Allocating Your Money Wisely
My dad is a smart man. Not only did he come to this country with little knowledge of English and manage to be valedictorian of his class, but he knew a whole lot about money management without anyone ever teaching him.
I have 3 siblings and all 4 of us had our college tuitions paid. At one point when all of us were attending school at the same time, my parents somehow managed to be paying $145,000 per year in tuition expenses alone. How on earth did they do this?
It started a long time ago. When my dad finished grad school, he followed a job offer to New Jersey in 1975 and bought his first house at the age of 25. More than 30 years later, my parents still live in that same house.
They bought the house in the upper $70,000s. As time went by, incomes went up and they saw all their friends buy newer and bigger homes. As a kid, I admired their friends' homes and felt embarassed about our tiny house. What I did not know was that this was a smart move on my parents' part. They paid off that house VERY fast. After the house was paid off, they had more cash to do whatever they wanted. So they added 3 extensions to the house, bought a few investment properties and provided us with things that were important such as good education, music lessons, sports, etc. At the same time, they contributed money to our college savings accounts, AND opened up retirement accounts and trust funds for us kids.
Now this was a bit excessive but you get my point. You don't need to be making lots of money to do this. The important concept to grasp is to reallocate all your money so that they are used in areas of importance. Too many people have luxury cars but can't afford to pay for their kid's college education. What my parents did was pick a house they could afford (and trust me today no one really buys a house they can actually afford - I know I haven't) and lived in that house all their lives. It didn't matter to them that they couldn't compete with their friends' big fancy houses. What mattered to them was that we all got educated and had no debt. And boy am I glad our parents thought of us.
Another good thing about them living in that same little house all these years was that the value of that house has gone up at a sick rate. They picked a home in one of the most desireable towns (although it was not exactly in the nicest part of town), with one of the best school systems, and close to New York City. That same tiny house is now worth in the $800,000s.
Now, worst case scenario. Had my parents decided in the 90s to move to a bigger, nicer house, they would have gone from a 70K house to maybe a 600K house. Money out the door. This same money is the money that would have been invested into our college funds or retirement accounts. Without that money, we would have had school loans. With the school loans I would be in debt right now.
I really respect the fact that someone can sacrifice their own wants for the benefit of their children. I can only hope that I can do half as much for my kids one day.
I have 3 siblings and all 4 of us had our college tuitions paid. At one point when all of us were attending school at the same time, my parents somehow managed to be paying $145,000 per year in tuition expenses alone. How on earth did they do this?
It started a long time ago. When my dad finished grad school, he followed a job offer to New Jersey in 1975 and bought his first house at the age of 25. More than 30 years later, my parents still live in that same house.
They bought the house in the upper $70,000s. As time went by, incomes went up and they saw all their friends buy newer and bigger homes. As a kid, I admired their friends' homes and felt embarassed about our tiny house. What I did not know was that this was a smart move on my parents' part. They paid off that house VERY fast. After the house was paid off, they had more cash to do whatever they wanted. So they added 3 extensions to the house, bought a few investment properties and provided us with things that were important such as good education, music lessons, sports, etc. At the same time, they contributed money to our college savings accounts, AND opened up retirement accounts and trust funds for us kids.
Now this was a bit excessive but you get my point. You don't need to be making lots of money to do this. The important concept to grasp is to reallocate all your money so that they are used in areas of importance. Too many people have luxury cars but can't afford to pay for their kid's college education. What my parents did was pick a house they could afford (and trust me today no one really buys a house they can actually afford - I know I haven't) and lived in that house all their lives. It didn't matter to them that they couldn't compete with their friends' big fancy houses. What mattered to them was that we all got educated and had no debt. And boy am I glad our parents thought of us.
Another good thing about them living in that same little house all these years was that the value of that house has gone up at a sick rate. They picked a home in one of the most desireable towns (although it was not exactly in the nicest part of town), with one of the best school systems, and close to New York City. That same tiny house is now worth in the $800,000s.
Now, worst case scenario. Had my parents decided in the 90s to move to a bigger, nicer house, they would have gone from a 70K house to maybe a 600K house. Money out the door. This same money is the money that would have been invested into our college funds or retirement accounts. Without that money, we would have had school loans. With the school loans I would be in debt right now.
I really respect the fact that someone can sacrifice their own wants for the benefit of their children. I can only hope that I can do half as much for my kids one day.
posted by M @ 10:42 PM
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