Financial Philosophy: The Road Map For Making Financial Decisions

April 8, 2016

Daniel and I lived as DINKS (dual income, no kids) for few years between paying off Daniel’s student loan and starting a family. We were both in the consulting industry as engineers and made a decent wage; we had a lot of disposable income. We did as all young folk do: eat, play and travel. Within our means of course. Way below our means, actually.

We were good savers. Saving was ingrained into our lifestyle, a product of our upbringing. We both had the stereotypical cheap Asian parents. We spent and spent and spent, but we also saved and saved and saved. Until one day, we had a chunk of money in the bank that we weren’t sure what to do with. We had been saving without a purpose or an end goal other than to save. We had no idea what we were going to use our money for.

Saving for the sake of saving was pointless. Yes, it is good to save, but without motivation—the why— we could have cleaned out our savings on impulse. That didn’t happen. Instead, Daniel and I took a good look at what we wanted to use our money for and acted accordingly. You see, we had an underlying philosophy that served as a general guide. This financial philosophy, which encompasses our attitude towards money, governs our financial decisions.

Our Financial Philosophy

We are stewards of our money

In the Parable of the Talents a man entrusts three of his servants with some money. The first two work to grow what they’ve been given. The last servant  dug in the ground and hid his share of the master’s money. Upon the master’s return, the first two servants were rewarded for their efforts while the third was admonished for his laziness. The story serves as a reminder that our money doesn’t actually belong to us- we are only temporary caretakers. Our finances belong to God and are to to further His purpose until He returns. Our faith and focus in honouring God with our money is our fundamental value; it is our responsibility to diligently manage what we have been given and use it to help those in need.

Money is earned

My parents did not start off with much. They had $200 in their bank accounts when I was born, so the story goes. My mum took menial jobs here and there—anything, really— to take care of her family and help my dad through school. Though my dad worked through university, he still graduated with a gazillion dollars in student loans (I exaggerate, but the story is told by my mum who claims to have walked barefoot uphill to school— both ways). Even with a third child on the way, my parents each worked two jobs. My dad was an engineer for a software company by day, but worked after hours to pay off his debt. Now in their early fifties, they’re debt free, mortgage free, and could retire if they wanted. They didn’t accumulate their wealth overnight; they worked hard for it. Really hard.

We are fortunate thanks to the my parents’ tenacity . We are committed to following their example of putting in the work needed to provide for our family. Daniel and I have agreed that we are not above any honest opportunity. Money is earned and circumstances can be changed with the right attitude and effort.

It doesn’t matter how much we have if we don’t manage it

Nicolas Cage, star of classics including Face Off and The Rock (so I’m told), blew through his $100-million fortune and owed $13-million in taxes in 2014.

Columbus Blue Jackets’ Defenceman Jack Johnson declared bankruptcy in 2014, claiming $50,000 in assets against $10 million in debt. He left the management of his finances to his parents who took out millions in high-interest-rate loans in his name without his knowledge.

Then you have those like Mr. Money Moustache, a former Canadian and engineer— former, well, because he now lives in the US and retired at age 30. On an income far less than Mr. Cage and Mr. Johnson, he was able to assemble enough assets to live off the proceeds of his investment portfolio.

Having money doesn’t mean you get a free pass. The habits for frugal living and smart investing can be learned. We do not want our hard-earned money to be lost or wasted, simply because we didn’t care enough to properly keep track of or invest it.

Live simply to make room for the things that matter

When Daniel moved overseas as a teenager, all his belongings fit into two check-in sized suitcases. He thought he was poor— until he saw migrant workers living in shipping containers. Seeing what little people can live with, he learned to appreciate the things he owned.

I came to that same understanding while travelling in Nepal. As we trekked through villages up to Everest Base Camp, we encountered porters along the path in flip flops and children using old plastic bottles as toys. I remember watching one rosy cheek toddler play with a cardboard box all through dinner. The Nepalese villagers had little, and yet they exuded joy and contentment.

Since then, we have pared down what we own. That is not to say we are minimalists; we are far from it. Instead, we strive not to pursue things and money with the belief that they will make us happy. As Ben Franklin once said, “Money never made a man happy yet, nor will it. The more a man has, the more he wants. Instead of filling a vacuum, it makes one.” Ironic, isn’t it, that his image graces the US $100 bill?

Similarly, we have simplified the way we manage our finances. We do not want to be bogged down by tedious penny pinching to meet saving goals nor do we want to stress about downturns in the economy. We have developed a financial ecosystem which allows us to chase the things that do bring us happiness.

The Last Word

Philosophies on personal finance, which can be shaped by values, past experience, culture and faith, are different for each person and family. It is important to define a financial philosophy to understand how you view money. Acknowledging your belief system will help you create goals and the plans to achieve them. While priorities shift with time and circumstances, your financial philosophy will serve as a constant guide through life’s different situations.

What is your financial philosophy? How do you think about money?

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