Motivational speaker Jim Rohn famously said we are the average of the five people we spend the most time with.
One significant reason this happens is because of their example and model. As we recognize their positive aspects, we seek to emulate those characteristics in our own lives.
Another reason is because of the conversations we have and the advice we share. The more quality time we spend with people, the more nuggets of wisdom we begin to hear from them.
Over the years, I’ve been blessed to have countless positive influences in my life. Their example and their wisdom have shaped me in every way—including my financial practices. Here are seven specific ways.
The 7 Most Life-Changing Pieces of Financial Advice I’ve Ever Received
1. “Most people who overspend their income do so in one of three ways: 1) Too much house, 2) Too much car, 3) Too much entertainment.” // Financial adviser, 2008.
I made a passing statement to a financial adviser friend of mine one particular evening over dinner. I had no data to back up the claim, it was purely an observation made on anecdotal evidence. I told him that most people I know who are living in debt seem to carry a monthly car payment. That’s when he offered the financial advice above in the form of his own personal interactions.
There are outstanding circumstances for sure (medical emergencies, tragedy, job layoffs, etc.). But generally speaking, if you have a hard time living within your income, check your spending on your home, your car, or your entertainment (dining, tickets, trips). I have tried to keep all three modest ever since.
2. “Begin your marriage living on just one income.” // Boss, 2000.
My wife and I got married in June 1999. During our first several years of marriage, we both worked full-time jobs. My boss at the time, a man I looked up to in countless ways, offered me financial advice one day during a short conversation by the coffeemaker. He suggested, even though both of us had steady incomes, as a newly-married couple we should work hard to live on just one of the incomes and save the other.
So we did. My wife’s income each pay period went immediately into savings and my income went into the checking account.
One year later, that savings account became the down payment on our first home. And four years later, when we had our first child, we were still living on one income which freed up my wife to choose to stay home if she desired.
3. “Buy your car with cash.” // Friend, 2004.
My first car, a Chevrolet Corsica, I bought from my parents and paid them back monthly over the course of one year. When that car began to sputter eight years later, I entered the marketplace to purchase another. Talking it over with my friend one day over a roast beef sandwich, he offered me his thoughts:
“Whatever you have in savings,” he said, “make that your budget for your next vehicle—even if it isn’t much. Then, rather than making a payment to the bank on your existing car, begin making a monthly payment to yourself for your next car. Whatever you would have paid for a car payment, put into a savings account. When your next car dies, you will have a bigger budget for the next one—then, repeat the cycle. You’ll be surprised how quickly you are able to upgrade your vehicle over the course of your life.”
This is advice I have never strayed from. And it’s totally true.
4. “If you can’t keep a monthly budget, use a spending plan instead.” // Writer, 2009.
In 2009, as we were just beginning our journey into minimalism, I was introduced to the idea of a Spending Plan. Contrary to a monthly budget that requires detailed tracking and frustrates many, a spending plan provides flexibility as it offers more of a snapshot, moment-in-time glance of your current spending. But the knowledge and lessons learned from the snapshot view of income vs. expenses provides valuable insight for course correction.
The idea is worth the effort for everyone. First, determine your monthly take-home pay. Second, subtract your fixed monthly costs. The money left over is your monthly discretionary income. With that number in hand, you are in a good place to determine where you’d like that money to go. Here’s a more detailed explanation.
5. “You are never too poor to give.” // Parents, 1979.
Growing up, there was not excess money around our home. In fact, only years later did I begin to hear the stories and understand how tight it was at times. The most significant involves a local grocery store raffle contest that happened to draw my parents’ names on the very week they seemed entirely out of options to feed their young family. And yet, through it all, my parents lived with a simple philosophy on generosity: “We will give to charity, and we will teach our children to do the same.”
Their example and their advice have revolutionized my life and my view of money. No matter how tight my money situation has been over the years, I don’t think I have ever missed the opportunity to give away at least a small portion of every paycheck I have received. This is not because I made lots of money. Quite the contrary, it is because I learned from a young age that generosity has rewards of its own and is always worth the sacrifice.
6. “Never take a job just because of the money. Always consider the money, but never let it be the determining factor.” // Mentor, 1998.
In 1998, following a two-year internship after college, I began the search for my first full-time job. I remember, at that time, seeking the counsel of a spiritual mentor of mine. Sitting across from his desk, I asked about money and how much I should let that factor dictate my decision.
