Four Love & Money Lessons from Small-Town Folks

Personal Finance
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By Richard M. Rosso, MS, CFP®, CIMA®

Learn more about Richard on NerdWallet’s Ask an Advisor

For decades, the dusty mecca of Luling, Texas (pop. 5,500), has celebrated all that is cold, wet and sweet with an annual watermelon thump.

Once dubbed the “toughest town in Texas,” Luling was initially a rest stop for cattle drivers along the Chisholm Trail. It’s odd that it became associated with anything as sweet and refreshing as ripe watermelon, but so it goes in Texas.

An acrid odor rises from oil pumps and mixes with the fragrance of barbecue. A train rolls through with an ear-piercing whistle. Luling’s era as a hub for heavy commerce and cattle are gone, but warm shadows of the past linger in the present. Bits of daily life flow through a time warp—polite words travel along narrow streets like the trains on the railroad line.

And there’s watermelon. Lots of watermelon. For four fun-filled days each July, carnival festivities and watermelon-themed events like seed spitting (not as gross as it sounds) liven up the blast-furnace heat. For the past several years my daughter and I have joined in, ever since a fascination with Texas history first rolled me down Interstate 10. I remain intrigued that the people of this land survive and even thrive on modest financial resources—the median per-capita income here is less than $20,000 a year.

What small-town secrets of success can they give us? Over time, I’ve compiled the best lessons from the residents of Luling. Here are four of the most memorable.

“I don’t eat the whole chicken all at once, just a piece at a time.”

You can’t make this stuff up! Those who seek immediate satisfaction or look to get rich quick are go­ing to suffer from financial indigestion or worse. Growing wealth isn’t magic; it begins with an awareness of cash flow, consistently spending less than household income, managing debt, and having a savings and/or investment plan for specific life milestones like retirement or college.

Many feel the tasks are too overwhelming, so why bother?

Well, listen to Luling: Take baby steps: If you’re not saving, start, even if it’s just $30 a month to bolster an emergency cash stash. Increase your 401(k) or retirement plan contributions by 1% now. Direct as much as you can toward paying off credit card bills. Take action. Worry about the repercussions on the budget later. You will make it work.

“Don’t owe nothin’ to nobody.”

It appears those with smarts in Caldwell County, mostly “senior folk,” abhor debt: This gem came from an elderly gentleman enjoying ribs at the City Market barbecue joint.

Mortgage debt is understandable as long as your payment, including principal, inter­est, taxes and insurance, doesn’t exceed 25% of gross monthly income. The stan­dard rule of thumb is 28%; my advice is to come in below, as the rule is as antiquated as downtown Luling’s facades. I have been disciplined enough to follow a “20% of gross” rule. But then I’ve never perceived a house as an investment—just a place to hang the hat.

Side note: City Market accepts cash only. Enjoy melt-in-your-mouth brisket without taking on additional debt. The establishment is always smoky and there’s no air conditioning. Don’t worry: As you start to sweat, you’ll feel cooler.

“You can fool yourself but the pigs’ll still laugh at you.”

Emotion is the greatest enemy of investment suc­cess. Individual investors are plagued by overconfidence. We sell low and buy high, hold on to losers too long and create trends where none exist. Assess your emotional biases; you’ll be much more suc­cessful at investing.

With the 200% run-up in markets since March 2009, I’m starting to observe (finally) signs of recency bias among investors as they project their most recent stock market experience into the future. Many are comfortable with lofty stock market returns and the unusual absence of corrections, and that’s as dangerous as Luling’s Main Street in 1877.

Gauge performance against personal benchmarks, not an index like the S&P 500. Compare your returns, on an absolute basis, to the returns you require to hit a gusher (Texas talk).

 “The heat won’t kill ya until it does.”

In Texas, ignore the heat for long and your health is going to suffer.

If you ignore your current relationship with money it will eventually get you in trouble. Overextending your credit, not saving or otherwise planning for retirement, a lack of an emergency cash buffer, and spending money as a substitute for happiness are bad habits that can catch up and scorch your net worth, permanently.

One 100-degree-plus day in 2011, as I stood outside Blake’s Restaurant on Main Street, a hot breeze overtook me. With it came the odor from nearby oil pump jacks. I wrinkled my nose.

An elderly local walking by tipped his white cowboy hat at me, stopped and politely said:

“I wouldn’t do that, son, that’s the smell of money.”

Duly noted.