Jun 16 2019

Father’s Day and Financial Advice

Photo of Me and My Stepfather (2008)
This Father’s Day has more meaning than usual to me, because late last year my stepfather passed away. I knew him nearly all my life, and although he wasn’t my father, he certainly was my dad in every sense of the word. Whenever one receives news of a loved one’s passing, a torrent of memories come rushing to the forefront of one’s mind. I have strong memories of his financial advice over the years, and our talks about money were certainly a major contribution to my life’s financial education, especially when I was just a kid. I thought I would share some of what I’ve observed about him and learned over the years.

It’s a common refrain among personal finance bloggers and experts that schools do a poor job of teaching kids about money. I have to agree, although I did get some personal finance eduction in junior high and high school (a topic for a future post perhaps) that served me well later in life. Because there’s so little financial education in school, parents are a major contributor to a kid’s financial knowledge. Sometimes that advice can be rock solid, sometimes seriously erroneous, and more often somewhere inbetween.

My stepfather was the breadwinner of the family, working in the local timber mills in Southern Oregon until he retired in ’95. His formal education didn’t go beyond high school, but he learned a lot as an F-86 mechanic when he was stationed in Alaska in the early 1950s. He was also an autodidact who wasn’t afraid of using the almighty library card to learn something new. For example, his first car was a Model A and how did he learn to maintain and repair it? The library.

Living Frugally
My parents were mostly on the same page when it came to money. However, they arrived at frugality from different directions. Mom grew up in Illinois and Nebraska, and being a “Depression Baby” she saw the Great Depression up close as a child living on a farm, with her adopted father being a sharecropper. My stepfather grew up in Port Angeles Washington, spending his summers working at his aunt and uncle’s farm near Olympia. In 1968, he had to declare bankruptsy and start over. Both learned how to watch every dime and not be foolish about money.

Avoiding Debt
My parents avoided debt whenever possible (why waste money on interest?). My stepfather saved up and bought their house 100% in 1972. Yes, you read that correctly. Just four years after becoming bankrupt, he was able to save up the cash to buy a house without a mortgage. Granted the house was a crap 1920s fixer-upper in a small Southern Oregon town when real estate was cheap, but I still find that amazing. Try and do that today on a manufacturing job’s wages!

In late 1979, he bought the only brand new car I ever saw him own: a dark blue 1980 Chevy Citation. Did he take out an auto loan to finance it? Nope. He bought it 100% with cash. And by “cash” I don’t mean writing a personal check to the dealership, but lugging a stack of greenbacks which the dealership dutifully counted. Do that today and you would probably be investigated for being a drug dealer or money launderer.

They also never had credit cards, so they never racked up credit card debt which is so common today. On the other hand, because they never took out loans or used a credit card, I’m fairly certain their credit scores weren’t good.

My parents also avoided paying other people to do home maintenance and repair, preferring to do it themselves whenever possible. If fact, they carried this DIY philosophy pretty far. The house he bought in 1972 was a 1920’s fixer-upper ranch-style house, but instead of just fixing it up, it was decided to remodel the house in the extreme. From 1975 to 1981 the house was torn down (except the original flooring in the master bedroom) and rebuilt bigger and better. The only parts of the remodelled house that weren’t DIY were the garage’s concrete slab floor, textured walls, carpet installation, electrical system installation (done by my stepfather’s electrician brother), kitchen cabinets, and asphalt driveway. *Everything* else was done by my parents. Construction was largely done during the summer months and then things slowed down when the weather turned cold. Growing up during those six years of the remodel, living was certainly different from a typical middle-class kid’s lifestyle (for example, the work-in-progress kitchen and dining area doubled as the living room, the original toilet was surrounded by three sheets of plywood with a curtain for privacy, and I didn’t have my own room until the house was done in 1981). Because so much money was saved on labor, my parents splurged on a few things such as the bathroom’s marble shower walls, marble vanity sink, and steel bathtub. The local lumber yards were cherry picked, so the house doesn’t have a single sheet of patched plywood or warped 2×4 in the frame.

The remodeled house’s only flaws were that there was only one phone jack in the entire house, the windows had aluminum frames which resulted in moisture condensation on the frames during the winter, heating was by wood stove (but a very rarely used secondary electric heater was installed in the attic), and there was no air conditioning (so summers got pretty hot).

In retrospect, such an extreme remodelling job was incredibly audacious. Especially considering how my stepfather never done it before, did it all while holding down a job, and did it very well. In addition to the house, he built other structures on the property over the years such as a barn, cow feeding shed, and firewood shed.

In keeping with his DIY ethos, he did all car maintenance himself. From routine oil changes to engine overhauls, he did it all.

While my parents were on the same page for personal finance, they did have one major difference. He was more willing to take a calculated risk than she was. Mom was VERY risk averse when it came to money, so she did very, very little investing. I was too young to be aware of it at the time, but in the 70s, he bought stock in the timber company he worked for and turned a tidy profit when he sold it off. Mom was amazed that he ventured into the stock market and came out ahead.

In 1985 we got a satellite dish to expand our range of television entertainment (in a sense we were pioneering cord cutters at the time, but we never had cable TV). At the same time he also invested in Jones Intercable, a cable television company. I jokingly gave him flak for investing in “the enemy” but a few years later he sold off the stock with a nice profit. This was a lesson I failed to heed: You may not like a business’s practices or industry, but if it’s making money, then invest. Had I learned that lesson and invested just $1000 in Microsoft in the early 1990s and held on for the next 25 years, my life would be very different right now thanks to its many splits and later dividends.

Banking and Interest
Back when I was 10 or so, I remember we were talking about money while he was working on installing insulation in the outer walls of the house. During the conversation, he told me that kids could have bank accounts. That blew my mind, because I thought only adults could do that. And then he really cracked my head open when he told me about interest. What? Banks PAY you to keep your money with them?! Whoooaaa!!

CD Laddering
One time in my mid-20s we were sitting at the dinner table talking about money and I was telling him that I was considering CDs to get a better return than what I got from a savings account. He told me that the smart thing to do is to buy a 1 Year CD and then six months later buy another 1 year CD. Thus one would have some money available every six months instead of having it totally locked up for a whole year. I thought this idea was brilliant! Later, I learned that this was the basic idea of “CD laddering.” I didn’t implement his idea because I never got into CDs all that much, but I did appreciate the cleverness of this “money hack.”

Passive Income
Although he worked for a living, he wasn’t blind to the concept of passive income (for many people, the idea is completely foreign to their mindset). Back in the early 90s, I remember him telling me about the idea of storage unit rentals as a way to make passive income. Of course, it was a horribly capital intensive idea (buy property, build the storage units, hiring somebody to manage it 24/7, etc.), which is why he never pursued the idea. But he was on to something, and it certainly opened my mind to the idea of passive income (outside of bank account interest).

These are my most notable personal finance memories and perspectives about my stepfather. Personal finance was just one of many things I learned from him over the years, and for that and more, I will be eternally grateful. Now, being a husband and homeowner myself for over five years, I better understand things about my stepfather than when I was just single and living in an apartment.

If you are a father, uncle, or father-figure, then please do your best to teach the next generation about money and personal finance. Making intelligent financial decisions is one of the most important life lessons one can instill in kids, and what is learned can literally enrich them for a lifetime.

Image Credit: Kevin Kegin’s American Warbird