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?
About Joshua Becker
From my high school home economics teacher:
“When outgo exceeds your income,
then upkeep becomes your downfall.”
(Do schools even teach Home Ec anymore?!)
Some of the financial tips I practice are: 1) Not to spend more than what I earn. Stay away from debt unless it’s for life threatening emergencies. 2) Charity does not make one poor; it blesses one with more or at least it makes one happy. It’s better to give than to receive. 3) Save for the future but not too much. Live in a moment. 4) Stay connected with important people in your life, your family and your friends.
Great article thank you!
My answer – Be able to separate your needs from your wants. It’s crucial to living within your means and being or becoming a saver instead of a spender.
This is great advice, Joshua. What’s more, it’s great advice because you’ve actually followed through with it.
Thanks for sharing. I’ll be passing this along to people I’m connected with online.
Thanks again!
Pay yourself first. Save 10% of every paycheck. That helped get me out of a bad marriage, I ‘wrote a check to myself’ so there was always more money than what showed in the register.
Get a 15 year or less mortgage for your home, and don’t purchase a home unless you can put 50% down. We discovered the last piece of advice by accident. My husband lived in an apartment and I lived 5 hours away, so looking for a home before getting married was difficult. After getting married, we decided to live in his apartment until we could find a desirable home/neighborhood. We both worked long hours, which didn’t leave much time to look for a home or spend a lot of money! The savings of maintenance/taxes/ utilities/not having a large living area/using bachelor furniture added up, and by the time we found a small home 2-3 years later we were able to pay 50% of the price in cash which allowed us the ability to get a 15 year mortgage instead of the typical 30 year loan. We made extra payments, so by the time we had children and outgrew that home, we had paid off the mortgage. Once that home sold, we used the full amount to put 50% down on another home with a 15 year mortgage. We’ve been married 19 years and are now debt free, and I am a stay at home mom enjoying every minute I can with my children! This may not have been possible if we had plunged into a home the first year of marriage.
When we paid our house off and car I kept making those 2 payments Into my savings act…hit 90.000!!!!
Before we were married, we talked about money and how we spend money. Neither of us were spending to maintain an image or lifestyle. I did, however, adapted my husband’s “allowance system”.
For many, they are always running to the atm and then cannot remember what they spent their money on.
We get our “allowance” usually on Friday and it has a set amount. This is our walking around cash for lunches, movies and other small stuff. You can allot a set amount per day (my general method) or spend about half during the week end and meter out the rest for the week days (my husband).
No trying to track receipts or note down something on paper. You either have the money or you wait until the next allowance day.
My nan once said to me, ‘Money comes and money goes, I’ll have some more next week, let me buy you the gift’, after I had tried to stop her buying me a gift I thought she couldn’t afford. While she didn’t mean this as an excuse to get in debt, she did mean that you shouldn’t worry so much about money that it stops you from enjoying life. It’s always stuck with me. Anytime I feel myself getting a bit stressed because I’m strapped for cash, I remember those words. It’s not worth stressing over.
When the investment guy came around to talk retirement money at my very first professional job, there was no way I was going to do it. I made $12.19 an hour (which was actually good in 1994 for the allied health field I was in) and my husband was a full time pharmacy student with two jobs. My supervisor kept insisting, and gave me a motherly talk and the push I needed. The first amount I invested was $62/paycheck, and it felt like a fortune. However, after a few pay periods, we had adjusted and no longer missed it. She was right, and I’ve never stopped investing for retirement since. Having my money grow since the age of 22 has made a big difference in the amount we will have in our later years.
I barely make that an hour now and I’m a single mom raising 2 kids by myself. I still save a little each check in my 401K before and after tax deductions. It’s hard hearing people talk down on hourly wages from nearly 30 years ago that I barely make now. I may not make a lot of money but I love my job and it allows me to support my family. That’s more than a lot of people who make $30/hr can say.
My parents taught me nothing in regards to financial advice. I’ve recently been trying to unlearn bad habits. They bought cheap junk rather than spend on quality. My own best financial advice is to spend more ONCE on quality for needs and skip the cheap junk “wants.” And being happy regardless of income; not desiring an expensive home is probably the best financial choice I’ve made.
One financial adviser told me to get rid of my current whole life policy (which he sold me a year before), and buy this new one at a new company he went to. This was the best financial advice because it opened my eyes to the fact that I am my own best advocate for my finances. I dropped him and the whole life policy and began to read books, articles and blogs and I am so much better off financially. That “terrible” advice changed my life!
My mother is a very bad money manager. When she had retired from her job, she had nothing as saving. Because of some unfortunate circumstances, she had to repay most of her retirement benefits. She was so much afraid of that situation that made her ill and a patient of panic attack. At that time, I took the mater in my hand and I become the money manager of my house. From the very beginning of her pension income, I started to save a little, than spent on the needs like grocery, bills etc. and than whatever left, that money spent for wants like entertainment, travel etc. After 8 years of her retirement, i saved quite a lot and my mother is now always amusing that money saving is that easy…
Great post, I must admit. All the points are awesome
“Taxes will be one of the biggest expense in a person’s life. So, manage it.”
“A dollar spent is a dollar fifty cents of before-tax money you have to earn, when you take into account all the different taxes (ie. income tax, sales and service tax).”
I read both the above somewhere, and they have stuck with me all these years.
I also took to task to arm myself with knowledge of how expenses and the different types of incomes from a tax standpoint.
The time I took to understand income, expenses, and taxes has led me to the conclusion that I am better off starting my own business, and learning to spend wisely.
It has also freed me from tying myself to a 9 to 5 job, spending time in a 6 x 6 cubicle, and doing things that do not add any value to my life whatsoever just to survive in a corporate jungle.
“The only things that are certain in life are death and taxes.” We cannot do anything about death, but we certainly can do something about taxes. =)
Great article! All very good advice! Best advice came from my mom,” Never let your rent or mortgage be more than one week’s pay” We have abided by that our whole married lives, ( 35 years)! We live in one of the states that was hit the hardest by the real estate market collapse. That in turn caused a terrible downward spiral in the construction industry that we work in. We are very grateful that our company survived and we had no issues paying our very affordable mortgage.
Great article! My two quotes/lessons that really resinate with me are: “The more things you own, the more they own you.” I have been a collector of things all my life, and learning this lesson has made me become happier, with less.
My other lesson I picked up from financial guru Dave Ramsey’s book ‘Total Money Makeover’, is that things don’t make you happy, but the fact that you don’t NEED that thing is what makes you happy. I applied this to my collecting habit, where needing that new ‘thing’ will make me happy, but in reality, its actually the moment after you get that thing and ‘don’t need it’ is the true moment of happiness. So why not, skip the ‘NEED’ part and be happy NOT needing it?
Best advice I tell my kids that I coach in High School..One house,one job you love and only marry once.. Little extra marry ugly they wont leave you. Now most people say I see your wife took your advice. Same house and wife 39 years and had 2 jobs that I stayed with for 40 years total..
That was perfect for your time. Nowadays, everything is different. “One job” is very rare.
“Motivational speaker Jim Rohn famously said we are the average of the five people we spend the most time with.” Yes! I think that our parents especially can be a huge influence in how we think about and use money. Sounds like your parents were a positive force in how they showed you the value of giving back.