth is, most Americans have insufficient savings to hold up against a $500 emergency. Being in this position means that when emergencies happen – and they will happen – you may not have any financial cushion, which then can lead you into high-interest debt to resolve an emergency.
“For some of you just starting out, even at 20% of your income, it is still a very high percentage, but get into the utilizing the habit of putting it into a high-yield savings account. There is no such thing as saving too much because up to this point in our lives, there are surprises that always crop up at unexpected times, and having that cushion will make it such much easier to deal with those things.”
“Compare current rates”
The second learnt is to know whether it is a need or want. With time I will learn to appreciate it as it is. My dad spent almost two full hours with me over this topic. It’s basically deciding whether you should have money or you should have financial struggles.
Financial needs are: Expenses necessarily required for you to live and work-housing, transportation, and food. Wants among expenses that help you live more comfortably or go directly into particular areas of the lifestyle you want- travel, entertainment, designer clothes and shoes, or eating out.
It is important to understand this difference and how it will reflect in the budget. You might spend so much money on wants that there isn’t any left for their needs. When couched in “More month than money” term, that’s just it.
It is an okay thing to eat out or to go on trips or to keep some designer things for me, but as soon as it turns into a habit of too much, that can ruin me financially. However, what I learn from the conversation with dad is to build an emergency fund, create a budget, stick to it, and then enjoy some splurging, which I still do.
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