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?
Holly says
My mom taught me how to use a credit card wisely by using it like my debit card but paying it off every month. I never carry over a balance on a credit card. By doing this I actually get extra money at the end of the year thru whatever the credit card has to offer.$$
Geoff says
We went bankrupt once by overspending and having a mortgage and car loan at the same time. I learned a hard yet good lesson from this. I became very careful with money from then on and listened to advice such as yours. I am retired now and we have no debt and own our home and 2 cars. I only earned an average wage but was just very prudent with money.
Nimzovich says
Over 20 years ago a friend told me something that totally changed my perspective on personal finance. He said he was paid twice monthly, and lived off only one of those paychecks. The other paycheck he saved and invested. As I wrapped my head around his comment, I realized he was saving and investing one half of his net income. I made more money than he did, but I was saving next to nothing. Upon further reflection, I decided I had to stop focusing on how much money I earned, and instead focus on how much I saved and invested. As I now approach retirement, I am thankful we had that conversation.
Fay says
Thank you for the good advice. I’m new to Pinterest.
My piece of advice to add..
When you get an increase in your salary then keep budgeting on the old salary and autosave the actual increase received into separate savings until you have a purpose for it.
Sandy says
Take the time to live the difference between wants and needs.
Juliana says
Contribute to your $ matched 401K. Why? Someday you’re going to be old.
Melissa says
My favourite quote: “don’t buy something just to impress someone”.
Ewi says
Never ever buy anything with money you don’t have. If you can’t afford to pay cash this month, why would you be able to next month?
It was said by my father and I live by it. We never use our credit cards, only debit. Eventually the bank gave up on us and took the credit cards back, since they were never used. We had told them as much, when we opened our accounts at the new bank, that only debit was needed, but it took them awhile to believe us!
Jen says
“If you live like no one else now, you will LIVE like no one else later.” And “Live beneath your means”…Meaning don’t accumulate the fancy cars, huge houses-when you are young and you won’t be a slave to it later…you will be FREE. It was hard at the time, but so awesome now! It allowed me to be a stay at home mom and I wouldn’t trade that for any amount of money!
Mercedes says
Pay tithes first, it blesses the rest. Pay off your credit card every month, don’t use the card if you can’t do that. Add extra to pay down principle with every mortgage payment, we’ve paid off two houses early this way. Don’t impulse buy, think about it at least overnight before purchasing.
Amanda says
My financial adviser asked me in 2005, what are the 3 things you’d regret on your deathbed. Those told him what my goals were and he taught me to use money as a tool to achieve them.
Yodak says
Credit can be a trap. Use a credit card only as necessary, and only if you can pay it off at the end of the month. Never carry a balance forward. If you can’t afford it, you don’t need it.