Hi little baby,
Gah! 38 weeks and you’re still cooking. This is all good stuff, as my to-do list has suddenly gotten epically long. Why…? Because Mommy and Daddy are buying our first house! Crazy timing, hey? Yeah, I didn’t say our timing was great, but equally the timing is phenomenal as we’ve found an incredible home that I can’t wait for you to grow up in.
There will be plenty of time to gush about the details of the house, but we’ll save that for when the deal is done and dusted. For now, let’s talk about money. Your Dad and I visited the bank to get that fancy mortgage pre-approval and it was such an eye opener that I realized that of all the lessons we’ve discussed, I don’t think we’ve talked so much about money management.
Back to the bank. We came in knowing exactly how much we wanted for our mortgage. Do you know how much they offered us? MORE THAN DOUBLE WHAT WE WERE ASKING FOR. Seriously. Now, in some cases in life, you think, great! In this case, all I could think was how unethical it is for banks to offer you more credit that you really can “afford”. Sure, if we bought a house double the price of the one we’re looking at, we could make the payments on it… just. What we couldn’t do would be travel, live stress-free, I couldn’t take the full year maternity leave, and we’d be shopping for hand-me-down clothes for life.
The scary thing is, I know a lot of people that would jump at that opportunity to buy their “dream” house, which would soon become their nightmare ball and chain.
So, little baby, here are some of Mommy’s most important money management tips in life. Note: I’m not a rock star with money, but I’m a good saver. There is always more to learn, but here’s what I know now.
Always Put Away 10%
From my very first paycheque, I remember my aunt telling me that she’d always put away 10% of her earnings into savings. 10% of your first paycheque will be peanuts, but if you get in the habit early, that 10% grows and grows. Also, when you’re young and your life is full of disposable income, perhaps that 10% can be more like 20-25%, but ALWAYS safeguard the magic 10%. Compound interest, baby.
Travel AND Work
With your Mommy having visited over 30 countries, people seem to think I’m a bit of a trust fund baby. WRONG. I won’t lie, your grandparents paid for my university, for which I’m eternally grateful, but they did not pay for my expenses to travel the world, no siree. As soon as I was done high school, I had no idea what I wanted to do with my life. Off to Scotland I went, with a ticket paid for with funds from my first job, and I got a job working at a hotel where they also provided staff accommodation. That job allowed me to save a ton of money, explore Scotland and ultimately to see the world thanks to connections that I made.
Get a Job!
I had my first job when I was fourteen. I tagged peoples’ dirty clothes in a dry cleaners. It wasn’t glamorous, not at all, but I worked and made my own money. I had to become responsible for myself, my professional conduct and scheduling shifts. I learned so much from that first job that carried through. And, when I was looking for jobs after that, I had three years on my resume where most of my peers were only starting to job hunt. Having a job early in life is only ever a good thing, in my books.
Treat Credit Like Debit
There is only one reason that I got a credit card when I was sixteen, and that was because you couldn’t book ANYTHING online without one. That said, I learned early on to treat my credit card like a debit card. I would only spend the money that I knew I had sitting in my chequing account, and my card would be paid off in full each month. In thirteen years, I have NEVER carried a balance on my credit card. Who wants to pay some crazy bank 18% to borrow money? Nobody sane, that’s for sure.
Live Within Your Means
We’re not buying the crazy expensive house. We’re just not. That wouldn’t mean living within our means. That would mean non-stop stress, arguments with your Dad and feeling like we have to stay in certain jobs because of the paycheque attached to them. No thanks.
Living within your means is important at every stage in life. If you can’t afford to be going out every night in university… don’t! Your grades, and your liver, will thank you for it.
Living within your means will ultimately support your mental health, stress levels, your relationships and your overall happiness. I’m pretty sure there is a quote out there about how happiness is living within your means, and misery is spending a cent over what you make.
Buy a House with 20% Down
I remember vividly my Grade 10 math teacher talking to us about mortgages. She showed us this frightening chart with what happens when you buy a mortgage with 5%, 10% or 20% down, how much interest you pay over time.
It’s funny, because the most common thing I hear from people my age is “I’d rather my rent go towards my mortgage than towards a landlord.” Well… that logic is somewhat flawed. Your rent can either go to a landlord, and continue to allow you to save money… or you can pay the bank a ridiculous amount of interest. Either way, money is going out the door that you’ll never get back. Don’t get sucked into thinking that the mortgage is necessarily better.
Our point of view was always to have the biggest down payment that we could, on a house that we could afford, so that when it came time to get our mortgage, we were making a minimal jump from our rent payments to our mortgage payments, a budget that still allows us to save money every month.
Also, with 20% down, we do not require certain insurance payments the way you would with a smaller deposit. Savings, right there.
Save for What Is Important
If you’re anything like your Mom, you’ll want to save for some crazy travel adventures. I don’t blame you. Get in the habit of saving early and often, planning for the things that will add value to your life. Mum and Dad? Well, we have had many savings goals over the past few years. We saved for our trip to Southeast Asia, none of which was paid for by credit. We saved for our down payment. And now? We’re saving for your university/college/education fund. That’s important to me. My schooling was paid for and so will yours be. You’ll pay your rent and your expenses, but the best gift I can give you is some sort of education for whatever you’re passionate about. I just need to start saving now!
Be Clear on Your Life Priorities
I remember making a mini vision board back in the day when I was in France of all the things I wanted from life. Travel, a nice house and experiences with my family. “Victoria, you can’t have it all,” said that mother of the kids that I was au-pairing. It’s funny… because you can have it all, just maybe not the top end version of it all. We’ve managed our money so that we could travel (albeit to cheaper countries and have stayed in some questionable places), we’re buying a house we adore, and the experiences with kids don’t have to cost much money. Kids just want your time. I never cared about nor do I remember the gifts my Dad brought back from business trips, I only cared that he was back.
Make sure you’re super clear on what your priorities are in life. It’s easy, especially in junior high and high school, to want what every other kid has. The thing is, that’s a six year period of your life. If you can get through that without succumbing too much to the peer pressure of having the best this or that, you’ll be fine. It often continues into adulthood, but here’s the thing… I don’t care what my friends have that I don’t. I care about what we do with the time we have together.
Find an Expert
We got to the stage where I knew that having my money just sit in the bank wasn’t the right thing for us anymore. I also, however, was not super comfortable with experimenting with the stock market. I’m a moderate-risk investor, so finding a financial advisor who understood my comfort levels and my financial goals was key. I’m happy to say that a year and a half on, the funds that we’ve got with a financial advisor have reaped much higher rewards than they would have sitting with the bank.
Okay, that’s more than enough for now, as I realize the epic length of this post. Anyways, it’s an important topic, so I wanted to dedicate the right amount of time to it.
More to come as you grow up.
- You’re the size of a pumpkin. This… I feel is very true. I feel I look like I’ve shoved a pumpkin down my top!
- Zing! Zap! Ouch! Yep, you’re sending some awful zaps of pain down my legs with frequency. It can be a tad scary while driving, let me tell you.
- You technically COULD be born on my birthday. If you’re born tomorrow, that is. By the way… it would be convenient if you were born between the 7th and 14th, as we’ll have paperwork to sign for the mortgage and lawyer from the 15-18th. Just saying, you know, in case you want brownie points.
- I started a baby book of all my baby blog posts for you on Mixbook. It’s actually looking really good, and I’m glad I’ve captured these posts in print.
What money management tips would you share with your kid?