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?
Cecilia says
Many years ago when I was struggling financially, I started using the “envelope” system. You have your pay deposited directly to your bank account, you then withdraw a set amount for groceries, plus another amount for discretionary spending, every pay period. You can only use the amounts in that respective envelope. I would normally purchase my groceries weekly using a bit less than half the money, leaving a bit aside for unexpected ingredients. Same with entertainment, If the funds are not in there, you simply cannot afford to go. After a while, your envelopes can carry over a few dollars every week and it’s gets easier to see where you spend your money. I’m now mortgage-free, car-loan free, in fact totally debt free.
Pandora says
When purchasing anything always ask yourself if is a necessary purchase. I’m not saying deny yourself pleasure able things just be honest and put things in their proper perspective. Will it give you pleasure tomorrow or guilt?
Donna Rosario says
When I bought my first new car I financed it through my credit union and had the payment automatically withdrawn from my checking account. I was eagerly anticipating the money that would be freed up as my payoff date drew near. My supervisor told me, “Transfer that withdrawal to a saving account! You have been living without that income for three years.” It broke my young (at the time) heart but I followed his advice. I still do. Not only have I been able to buy a car when it becomes a need with money from that account but I am able to deposit money into my IRA, too.
Irene says
I did the same thing! Since I hadn’t had the loan money for many months, I had it put into a savings account (which made some money in those days!).
Neil says
“The fastest way to save money (make a profit) is to get out of debt”. (My dad).
Pay off your loans as quickly as you can and then everything you earn is yours. We always bought Cara with cash (or interest free financing then paid it out when the interest free term ended). We paid annual lump sums on our mortgage and took years off the thing. And we took the kids with us to the bank to make our last payment as a family, then went home and symbolically burned it in the fire pit.
Michelle says
I make a list each year of known occassional expenses and the dollar amount I plan on spending or what i know the bill will be. I add it all up and divide by 12.
The amount found after dividing is what I save each month to cover these occasional bills, which don’t happen each month. I don’t need to use credit as I have planned for them.
Cindy says
Grandfather told me “if it’s worth buying, it’s worth saving for”
Allison says
Pay off your credit card balance every month.
Danielle says
Set aside money to give first, then save and pay expenses. My parents modeled this my whole life, even when money was tight….which it often was. It’s tempting to pay yourself first (savings), then expenses, then give out of what’s left…..but I’ve found there’s rarely any left to give if I follow that model. It doesn’t have to be much, maybe just a few dollars if things are really tight, but it sets up for an attitude of generosity right off the bat, which is a blessing to yourself and others.
Ellen says
Attitude of gratitude!
Jennie says
Just a word to the wise: I don’t make tons of money at all, especially after the Canadian tax system takes its rather large cut, so I really spend next to nothing at all on entertainment – $10 on Netflix is it because I can’t afford cable or satellite and antenna reception is poor here. But I have realized that I entertain myself with foods I don’t really need and that it has been causing me to overspend on my grocery budget. Beware of food-ertainment!
Carrie Willard says
These are excellent! Very simple but powerful. I like the idea of a spending plan. Hubby and I have been tracking our spending to the dollar for a few years, we did so while paying off his debt, but I think it’s getting too time-consuming and tedious for us now.