He responded with some of the best advice I have ever received: “Joshua, you need to consider the money. A job that pays too little or seeks to take advantage of you will ultimately add stress and worry to your life and keep you from doing your best work. So you have to consider it. But never let it be the most important, determining factor in your search. Always consider your talents and skills and strengths and the opportunity to make a difference in the world first.”
I have tried, throughout my life, to consider income in the jobs I have taken, but have never allowed it to be the most determining factor. And I have literally no regrets concerning the path that career advice has taken me.
7. “One extra monthly payment per year on your mortgage shortens the length of your loan by years.” // Real Estate Broker, 2001.
While working through the specifics of our first home purchase, our real estate agent made a passing comment concerning our mortgage payments. For her, I think it was just a simple fact about the mechanics of amortization schedules. But for me, it became a life-changing goal—make one extra monthly payment each year on my mortgage.
Over the course of the next 16 years, we’ve worked hard to add a little extra each month to our mortgage principle—even if it’s just $50. In the end, most years it’s added up to a full extra monthly payment. As a result, we’re on-track to have our mortgage fully paid well before 2031. And for that, I’m forever grateful.
I don’t always ask a specific question for the comment section. But I’d love for you to add your wisdom to this post:
What is the single most significant piece of financial advice you have ever received? And how has it improved your life?
P. Foster says
Another small way to “save” which isn’t as easy now that people really don’t write checks is to round up whenever you subtract a check from your balance. If my bill was for $45.50 I would round up to $46.00 as a subtracted amount and then write the regular check for the $45.50. Afterwards when I balanced the check book, I usually had a tiny amount of money saved, and I would take that out and transfer it to savings. Then start all over again. It wasn’t much but it would add up over time. I happen to use a credit card but I use it solely to buy things I need and pay the balance off every month. It’s a rewards based credit card so every so often I ask for cash back and that adds up when you are using it for everything. Especially if you use it for large ticket items. I also do not pay my bills until after the interest is paid on my accounts, since every dollar they give me is a dollar earned. I also treat my savings account as if it did not exist.
Nanette says
The best advice I ever received was ” pay yourself first”. What started out as a struggle ended up being an amount for a comfortable retirement.
Kim says
When we were planning our move to a new town, our Financial Adviser suggested that we purchase the smallest house we could comfortably live in. Not only would this save on heating costs and property taxes, it would also make it easier to sell down the road as smaller houses often sell faster than larger, more expensive houses (especially as the Baby Boomers retire and look to downsize from their larger houses). It was the best advice for us as the smaller house had a significantly smaller mortgage and is easier to clean and maintain.
Christina says
If a desire or want comes, pray about it. Ask God to help discern if it’s something that you will honor Him or not. And if yes, then He’ll provide it. If not, then ask Him to help you let go. It’s been very helpful to me this past month as I read it from a bible study I’m doing.
J.D. says
What is the name of the Bible Study you are doing? Sounds like a good one!
Stephanie says
“Get out of debt and never, ever get in debt again.” We took Dave Ramsey’s class eight years ago. We have no debt except for our house and I paid cash for my car two years ago – used Honda Civic in great condition.
Now that I need to go on disability – I have ALS and truly cannot work any longer – It is in enormous relief to have savings and no consumer debt. It won’t be easy, but it will be much easier because of the steps we took years ago.
Eileen Machay says
The best piece of financial advice I’ve ever gotten was from a former boss regarding purchasing my 1st home. He said:
No matter the asking price; offer what you’re willing to pay and don’t be afraid to insult them!
I’ve gotten so many deals through the years just because I’m not afraid to ask for a discount!
Brenda Toker says
Always pay off your Credit Card every month!
Elaine Henry says
The most important financial and life changing concept was understanding to “give”
first. Secondly, pay cash with everything, (excluding your house) or don’t buy it.
Bonni says
Along the same theme of making an extra mortgage payment every year, choose to have your mortgage payment deducted from your account every other week instead of monthly. The extra long months will take care of it for you. It turns a 25 year mortgage into closer to 17. Also mentioned by someone else was using the credit card for larger purchases such as furniture and paying it off immediately upon receiving the statement. The accumulated points easily translates to a week’s worth of ‘free’ groceries once or twice a year.
Barbara says
When you have determined what your monthly discretionary income is, take out the actual cash for your “spending money” (entertainment, non-essential items, etc.). Because you will be more mindful when you hand over money rather than swipe a credit or debit card as to whether the purchase is really “worth it”! Also, always pause to ask yourself: How many hours of my life energy (time spent earning your money) is this item worth, to me?