Pattie Lovett-Reid: Financial lessons I learned through my children
As many of you may already know, I lost my father to a heart attack at a very young age (9), and while financial security was never really a serious concern, I felt even as a young child that somehow money mattered. I’ve always been a ferocious saver when I needed to be and can't help but wonder if my money mind was shaped when life threw our family a curve ball.
Fast-forward to today and I'm the mom of four financially-independent adult children who all have very different money mindsets. They all have an element of financial savviness, understand the importance of financial security and that life isn’t all about the money.
Upon reflection and watching their money management, I've come to realize there isn't only one way to do things right and small changes can result in big returns.
Here are a few things I would tell my younger self as I've watched our children grow:
1. Enjoy life. Look to strike a balance between spending and saving. Spend money on the things that give you the greatest pleasure while tucking a bit away for a rainy day. If travelling is your thing – do it. If a golf membership means compromise elsewhere, that's okay. Take the time to figure out what you can spend today versus what you hope to spend in the future and strike a balance.
2. Get rid of debt as quickly as possible and don't fall into the lifestyle trap. Raises early in your career may happen fast and furious and some will climb the corporate ladder. Others will get lump sum bonuses. Large sums of money can create an artificial high. Always ensure the cost of your lifestyle lags your income growth. You will never get in financial trouble if you remain financially humble and don’t become entitled.
3. Borrowing to invest is a respected investment strategy, borrowing to enrich your lifestyle is a recipe for disaster. Borrowing to improve your balance sheet is a savvy financial move. You can leverage your financial standing when you borrow to go back to school, start a business, buy a home, or even invest in the stock market.
4. Don't be afraid of risk. The greater your financial literacy the better your chances are of building wealth. Ignorance is not bliss and if mistakes happen you have time on your side to take corrective action.
5. Set short term goals and execute against them. No one in their 20s or 30s is going to get excited about saving for retirement. It is the discipline around planning and goal-setting that helps to set an upward wealth trajectory into motion.
Finally, your true financial weapon is – you! Your ability to go out and earn an income is your greatest asset. Respect that asset, continue to grow and invest in that asset, and recognize the day will come when your financial capital takes over from your human capital – the ability to earn a living. Harvesting the strength of your human capital and financial capital ensures your standard of living continues to grow.