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?
Vicki says
Dave Ramsey promotes a pyramid for paying off your debt. Line up every monthly debt payment from least to greatest. Pay the absolute most that you can on the smallest and the minimum payment on all the others. When the smallest is paid off, take the entire amount you were paying each month and put it toward the next bill, continuing to make the minimum on everything else. Everything – including car, house, and student loans – will be paid off in an incredibly short period of time!
Krista says
What an amazing article, so full of wisdom. Love it. I also love reading about finances, am a budget geek and watched how my parents raised 12 kids and gave generously on one income.
But you asked for ONE piece of advice and this came from my dad in the early years of my marriage. We were in his kitchen and although he did not usually offer unsolicited advice he told me to be careful about skimping too much on the food budget (as I had been) because food is important to men!
I was floored for this had never occured to me. But over the years I have seen how my husband and I are content with few toys and plenty of second hand, we rarely eat out, and libe fairly simply. But enjoying simple, real food together is a major happy thing for both of us.
Andrea says
My favourite advice is something my grandfather always said, “Pay off your house first, it’s the biggest raise you’ll ever get” He paid his house off in his late 30s and with 4 young children. My mom still remembers him burning the mortgage papers in the fireplace, and of him telling her what a big deal this was.
Katwhrin says
Earn all you can, save all you can and give all you can.
Joyce says
My dad taught me a couple of really great things simply by his example:
1. Money is a tool – make sure it is working for you not you for it – don’t waste it.
2. Always live below your means
3. Take care of the pennies and the dollars will take care of themselves.
4. Delayed gratification – if you want to buy something, walk away and wait – never buy anything on impulse.
5. Never overlook or miss an opportunity to be generous with the needs of others who need a helping hand.
Ellen says
Lots of great advise here! My dad taught to save to buy things. Research your intended purchase in advance and wait a little longer if the best rated costs a little more. Also don’t be afraid to ask for cash discounts! Finally don’t buy stuff you don’t need.
Tony says
I never buy anything new. I buy things second hand that I resell later at nearly the same price. So when I need a tool for a job I buy it or of Craigslist and sell it back right after. So I can enjoy lots of fun stuff without having to keep the clutter and the budget is under control. I live in downtown Manhattan in a small apartment.
Ellen says
Brilliant!
Pam Dunn says
That money is a neutral substance–not good or bad.
Ab says
My sister taught me the envelope system. I save for many things consistently this way every pay day. I pay my bills and my envelopes first. If I am real short that payday due to an emergency, I may only put a dollar in, but I don’t blow it off. A dollar saved toward a new car today will be more toward a new car when I need it. I may not need to have my hair cut or buy a gift today, but when these things come up, I have a little money for them. I also believe in a little variety. A little 401k, a little savings, etc. It has taken many years to build this system, but would recommend to any one. Just lock it up and keep it safe in a safety deposit or good home security.
Judy says
My daddy said it over and over…”Never let desire overcome reason.”
Grace says
Good quote