Best financial advice I’ve ever received: Charlie Funk

July 27th, 2012 Charlie Funk
Charlie Funk

Editors Note – this article is part of our series “Best financial advice I’ve ever received.” People frequently ask bankers the best piece of advice they have ever gotten. So for this series, we’re asking MidWestOne employees to share the best money management tips they’ve ever gotten.

I’ve received many financial tips in my life, but the very best came from my father who was the owner of a very small bank in my hometown of Lancaster, Missouri:

There are only two good reasons to borrow money – to buy your business or to buy your home.

In our culture today, it’s almost completely opposite. After all, it’s almost universally accepted to have credit card debt or an auto loan.

I took my father’s advice to heart, and since my very first job, I made sure to designate a portion of each pay check for my savings account. With a proper budget, this becomes a painless practice.

This approach will allow you to pay cash for major purchases and save money instead of paying it for interest. For example, I’ve had the good fortune to pay cash for every car that I’ve purchased during my lifetime. And I’ve always viewed a credit card as a convenience rather than a borrowing source.

This doesn’t come without sacrifices. To save for a new car, I would often have to drive my car for another year or two. Also, I’ve sometimes had to wait a few months before I made a major purchase. However, in doing so I saved the expense of paying interest to the bank and instead was able to build my savings.

Of course there are exceptions to this rule.

Student loans are one example. In the late 1970’s, when I received this advice, there were not a lot of student loans, and college was much more affordable than it is today. I suspect my father, if alive today, would say that under the right circumstances, student loans are a practical use of credit.

Make sure you understand the magnitude of the total debt you will incur before jumping into the student loan game. Have a clear understanding of the implications of the debt and the amount of debt service that is going to take place once the student has graduated and is in the working world.

Other exceptions include unexpected expenses, like a large auto repair or an unexpected medical emergency. In those instances, a home equity loan, credit card debt or bank loan is an appropriate use of credit – as long as it is repaid in a quick manner.

And this leads to my final point. The second best financial advice I’ve ever received came from my first boss, Billy Cole. Billy once told me, “you should always have six months of your salary in a savings account or in a place where you can access it quickly.”

Life doesn’t always proceed as planned and having a “safety net” can be incredibly valuable when that medical emergency or auto repair comes along.

Excessive consumer borrowing was one of many things that contributed to the recent financial crisis. Any time you take on debt, do it with foresight and with prudence.

If you are considering a major purchase, ask a MidWestOne banker for an honest opinion. And don’t forget to save. Setting aside money for savings each month will allow you to build a cushion over time that will inevitably come to your rescue when you need it.

Charlie Funk

About the author

Charlie Funk is President and CEO of MidWestOne Bank. He works with the MidWestOne team to oversee the daily operation of the bank.

Comments are closed.