The immigrant's guide to personal finance : Four long-term strategies to improve your financial resilience

by Melanie K

In light of the current downturn of the economy and looking at the security of my own financial future, I can't help but reflect on the money management philosophies of my own parents, grandparents, and in-laws, most of them immigrants, and survivors of wars, the Great Depression and the Cold War. These experiences shaped the way they managed money, and while many of them have had over-the-top, frugal-to-the-extreme habits, even after achieving financial success, there are a lot of good, conservative, money management philosophies that the current middle class have simply abandoned in the relatively prosperous decades, and overly accessible credit, that we have enjoyed.

What lessons can be learned from these people who have seen some of the worst economic and political uncertainties within the past 100 years? I'm incorporating these four into my own long-term financial management plan:

1) Save first, then buy. Avoid credit, period. Knowing how to manage credit is key. When they came out with 0% interest in the 90s, my retired parents actually bought a new minivan on a monthly payment plan for the first time in their lives. My parents did this for all of two months - and then paid it off because they had the cash. They just were not comfortable 'owing' anybody. You might think it's nuts to turn down free credit like this, but my parents took debt very seriously, and our generation could also take it a lot more seriously then we do.

2) Have a backup career. One of my small business mentors is from an Italian family and her parents always told her to have a second skill set that she could earn a living from, 'just in case'. Passive income from renting a suite in your home, for example, can serve this purpose too.

3) Maintain an accessible cash reserve. Although she has always been an avid investor, my aunt made a point of keeping a portion of their family contingency fund in a local savings account so that they had cash that was available at the drop of a hat for emergency expenses. These days, having all of your savings in something like high interest online accounts means that it can take several days to access your funds.

4) Buy a home you can afford and pay down the mortgage. This follows the 'save first, then buy' philosophy. Put more than the minimum down on your house, and buy what you know you can afford (not what the banks are willing to loan you). Start with a small home rather than a dream home. My aunt actually never left her starter home. My parents raised three teenagers in a small three bedroom house, and made sure they owned it outright, before they built their dream house. When you invest in real estate, stick with it, make due, and pay the mortgage off as quickly as you can.

While it may be difficult for many of us to see beyond this economic turmoil, I think it will teach us some hard lessons and change the way we view quality of life and financial security. When it comes to managing money, some of the 'old ways' may become new again.

Women in Business: How will these economic times change the way you manage your long-term finances?