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?
Kayla says
When I got my first job at 15 my dad suggested that I put at least half of each paycheck in savings. I always did this and since I had relatively little expenses in high school I usually ended up saving the whole check. The result is that now as a college student I have not had to take out any loans and have even had money left over to go on trips with my friends and am never stressed about money. Glad I have started this trend as a young adult!
Judy says
You are doing great! Wish you could become a motivational speaker for your peers who need to see and learn and have no one to teach them! Good for you! We are ready for retirement and we learned the hard way…. later in life after a forever job loss. We are fine now… but what we could have accomplished if we had started at a young age. Enjoy your life!
Jess says
Start saving 15-20% starting with your first pay check into your retirement, you will never feel that you are giving something up when you do it from the start. You can increase it as you get raises and put that away for vacations or a car fund.
Sam says
Live within your means. Define your needs and live with it. When wage is raised, don’t raise your lifestyle or your needs.
Dave says
Live beneath your means.
JC says
Pay yourself first. From my very first paycheck, I automated deposits first for retirement, then for savings more generally. You don’t miss what you never had.
Diana says
A couple of solid pieces of financial advice I’ve received over the years include:
1. Pay yourself first. Transfer a percentage of your earnings to a savings account the day you get paid and do this consistently on every pay day. It adds up fast.
2. Never carry a balance on your credit card. Always pay off the amount owing in full every month so as to not pay interest, while still reaping the rewards offered by the credit card companies (cash back, travel points, free groceries).
3. Take full advantage of savings fund matching programs at work. It’s like earning an extra percentage above and beyond your salary – free money!
4. Start saving for retirement when you’re young (in your 20’s). You will only have to contribute a small amount to reach your goal, relative to if you start saving later in life. Compound interest is a beautiful thing.
5. Free can be fun. Make a list of all the things to do in your community for free or for a small amount of money. It’s amazing the events and activities that most cities have to offer all year round. Prioritize these activities over ones that cost more.
Chris says
Excellent advice, Diane!
Birdie says
Don’t make purchases on impulse (no matter how affordable). If you see something you like, that you weren’t intending to purchase, walk away (or put on hold). If online, put it in your cart or wish list. Wait a day or 2. If you cant stop thinking about the particular item, then go ahead with the purchase. Most of the time, however, you will forget all about it.
LPK9 says
When I was a teenager, my dad discouraged me from getting involved in one of those movie clubs where you got a bunch of movies for a cent, but then new movies would come along every month and you had to decide in a short amount of time whether to keep it or send it back. I took his advice and have always avoided anything of that ilk, where I would have to remember to say no to something or send it back. Maybe not a big thing, but it helped me think about how even a “small” monthly expense or commitment can add up.
Lizzy G. says
When I was a teenager Daddy told me to never get a credit card. I wish I’d listened. Only buy what you can afford to pay with cash.
Sam says
It’s a good advice. But once you are in complete control with your spending habits, credit can be use to get some benefits. It just not for everyone.
Pete says
Agreed, although we cheat a little. We have one credit card, and we used it to purchase almost everything we buy, including groceries. But we always pay it off every month. Never carrying a balance has saved us thousands in interest payments over the years, and sent our credit score through the roof.
Rebecca N says
When I started as a young teacher, those who had been in the profession much longer told me to “save/invest your raise.” They knew that if I could budget and live on my salary I could do a lot with the extra each year. Luckily I listened and am well set up for retirement.
Laurie says
“Increase your 401k saving percentage by the amount of your raise every year, and in a few years you’ll be fully funding it.” This advice was easy to follow, because we never felt like we were getting less take home pay. It took us three short years of following this advice to fully fund our 401k, and it’s been a huge boon to our retirement savings.
laura ann says
Laurie: Likewise for us, agree with you on saving for retirement. We have been retired 14 yrs this coming July lst. We both worked, later I worked part time, didn’t raise a family. We give to group homes in the area several times a year. House paid for, we pay cash w/trade in for new cars. Traveled much when younger, take trips to area parks and beach.
Tena says
I’ve learned hard lessons over time & without financial guidance from anyone & my mistakes. I’m in my 60’s. Retired. Pay myself first. Don’t live beyond my means. If something (a want or need) costs over $100-sleep on it for 48 hours…& chances are I didn’t need it. We have a small older 3 bedroom farm house. Nothing fancy. On 69 acres. My spouse & I drive used vehicles which were purchased used. We pay cash for most everything. We have savings, investments & cattle. We raise our own beef & pork, have a garden. Hardly eat out. Entertainment costs are minimal. We shop thrift stores & watch for great bargains in retail stores utilizing coupons. Always always pay off credit cards in full every month & never carry a balance. Ever. Have fun with family & friends is most important to us. We even have a small lakefront condo @lake of the Ozarks in Missouri which I paid cash for in 2014. So there’s our entertainment. We are fortunate through very hard work & delayed gratification.
Love your blogs & articles. Keep up the great work Joshua!