For those who believe the days of spending with reckless abandon will return, I have news for you: Those times never really existed.
Before the Great Recession and today’s tepid recovery, so many of us felt we could buy new cars, take exotic vacations, and engage in other lavish activities at will. The reality is, we borrowed a lifestyle, financing our extravagant tastes with credit cards and home equity lines of credit. It was as if we enjoyed a long, continuous party. We forgot the lessons of our parents and grandparents and now we are forced to spend years cleaning up our financial mess. In the process, we may have handed down unrealistic expectations and a number of bad habits to our children.
We must make money management and financial education a family affair. That means going back to the basics as we repair our finances and put our kids on the right financial course. First, we all need to take a refresher course on the rudiments of sound personal finance. The lessons are quite simple but require discipline: They include living within our means, paying ourselves first by saving a portion of what we earn, creating a budget and sticking to it, and avoiding the accumulation of unmanageable debt. In fact, much of this common-sense approach to your finances can be found in our Wealth for Life principles which you can download at blackenterprise.com.
Our grandparents and parents understood the value of a buck as well as the best ways to maximize dollars. We’re only two generations removed from African Americans who had been locked out of out of mainstream society due to Jim Crow laws and discriminatory practices. As a result, they were forced to scrimp and save and pool their resources to start businesses, build institutions, purchase homes, and sock away money for their children’s future. It was their sacrifice and determination that allowed for the creation and preservation of some of our great black institutions. Our parents, many of whom were children of the Great Depression, witnessed firsthand the aftermath of financial devastation from unforeseen forces. Not only did Mom and Dad realize that they had to adhere to their parents’ rigorous financial planning, they had to protect their wealth by being prepared for the unexpected. By doing so, they created a better life for us.
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As the first generation after the civil rights movement, we gained access to the best institutions of higher learning and top management positions in corporate America. Although we excelled in our careers and earned salaries that previous generations could only have dreamed of, many of us forgot the tried-and-true examples of our forbearers. Instead, we became caught up in the financial madness, trying to time the stock market for quick financial returns or using our homes as ATMs because we believed that home values would continue their endless, meteoric rise. Then, a few years back, our world crashed with the financial meltdown. Due to rampant spending and lack of attention to our finances, we did not provide ourselves with a sufficient cushion to weather the hard times.
As we regain our financial footing, we now have the prime opportunity to take up the mantle of our parents and grandparents and teach our kids the value of budgeting, saving, and frugality. For too long we have taken them on our excursion of wanton spending as we seemingly satisfied their every whim during the illusory flush times. We must bring them back to planet earth.
I have started this process with my college-age children. Like many of our kids, they believe that they can get anything that their heart desires. When they run out of cash, their first instinct is to text me and treat my cellphone like an ATM pin number. To put an end to this practice, I sat down with my daughters and sons and shared the financial facts of life with them: They will receive a monthly stipend, develop a budget for their living expenses, and stick to it. In fact, all four will have to find summer jobs to pay for a portion of their expenses during their college years. 0These rules may fall under the tough love category, but they are necessary if our children are going to appreciate the value of a dollar.
We have the same goals as our parents: to make the next generation more financially secure and provide them with more options than we had. We must put our financial house in order while we lay the foundation for theirs.