I am very lucky. Unlike some of my personal finance blog counterparts, I never learned how to drag myself out of debilitating debt, never needed to carry a balance on my credit cards due to circumstances beyond my control, and didn’t face much adversity that could put my financial position in dire straights. As a result, I can’t really say I’ve “been there”. I didn’t need to be frugal. Yet, I always have been, and perhaps that’s part of why I never needed to.
So where did my frugality come from? Like many things in life, I owe it to my parents, specifically, my father. There were many reasons, but the most important was probably our source of income.
We were an entrepreneurial family. Growing up, dad owned a business whose profits were unpredictably seasonal. It did not come without advantages: learning the importance of saving from a very early age, understanding creative thought and capability to do important things, having a drive to succeed. With advantages also come disadvantages: learning how stressful unpredictable markets and inconsistent salaries can be on a person made me rethink my entrepreneurial roots. It was a childhood rich with lessons I learned along the way. Those lessons shaped me into the person I am today, regardless of whether I ever own a company or just continue work for one.
Lesson 1: Be proud of your work.
Entrepreneurship taught me the value of having a strong work ethic. One personality quirk that would frustrate my father more than any other was when people did just enough work to get by. He couldn’t understand how people could lack pride in their work. Putting effort into doing a job exceptionally well was something so fundamentally important to him that I figured it must be important to any business owner.
As a result, I treated every job as if it was my own company, and that attitude has served me very well in my career. To this day, the summary line of my resume starts out with “Entrepreneurial”, and always solicits a nod of approval during an interview.
Lesson 2: Everyone has a boss.
Owning your own business is a common dream. My dad used to say he wanted to own a business so that he wouldn’t have to work for an idiot. Unfortunately, after opening his own business he realized that he still worked for an idiot. It’s a humorous play on words but serves as a reminder that ultimate escape from authority is elusive. At the end of the day, everyone has to answer to someone - whether your boss, your customers, or the person in the mirror.
Lesson 3: Save your pennies.
Entrepreneurship has risks, especially when you own a seasonal business. Sometimes, the business didn’t bring in any income for weeks. Those were always tough times. But because we had saved and prepared for emergencies, we were able to survive the lean times.
Saving for a rainy day is a lesson I’ve carried with me throughout my life, to the point of obsession. Rather than drain the emergency fund for a 20% down payment and avoid mortgage insurance (PMI), we decided that buffer was something we weren’t willing to live without. Ironically enough, my department restructured and I lost my job a few weeks after closing on our home. It was a fantastic lesson in the importance of an emergency fund.
Lesson 4: Employers are people too.
I owe my lack of entitlement to my father, who shared all the challenges of owning a business with us. Many of my colleagues take health insurance for granted; as if it’s a benefit the employer owes them. Very few people know the true cost of employing someone when you add benefits and taxes into the mix.
A good rule of thumb is to add 40% on top of your salary and that’s how much your employer pays for you. The cost goes up even more with smaller businesses, because large business can save on benefits through economies of scale. Yes, it really is that much.
Lesson 5: Efficiency is a money maker.
My very first “job” at the age of 7 was helping out at my dad’s flower shop. I had two options - I was paid 1 cent per box for making boxes or $1 per hour for watering plants. Using that logic, if I made at least 61 boxes an hour, the box job would be more lucrative.
I quickly realized that the faster I made boxes, the more money I would make. Within a few days, my earning doubled merely by working more efficiently – lining up the boxes so I was doing similar tasks assembly line style. Dad appreciated the extra effort and gave me a raise by rounding up to the nearest quarter – sweet! I was able to buy the next set of Garbage Pail Kids cards that much quicker.
Applying the same mentality to your career, it’s not always intuitive that being efficient will profit you. After all, if you’re sitting in a desk job on a salary you get paid whether you type up 1 memo a day or 20. Chances are if you can type 20 memos and your colleague can only type 15, your workload will not be distributed equally. So what’s the incentive to work efficiently? The gratification comes much later in your career. The more efficiently you can work for your employer, the more money they can make in less time, the more valuable you are to the company. Efficiency is an investment in your career by adding value to your company, and value to yourself.
Lesson 6: Reserve the right to challenge the status quo.
Dad found ways to do things and stick to them, but wasn’t afraid to do things other people wouldn’t. Sometimes, it worked well for him. Other times, it failed miserably. We ended up okay overall.
A common rule of thumb in investing is that bigger risk = bigger reward. If people were always afraid to do things, where would we be now? It would be a very boring, if not futile, existence if no one were willing to challenge the status quo.
Lesson 7: Differentiate yourself.
Right now, there’s a big buzz around “branding”. All branding refers to is finding a way to differentiate yourself by doing something differently. Someone will always be able to make a widget faster or more cheaply. What are you doing to differentiate your contribution? If you can’t do something better than anyone else, it’s best just to start over and find something you can. Your life has a unique purpose. Find it and relish in the beauty of your individual contribution to the world.
And thanks to dad (and mom) I am very, very lucky. Happy Father’s Day, Dad! I love you very much.
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