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A few weeks ago, my youngest son and I had the opportunity to interview my grandfather for a class project.
My son’s class was tasked with interviewing someone who had lived through a historic event. We decided to interview my grandfather … who along with my grandmother both lived through The Great Depression.
We found out that my grandfather had just turned 5 years old when The Great Depression started. Growing up during this time was really his first memories of being a child.
There were a lot of lessons about life and money that he learned growing up during this time. His experiences have certainly shaped how he lives his life … even today almost 90 years later!
Many of the answers we got back during the interview were so powerful, I couldn’t help but share them here on The Money Sprout.
We have already covered a couple topics from our interview in previous articles including –
Today we’d like to add another important lesson we’ve learned to the archives here – Don’t Spend Money You Don’t Have.
Don’t Spend Money You Don’t Have
For as long as I’ve known my grandparents (basically my whole life) … they have always lived within their means.
They have lived in the same house their entire adult lives. It is a simple house built on their family farm.
The house is about 1,500 square feet if I had to guess … not much more than that.
It has 2 bedrooms, 1 full bath, and a shower in their unfinished cellar. There is also a finished attic where most of their kids slept growing up.
My grandparents had 5 children and all of them grew up together in that same house.
I’m sure that at times life was challenging raising 5 kids in a house that small. But they seemed to manage.
I couldn’t even imagine raising my 3 kids in that same house today. Instead, my wife and I made a big financial mistake and bought a house that was way too big.
Anyways … I don’t really know if my grandparents financed their house or paid cash for it when it was built. Based on their philosophy of never buying anything on credit … I’m guessing they paid cash.
But either way … they never felt the pressure to own a larger home, even raising 5 kids. They lived within their means and kept their housing costs to a minimum.
They also took the same approach with vehicles.
Always Buy a Car with Cash
When I was in high school, I remember having a conversation one time with my grandfather about cars.
I have never been a person to want a fancy shiny sports car. But I have also valued having reliable transportation and have bought plenty of new cars in my lifetime.
My grandfather told me during our conversation that one of the worst financial decisions you can make is buying a new car. And even worse … buying a new car with financing.
During our interview with my grandfather, one of the answers he gave to a question reminded me of his talk with me many years ago about cars.
How Did Your Life Change When The Great Depression was Over?
When my son asked his great grandfather how his life changed after The Great Depression, he gave a short but powerful response.
[pullquote align=”center”]We only spend money we have and never use credit. We pay cash for the cars we buy. [/pullquote]
My grandparents have lived by this principal for almost 90 years!
They never buy more than what they need. This includes two of the highest expense categories for people today – housing and transportation.
By only paying cash for his cars … my grandfather has been able to save a ton of money. He never finances them and refuses to pay interest to a bank.
Instead, he only uses cash to make his purchases … even big ones like a car. And if he doesn’t have the money … then he simply makes due with what he already has.
I Should Have Listened Closer to My Grandfather’s Advice
Over the years … my wife and I have certainly made some financial mistakes.
Some of those mistakes were preventable while others may not have been.
The mistakes that were preventable would include things like buying our house that is just too big for our family. I have written plenty of content on this mistake already.
But just as a reminder … we bought a 3,300+ square foot home for our family almost 10 years ago. We are able to make our monthly payments, pay for our home owners insurance, and property taxes.
We can afford to keep it fairly warm in the winter and cool in the summer.
The house is certainly well within our budget. But I often think of the missed opportunity costs over the past decade if we would have bought a home that was 2,300 square foot instead.
That size home would have been plenty for our family and the costs savings would have been huge. Not to mention the missed returns if we were to have invested the difference.
Or if I would have taken the advice of my grandfather and only paid cash to buy a car.
Over the years, my wife and I have probably bought 5 new cars between us. We drive them usually until they die or become unsafe. But what if we would have purchased used cars instead of new?
Just think about the missed savings just from our car purchases. Invest that difference in the stock market and we would have certainly been further ahead in our net worth journey.
My Advice for Second Generation FI
I consider my 3 children part of the Second Generation FI movement … or population … or whatever you want to call it.
They don’t even know they are part of this movement yet … except for maybe my 15 year old son. He and I have had some conversations about investing, saving half your income, living well below your means, etc.
Most of the time he seems very bored with these conversations … but at least I’m planting a seed … I hope.
When the time comes, I hope they think about the lessons that my grandfather passed down to me and to them. I hope they do a better job of listening to this advice than my wife and I did.
What about you? Do you have a grandparent or someone from another generation who has given you financial advice? What was your reaction? Did you take action on the advice?
One Reply to “Another Lesson from The Great Depression – Don’t Spend Money You Don’t Have”
Don’t spend the money that you don’t have
The only simple mantra people should religiously follow