Growing up, I knew my parents were financially successful: We had a nice home, my sisters and I went to private school and we traveled internationally. I was always appreciative of the lifestyle my parents provided for us, but I never thought about how they’d gotten there — or realized that they hadn’t always lived so comfortably.
But as I got older and my parents approached retirement with close to $1 million in savings, I wanted to know the path to their success. I was shocked to learn the starting point: bankruptcy.
Just after I was born, my parents’ income dropped from over $100,000 to $0 when they both lost their jobs, leaving them with a newborn, a mortgage, $10,000 in credit card debt, no savings — and no way to pay their bills. Feeling overwhelmed and afraid, they declared bankruptcy.
As my father describes it, it was a low point in their lives — and a tremendous motivator. They decided to pursue their ultimate dream and started their own business. It was a risk, but after countless hours spent working multiple jobs, their company began turning a profit. Now, 20 years later, my parents still own and manage the same company, which earns millions annually.
Bankruptcy taught my parents some valuable lessons, which they made sure to instill in me and my siblings. Here are the five most important lessons that have shaped how I interact with money.
1. Plan for the Worst-Case Scenario
Before my parents lost their jobs and declared bankruptcy, they both worked for my father’s uncle. Job security seemed like a given, and they never imagined they wouldn’t have a steady paycheck, so they never had a back-up plan.
But then my dad quit when he discovered some practices that he didn't agree with, and my mom was fired in retaliation. In just a couple of days, they went from financial security to devastation.
In my life, I have a back-up plan for almost everything. I think of the worst-case scenario, walk myself through what I’d do if that happened and make a plan. Not only does it help to ease my stress and anxiety about the future, but it also allows me to live more fully in the present.
2. Always Have a Savings Account
Besides having an abstract back-up plan, it’s important to have a concrete one too — in the form of a savings account. When my parents lost their jobs, they had no emergency fund or savings account. Suddenly, they had no income and bills to pay.
So when my sisters and I were growing up, my parents ensured that we saved our allowance money, and they taught us the importance of an emergency fund. In my adult life, I continue to set money aside for the unexpected, and I never allow my savings account to dip below $1,000.
3. Live Within Your Means
When my parents started their careers, they were making great money and spending it all. It wasn’t until their income disappeared that they realized the importance of living within their means, and they instilled this in me from an early age.
As I’ve progressed in my career and seen my salary grow, I’ve been tempted to also increase my spending, but their advice always comes back to me. I continually check my spending habits by assessing my budget to ensure that I’m spending money on the right things, cutting costs where I can and saving money each month.
4. Mistakes Don't Define You
One of the things I admire most about my parents is their ability to pick themselves up after hitting rock bottom. They could have let their bankruptcy cripple them, but they decided to learn from their mistakes and move forward.
But they didn’t find success overnight. For starters, their bankruptcy stayed on their credit report for seven years. And while their business was getting off the ground, they worked multiple jobs, put in hundreds of hours and sometimes hardly saw each other. But in time, their hard work paid off and their story gives me hope that no matter what happens, there’s always an opportunity for a second act.
5. Money Isn't Everything
There’s no denying that money can reduce stress and make things easier in life, but it doesn’t buy happiness. My dad quit his job because it went against his beliefs. To him, his morals were more important than a paycheck.
Since graduating college and entering the workforce, I’ve switched my job three times in five years for similar reasons. I need a work environment that I enjoy — the paycheck is secondary. And thanks to my parents’ example, I know the importance of job satisfaction and fulfillment, as well as having a financial cushion and back-up plan before switching jobs.