Something that all my baby-boomer friends and I share in common are parents and parents-in-law who lived through the Great Depression. That’s where the similarities end however because unlike my friends’ parents, my in-laws lived their entire adult life as if the Depression was still going on.
Now I’ll be the first to admit that sometimes I find their frugality a bit excessive, like continuing to wearing clothes that should have been donated – oh – 40 years ago. But I’ve also learned a number of valuable lessons from my parents-in-law, the most important being that one should always live below their means. Here are a few other lessons my husband and I have learned from them.
Don’t waste money on cars
When it comes to cars, buying a new car every few years is a huge waste of money. On average, cars lose 15-25% of their value each year plus there’s the cost of interest and higher insurance rates too. Buying a good car to begin with and then taking care of it for several decades will save thousands of dollars each year.
Buy a house and pay it off quickly
Banks love those 30-year mortgages because it means lots of interest income for their investors. And while all that interest income might lower our income taxes, we save more money by not paying any interest at all. Owning a house “free and clear” means that we can get by with less income which is especially important in our retirement. It also gives us a way to earn retirement income by converting the home to a rental if necessary.
It’s OK to be a packrat
Back in the “old days”, people had barns and attics so they could store stuff that might have a use in the future. There’s nothing wrong in hanging onto old lumber, or old furniture, dishes or household goods that you might have a use for in the future. Our family saves several thousand dollars each year by repurposing or upcycling stuff that the family already owns instead of buying new.
Be a DIY-er
Unless you make awesome wages, it is always cheaper to try and fix or make something yourself instead of hiring out. Aside from saving hundreds of dollars on things like home improvements, DIY sewing, having a garden, car tuneups or whatever, money saved is always tax free, unlike the money you have to earn to pay someone else to do the job.
Pay yourself first
My in-laws couldn’t stress enough the importance of paying down debt and paying into retirement plans, investments, life insurance, savings, and health insurance before spending any money on household bills and “fun” things. While at first we though this strategy seemed like a lot of sacrificing with little to show for it, the wisdom of Dad’s advice really hit home when the economy crashed. Having assets made it possible for us to weather the storm and kept us going.
My parents-in-laws learned during the Great Depression that staying financially solvent only happened when spending was pared back. When the goal is financial security, following their examples of frugal living is how we build wealth.
More by this contributor:
How a savings account has benefited our family
A mortgage from the Bank of Mom and Dad
Scrounging our way to savings