If you were born soon after the turn of the twentieth century, grew up with no money to spare, lived through the scarcities of two world wars, had your savings wiped out by bank closures during the depression, raised four boys and never had a large income, what are the odds that you would become rich?
Rich enough to travel at will and give significant financial support to a number of education institutions. Sound far-fetched? Maybe. But it happened to my parents. Their approach to family financial planning (and that of many people of their generation) is instructive for everyone in today’s world of turmoil and debt. Not only individuals, but governments at all levels and many corporations, including most large organizations in the financial industry could learn from them.
If you’ve read the story of my parents’ courtship (“The Chemist and the Farmgirl,” in the Short Story section) you know that when they were going to school they were both chronically short of money. In fact, they had been all their lives. How did they overcome this condition? Stay tuned.
My father, Gerhard, was born in Berea, Kentucky in 1907. His father was a minister and educator who had a hard time holding a job, so Gerhard could have been born just about anywhere. They lived in a number of different places when he was young. His mother was born in Germany and was never comfortable in the U.S. He had one younger sister.
My mother, Lura (originally named Philura after her grandmother) was born and raised in Harbor Beach, Michigan on an unproductive farm beside Lake Huron. Her parents both worked off the farm to make ends meet. Her grandmother lived with them and did most of the homemaking chores. Lura had three brothers and a sister. My surviving uncle adamantly claims that they were never poor. In his view, poverty is a state of mind.
Gerhard and Lura were both expected by their parents to go to college. They did, on shoestrings, working, and in my Lura’s case, living with an uncle in Kansas. Both taught high school subjects for several years before attending graduate school. Lura decided to return to college when the high school where she taught offered her $1 plus whatever they could scrape together for the next school year. Both lost money they were planning to use for graduate school, at least temporarily, when banks closed.
They met in 1933 at the University of Michigan and got married in June 1935 (see “The Chemist and the Farmgirl”). Although they had very little money, they started their married life with no debt. Keep this in mind because debt management is a large part of this story.
For two years Gerhard taught at Case Institute of Technology in Cleveland, Ohio for the grand salary of $1700 per year. He had been offered $1600, but he said he couldn’t live on that with a wife. He was told not to get married; he said he was going to, anyway, so the college gave him an extra hundred dollars a year to support a wife.
Lura, who had three years of teaching experience, couldn’t work full time, because she was a married woman and the depression was still in full swing. She only worked part time in a department store at Christmas.
After two years of stretching to make ends meet, Gerhard asked the president of Case for a raise. The president told him to get another job offer and the college would try to match it. He received an offer of $2400 per year from Union Carbide near Buffalo and accepted it. He stayed at Union Carbide for 30 years.
Three years later, in 1940, Gerhard and Lura purchased a house in Amherst, a suburb of Buffalo, New York for $6500. The key was that they had enough money saved for the down payment, even though by now they had two sons (I was the first). They were able to make an offer on the house the day they first saw it because they knew it wouldn’t be on the market long.
We lived in that house until 1950, through the years of World War II with ration stamps and blackouts. Gerhard and Lura continued to save money. They were good parents, but they were certainly frugal. When I needed a jockstrap for gym class at school, Mother gave me an old one of Dad’s. It was much too big for me and I had great difficulty keeping it from falling down. Of course, there was no way it could provide the support for which it was intended.
However, Mother always put plenty of nourishing food on the table and Gerhard and Lura supplied our needs, including medical care, which we seemed to need in abundance.
Dad got us boys into the saving habit early. We received a small allowance (starting at a nickel a week) and were paid a little for working around the house. Half of what we received went into an account called College and Travel.
In 1950, we moved to a small farm in Clarence, New York. The war was over and people who hadn’t been able to buy much during the conflict dishoarded their money and started spending like crazy. As a result, Dad and Mother sold the Amherst house for $17,000. In 1955, Dad told me he had paid off the loan on the farm. They lived debt free for the rest of their lives.
My three brothers and I were expected to work on the farm (although we didn’t do any farming except for a cow and a few other animals). We had summer jobs as soon as we were legally old enough to work for others. We were expected to pay for half our college education. When we borrowed money from our parents for college or a car (I didn’t own a car until I was 22) we had to pay it back with interest on a rigorous schedule.
Lura returned to teaching high school after her sons were all in school. She earned a second master’s degree at night and taught English at a community college. Gerhard retired from Union Carbide after 30 years and taught Chemistry at the State University of New York at Buffalo. For the first two years of this job, Gerhard and Lura lived in Paraguay where Gerhard consulted at the university in Asuncion and Lura taught at the American school.
They traveled widely and gave financial support to educational institutions. They never owned a credit card. When Gerhard was put in a nursing home for the last few months of his life, the financial person called my brother, asked how Lura was going to pay for it and suggested she plead poverty so she could receive government assistance. Steve, surprised, opined that she would just write a check. Which is what she did.
When I started helping Lura with income tax (that had always been Gerhard’s job) I was amazed at all the money they had, invested in a diversified array of stocks and bonds. They didn’t put all their eggs in one basket. If one investment lost money, others would make up for it. Madoff investors, are you listening?
Lura lived the last ten years of her life in a retirement community and covered the expenses from Social Security, her pension and investment income without having to dip into her capital.
So what can we learn from this story? Here are the points I get from it:
· Take charge of your finances.
· Spend money wisely.
· Always save some money, regardless of what your income is.
· Be careful about getting into debt, and have a repayment plan.
· Diversify your investments.
Simple, isn’t it? And very difficult. If governments and quasi-government financial institutions can’t stay out of debt, why should we be expected to? Perhaps because people, individually, are smarter than institutions. We are the hope for the future, not government, despite what politicians tell us. It’s up to us to reclaim our role in the world. Financial self reliance is a good way to start.