George Washington was a great leader, general, and founder of our great country. He faced many times of financial hardship. Some were of his own making with money mistakes. Keep reading and learn how Washington overcame financial mistakes several times in his life and you can use these same lessons in your family.
Be wary of buying on credit
Credit cards are a modern invention but buying on credit was a readily available option in Washington’s day. Washington had an account with a London merchant named Robert Cary. Cary was all too happy to send clothes and other luxury items to Washington. Was there interest on his debts? Absolutely. The shopping habit got out of hand and was a weight on the family’s finances for around 10 years.
His wife Martha helped get the family out of their debt situation. That was fortunate since the situation was a threat to the family's business and reputation. Avoid this same mistake by never borrowing more than you can pay back. Also, avoid the store credit cards retailers push to sell you as much as they can.
“To contract new debts is not the way to pay old ones.” George Washington
Money and Family Don’t Always Mix
Family and money can be a challenging combination. Washington had a habit of loaning money to family. He rarely, to his detriment, agreed on set terms with the family borrower. He would often make no written agreement on interest, payback period, or even payback at all. This led to Washington family to be in a precarious situation with family debt on more than one occasion. Over time, with the help of his wife to a large degree, Washington got the debt under control. To avoid this mistake, tread carefully when money and family come up. Money is never more important than loved ones. If you decide to loan money to family, put it in writing and be clear with what is expected of each party to avoid resentment or disagreement in the future.
"The rich rules over the poor, and the borrower is the slave of the lender." Proverbs 22:7 ESV
When you lead a revolution and an army, there’s certain things you need. Uniforms, guns, soldiers all require money. Money muskets was something Washington recognized as a critical need. He did, however, underestimate how inflation could hurt his aims and the cause. Inflation was a terrible struggle during the revolutionary years. In 1778 alone, inflation was just shy of 30 percent!
There was real fear from families about food prices and other goods rapidly rising in price. Riots over food prices happened in many cities. There's a few reasons why inflation happened with colonial money. One of the reasons was the British! The Brits made a secret plan to print counterfeit colonial money. Why? They knew the pain it would cause.
Ben Franklin recognized this pain and called the situation "a kind of imperceptible tax." Eventually, with the help Franklin, congress and other, Washington was able to get inflation under control.
"[inflation is] a kind of imperceptible tax." Ben Franklin
Rich on Paper, but Cash Poor
We need cash to pay our bills. This is the problem Washington faced at several points in his life. He owned large amounts of land and was very wealthy, but often struggled to meet his obligations. Washington’s holdings, while large, often did not generate the cash needed for his lifestyle. This happens in our modern world too. A version of this can happen when someone aggressively pays off their house and then realizes they don’t have the money they need for other commitments. This is sometimes called being “house rich and cash poor.” Over time, Washington was able to manage his estate businesses more prudently and avoid the financial squeeze he felt at other times.
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