I read an interesting post about sex and money (hum… only the combination of those two words makes it interesting!) over at Million Dollar Journey. He was explaining what he learned about these two taboo topics from his parents. While he didn’t learn much about sex, his dad told him a lot about personal finance. That got me thinking about what I have learned from my parents about (sex?) personal finance. And if there is one thing I am glad is that they went bankrupt 13 years ago.
Funny enough, real experience is the greatest teacher of all. I was 14 when it all happened. Back in the early 90’s, my parents were not rich, but they were making a really good income. In fact, they were making in the six figures back then. We basically had everything we wanted; at the moment we wanted it. Being a teenager let me tell you it was a lot of fun!
The problem is that my parents (mostly my dad) were too busy to spend their money that they never figured that this wealth could go away at any time. So they were making 8K a month, but they were spending the very same amount as well. I remember that they were submerged by credit cards bills.
Unfortunately (or fortunately!), my dad lost his lucrative contract. As bills were coming in faster when rats run when there is a fire, it took only 3 months before my dad “pulled the plug” and declare bankruptcy.
We lost absolutely everything. House, cars, activities and my summer job (as I was working for my parents). We rented a small (and shitty) house (that looked like a cabin!). My mother was looking for spare change in house to buy the next pint of milk. There was virtually no money for anything. For people who were used to spend every dollar as they were burning their wallet when they stick around, this was cruel.
I remember getting blasted by my dad after I came back from the shopping mall with 3 posters and a pair of sunglasses. I actually took my “last” $100 to decorate my 6’X8’ room and I bough a pair of used Oakley with the rest of my money. He was so angry at me but not because I spent my money. Simply because he knew he couldn’t give me more so I can buy other stuff later on.
Even though we lived in poverty for about 3 years, this story has a very happy ending. My parents started a new company but didn’t go berserk on spending this time. They are now living a good life, working 3 days a week and they are almost debt free.
“Going bankrupt” at the age of 14 was a very important event in my life. I have learned a lot of things from this bankruptcy:
#1 Never spend more than you earn, this will slap you back in the face once day.
#2 If you don’t have a plan b with your personal finance, it will rapidly become your plan Bankruptcy!
#3 If you have more than one sources of income, you will fall down on your knees the day that you lose one, but you will be able to get up faster.
#4 Going bankrupt is not the end of the world. You are only losing things that you can buy again later on. Today, I don’t mind if I go bankrupt. But if it ever happens, I want to go bankrupt because I tried to create a successful business… not because I spent my money stupidly!
#5 What you loss after a whole life of work can be regain within a few years. Working smarter instead of harder will bring you a lot more money than you ever thought.
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