The sad part of learning about personal finance is realizing that the past generations before you did it all wrong. When I get a chance to sit back and think about all the learnings and values that were taught throughout my life, it becomes quite apparent why we never “got ahead”.
Perhaps it’s the failing of our education system that never teaches personal finance when we were young. There’s too much emphasis on science, arithmetic and literacy skills that just don’t translate to every day life management. Maybe the school curriculum was just that, a way to keep people as financially illiterate as possible and keep the parents preaching bad habits.
As an Asian Canadian family, I was taught the value of saving and buying a home, yet on the flip side one also shouldn’t ignore caste. Success was based on appearance and profession. As shallow as it may seem, brand name clothing and luxury cars signaled wealth. The larger the home, the more successful you were. All these factors were important to not shame your family name. “Saving face” was more important than taking the right path.
Unfortunately, all of these stereotypes and paradoxes don’t lead down the path of financial independence. In fact, all of these superficial ideologies and conservative money management strategies were a way to guarantee slaving away at your job for 50 years.
Living Up To Your Culture
The worst part about managing your finances is when there is a pressure to “fit in”. Everyone else is doing it, so you should be doing it too. The proper thing to do is to buy a home at no matter the cost. It didn’t matter that owning the house would cost more than renting. Owning was a requirement.
It can be said, with much of the Asian prejudice, that Toronto and Vancouver homes are vastly overpriced because of Chinese influence. That’s because Chinese families love houses. They don’t even have to be foreigners. New immigrants, first and second generation Chinese all love houses and most likely own 2, 3, or maybe even 10 investment properties.
That’s just the nature of the the culture. These financial biases all go against the proper teachings of financial management: Manage your risk. Don’t incur too much debt. Don’t speculate. Have a balanced portfolio and don’t rely on one asset class. All of these things are not well represented in the Chinese culture.
Aside from real estate, one of the worse practices in Chinese culture is probably the lack of estate management. Many think it’s best to let the government settle the differences and distribute the estate evenly to survivors. Though in practice this might seem fair, it certainly never is and never will be.
Greed and power has always been a staple of Chinese culture. This rears its ugly head when estates are left behind without a proper will and executor. Things get really complicated. Cash is easy to divide, but what about assets? How do those get valued? What if sister doesn’t want to sell for sentimental reasons, but brother needs the cash immediately? That’s why it’s important these things are spelled out.
If real estate should be sold, an executor sees to it and makes it happen. Nothing is worse than family squabbles over money and property. So let this be known. Never EVER EVER EVER, own property with siblings and extended family members. It’s bound to end with family feuds and grudges that will last a lifetime.
Perhaps the greatest fear of many of my ancestors was running out of money in retirement. That’s because conservation of wealth was more important than investing and having your money work for you. That thinking was the very opposite of becoming financial independent.
The notion of overprotecting wealth is what sets aside many who achieve financial independence, and those who live out the rest of their lives in fear they won’t have a roof over their heads. There is a distinct lack of understanding of what investments really mean to the Chinese culture. Stocks are synonymous with gambling and greed rather than preservation and wealth accumulation. So it’s to no surprise that many Asian cultures will tend to stick to the safety of guaranteed investment certificates (GICs) and high interest savings accounts which don’t present any levels of risk.
Unfortunately, it’s this total lack of faith and trust that lead many to a long, arduous career of extended time in the workforce. Many will never achieve financial independence because their accumulated wealth will never generate income to maintain their lifestyle. Chinese individuals may accumulate wealth through material possessions and dormant assets that are on display to see, but these possessions will never generate any cash flow to support day to day expenses.
Taking Your Own Path
It’s no wonder that I took very little financial advice from my predecessors. I simply learned from their failures instead. That’s really the key to financial success. Don’t follow the same mistakes as those that came before you. Learn from their shortcomings and try your best not to replicate.
Evolution is what makes us stronger. It’s no different when it comes to personal finance. If we continue to follow in the footsteps of those that failed before us, then we will no doubt suffer the same fate.
Since so few ever achieve financial independence, it must mean that sometimes you will need to choose a path that is less traveled. This decision may come with ridicule, disappointment and outright disagreement, but ultimately you know what’s best for you. The importance is having the will power to know what’s best for you.