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?
JC says
My grandpa said: If you can’t afford to pay for it, you can’t afford it. That’s his way of saying to save your money and pay cash for things. I also learned to look at things for their basic value. A car’s purpose is to reliably get you from point A to point B. I don’t need a status symbol. A particular color, or luxury interior like leather. And I have never owned a brand new car. I have always purchased a car with factory warranty left, usually a year old. I keep my vehicles for 10 years and between 150k to 200k miles. Keep up with maintenance. Clothes…I love Clothes that are unique. So…Marshall’s clearance rack. $7-$10 is fine by me…and thrift stores. I got a red Eddie Bauer down filled coat for $3. I quit smoking several years ago, probably have a 1-6 drinks a year. Eat out once a month. My mother was the most thrifty person I know and I learned a lot from her, but I learned a lot from others along the way too.
Anita says
This is an awesome article and the comments are equally awesome! I am a retiree who learned years ago to be frugal, take care of all of my possessions, give, save, invest and learn contentment! It’s amazing how small savings can add up to be quite impressive. I purchased/read books to instruct me on how to budget, invest, sew, prepare meals, decorate my home, purchase quality used clothing items, etc.! Now, with the availability of YouTube videos, I can actually see how to do certain things. My parents were frugal and they maximized their earnings. They stressed the importance of saving some of your income and to pay your obligations on time. You must master your wants as you make steps toward the life that you want to live…not the life that others think you should live!
Marwa Shalabi says
I love coffee and I used to order it at work or just grab one on the way. I think it was two years ago when I decided to buy a vaccum flask to help save the environment by reducing the amount of disposable cups I use and at the same time save some money. That is one of the things that changed my life.
Gene Bernar says
Both hubby and I are in our 60’s and have made our fair share of good and poor financial decisions. We found ourselves in a position to invest, we discussed for several weeks all the lessons we had learnt and worked out a plan that we both completely agreed on and even more importantly gave us flexibility and peace of mind. Now two years down the track we are still at peace with our decisions and the future options that they provide.
Money is an asset – get the most bang for your buck
Preserve the asset so you can revisit the benefits it provides
Consider what stage of life you are at – accumulation V’s retirement
Peace of mind is more important than high returns – get a smaller return but a hassle free situation
Manage your expectations – you cannot have everything – move those goal posts and find pleasure in daily fun
Hima says
Your financial advisor friend isn’t including women in his analysis. Research finds that women spend the most money on clothing/accessories. Pressure to look good.
joshua becker says
Thanks for the comment Hima, but that is not true according to my research. If you would like to cite your research, I’d be happy to look into it. But I cannot imagine a single scenario where women spend more money on clothing/accessories than they do on housing.
Based on data from the Bureau of Labor Statistics, women’s top six expenditures are:
1. Housing
2. Transportation
3. Food
4. Personal insurance and premiums
5. Utilities and Housekeeping
6. Apparel and Personal Care
Source
Honey says
??
Susan says
Thanks for sharing the top 6. Very impressive and i agree 100%
anonymous says
good ideas – and still 401 K keeps dropping dramatically
may be life insurance would be best to start with
Thank Joshua. I only wish those numbers were within the last 5 years.
anonymous says
Sorry, this was more a comment to Terri reply
Lori says
All those are very helpful and I appreciate your posting them here. I just think this is speaking more to the GenX and the Millenium are now staying home and don’t pay rent because they don’t have any to pay for. Cars are what they spend on the most and personal care.
R S says
It doesn’t refer to all the women ( can be for few ) Thanks
Terri says
Start funding your IRA with your first job.
Pay off your credit card every month.
Cash is harder to part with than swiping plastic for a purchase & helps prevent impulse purchases.
Emily says
Are you speaking about the Milleniium generation?
This is surelys so true in our house with my two kids.
For them buying hair shampoo, cream and nail polish are what they like to do. For cars, it is also a good amount spend on monthly insurance and fuel before they decide to take the bus and Marc
Grocery has become less important to them too because they are working mothers and eat on the run. The grocery is only done once a week.
My youngest is still living with us and he is soon to be in his thrities.
Matt Peel says
Invest! Put money into a low-fee index fund like Vanguard’s VTSAX fund. Compound interest will change your life!
Rachel says
Only borrow money to buy assets.
Jenny Rees says
The only good loan is a home loan.
Annmette Olesen says
Mine is when you are getting your paycheck, pay yourself rst
Marci357 says
My motto had always been, ” Its not how much you make, its how much you don’t spend.”
Christal O’Donnell says
Love this
Annmette Olesen says
Mine is when you are getting your paycheck, pay yourself first
Abbey says
That’s what Dad ALWAYS taught us!!