My wife and I have never missed an opportunity to lecture my son on strong financial hygiene practices. I view it as one of the many pleasures of being a parent. Throughout his formative years, and even well into his 20s, we made sure to throw in a few jabs and off-handed remarks about his spending habits.
To be clear, my son has never been excessive in his spending, and particularly since leaving for the United States a few years ago, he has really impressed us with his frugality and investment mindset. While we certainly had our fun with him back then, I’m grateful that he absorbed some of our lessons on sound financial practices, which were crucial when he began saving for a home.
It was these sound financial practices that guided my life through the various ups and downs. I can safely say that saving for a home would be practical impossibility without strong financial hygiene. However, this did not come naturally for me. It took me years of mistakes and poor judgment to realise that my life choices were not sustainable, let alone conducive for saving for a home.
The modern narrative is that millennials cannot afford, or have difficulty saving for a home. There is definitely truth to that statement, particularly in the larger metropolitan areas. However, I am a strong believer that, regardless of your income level, you can implement strategies that boost your savings level. I am living proof of that statement, and I’m here to share my journey towards achieving solid financial habits.
To provide some background, my wife and I were both born into middle class families in India. While the lifestyle was far from glamorous, it was certainly comfortable. We had adequate provisions and our basic needs were well met. My wife and my family shared multiple commonalities – both our fathers had well-respected, tenured jobs. Our mothers were homemakers. We shared our modest homes with siblings – I have a younger brother and my wife is one of four children.
Perhaps the most relevant commonality for my wife and I, was that our parents were extremely frugal. We had to be particularly daring or courageous on the day we asked for something that we wanted but certainly did not need.
My wife has always handled this environment better than I did. Every year she used to receive a box of fruit pastels that she absolutely adored. Knowing that would be the only occasion she would receive them that year, she would hide them away and consume them over months instead of days or weeks. That level of discipline from a child was legendary! Years later, I found a store in Australia that sells these same fruit pastels, and I now get them for her regularly. What is incredible is that she still savours them for months, such that I jokingly suggest we open a storefront to sell-off all the extra inventory!
I did not possess my wife’s saving habits. To be honest, I felt strangled by my parents’ tight purse strings, such that in an act of rebellion to this order, I became a spendthrift in my early 20s. I had a decent job that was paying well, certainly more than I’ve ever received previously, and my reaction was to throw my income away on expensive food, drinks, trips, apparel… basically all the wants I was “deprived” of when I was younger.
When my wife and I met and started dating, I continued this same behaviour with her – she had the more sensible head and foresight to warn me that these traits would only lead to misfortune. What I needed at that time was a reality check, which I inevitably received in grand fashion.
As part of my first job, I was relocated to a regional city to build out a sales practice for my company. By this time, my wife and I were recently married and we were living a life of “luxury in the absence of sensibility”. Allow me to elaborate on this phraseology – while my income was increasing, so were my expenses, such that we were living a paycheck-to-paycheck lifestyle.
It was only until one month shortly after relocating that the largest flaw in this lifestyle was exposed. There was a clerical error in my salary, whereby instead of being paid an after-tax and rent amount of 7,000 Rupees a month (which at the time was a respectable salary), I was paid only 1,200 Rupees for that month. What had happened was that my company erroneously withheld a lower amount of tax from my salary, and sought to rectify this in the final month of the accounting year. This money was as good as gone, as for those familiar with the Indian tax system, tax refunds are more a fallacy than a certainty.
This was a pivotal moment in my marriage and our combined personal financial habits. The easy option would have been to take out a high-interest, short-term loan to tide us over, or even request a small loan from our families. However, both my wife and I were against this idea. Up until this point, I was barely able to fund my lifestyle through my own income, but it was still income that I was personally generating. I knew that if I were to take on debt to fund my lifestyle, it would only lead to despair and unnecessary tensions that may be too much to bear on my young marriage.
So we chose to take the hard way out and cut almost all spending. With that 1,200 Rupees, we barely had anything for food or fuel. However, we knew that rice, lentils and soup were cheap, and in the absence of another viable option, that became our diet for an entire month. It was not glamorous but it was necessary. I also opted to walk to places instead of using my motorcycle, in an attempt to preserve fuel.
By cutting down our spending to “austerity-levels”, we ended up having a little bit left over from our 1,200 Rupee budget! In celebration, I ended up using that surplus to buy my wife some of her favourite ice cream. This was the eye-opener I so desperately needed, and while it was uncomfortable, it was achievable.
In your early professional years, that disposable income resembles independence and freedom. However, in the absence of pragmatism, this income can spell disaster. Prior to the clerical issue, I could always justify my expenses by stating that I could “afford” it – it was only until going through the experience that I realised that affordability should also be forward looking, and should be probability weighted based on uncertain scenarios that may negatively impact your life.
I’ve written in other posts about my business failing and the incredible financial weight it placed on our family. What I failed to mention is that we would still be in a hole financially if it wasn’t for the sound budgeting practices that we learnt all those years prior. Up until the point my business collapsed, my family enjoyed a fair amount of luxuries. For example, we had assisted help for our son and a private chauffeur when needed. Once things went sideways professionally, so did all these luxuries, as well as a few necessities.
However, as a family unit, my wife and I knew what needed to be done to get through the rough patch. We significantly curtailed our expenses, commenced a side hustle selling packed lunches to the neighbouring office complexes, and aggressively focused on our debt repayment.
For us, we were just going through another ‘clerical error’ of sorts, albeit at a much grander scale. It was for these financial practices that we were able to clear all outstanding debt relating to the business prior to relocating to Australia, so that we could effectively start our lives afresh and work towards saving for a home.
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While the above focused on saving for a home, I intended this post to kick-off a series of blog posts on responsible savings habits and financial hygiene practices. For those interested, I will be sure to update the blog on this topic in the coming months. As always, thank you for taking the time to read through the post and please feel free to leave a comment below.
The content outlined above was written, edited and published by the Lost Realtor. The author has over 20 years or real estate sales and investing experience in the Australian property market. He has held senior positions in Australian building companies, including being the General Manager of the residential sales division of Collier Homes. His qualifications include a Bachelor of Commerce degree and a Graduate Diploma in Building and Construction Law.