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?
My grandparents only bought items with cash. If you don’t have cash you can’t buy it.
Don’t ever have more dollars than sense.
The best advice I ever received was to get a mortgage account with 100% offset and move all of our savings into it to offset our mortgage, then to buy pay for our day to day expenses on a credit card so our money was offsetting our loan for longer and to pay off the credit card in full each month meaning no interest payment. Earning interest on that income would be taxable but the savings on our mortgage interest are tax free. Every dollar in that account offsets our mortgage balance and saves us in interest! I have saved substantial amounts of money doing this over the past 6 years of my mortgage.
a penny saved is a penny earned. Gram used to write down every expenditure in a little notebook no matter how small. it really helps to “read your financial reality” and to stop spending mindlessly.
Live below your means. Very simple in theory but hard to do when almost no one does this.
Don’t ever use credit cards if you are not disciplined enough to pay them off immediately. I always say when they ask if I want to use a credit card at the store, “no thank you, if I can’t pay with cash then I can’t have it.”
Never go to the mall or store just for something to do, you will only by needless things.
Always take your change from your pocket or purse everyday and put it in a jar until it’s full. Then take the jar and cash it in and pay on a bill that has interest on it to get it paid down faster.
From my dad: “mind the pennies and the pounds will take care of themselves”.
Put your raises in the bank. i.e., If you’re fine and you get COL increases, add the increase to your retirement contribution or at least half.
Last year i worked 3 months, the remaining 9 months i traveled through Canada, mexico, belize, honduras, nicaragua, costa rica. The previous years i have been working 4-6 months on avarage and traveled the rest, usa, india, indonesia, peru, ecuador, spain, east timor etc etc. My tip is, keep your fixed monthly costs low so you can survive longer times without income. With this model you have more freedom to treat yourself to what feels important for the moment, its probably not going to be a huge home thats eating up capital.
Another tip is to build a long term dividends stock portfolio. Spread your buys and your risk and look at the history. Buy large cap. Youre looking for passive income so you dont want to bother with buy and sell and the market fears.
Im currently persuing a career in photography where i have complete artistic freedom.
Best financial advice I ever got? Question the advice of he who has more money than you because he may not understand your poverty. Question the banker who freely gives you a loan because it is part of his job sign you up for stuff.
As a teacher, the best advice I ever got was to have the Payroll Department split my yearly income into 12 checks instead of the standard 10. This way, I get a tiny bit less per month in each check, but then I don’t have a period of two months in the summer where I have NO income and have to depend on having saved that money over the course of the previous 10 months. Also, our HR department takes out taxes differently in the summer, so I get almost an extra $1K in my two summer paychecks. Win-win!
Also: start your retirement savings NOW. Don’t care how old you are, do it NOW if you have even $5 left over at the end of the month after your bills are covered. Your future self will thank you.
The best advice I’ve gotten was from a financial planning seminar, in fact the solitary point I recall, was to not change your lifestyle at all when you get an increase in income. Don’t get a newer car, buy a new batch of clothing or move to a bigger house just because you got a raise or a higher paying job.
My husband and I got married almost 3 years ago. I moved to Canada (being an American) and we lived off of one income until I was legal to work for the first 2 years of our marriage. We realized how doable it was, and were still able to save some money. It was a complete blessing, and even though I am not employed, we still operate as a one budget household.
Do what you love
” interest should be earned and not paid ” …..true
From my mom, “No matter the deal, it’s not a bargain if you can’t afford it.”
Advice from my father: “There’s no greater prison than debt.”
Good one! My Grandfather taught me to pay off credit cards, in full, each month.
I read a book ‘Love Is Not Enough’ by Merryn Somerset Webb. Revolutionised the way I look and handle money. Only wish I’d read it in my youth. Should be compulsory reading for everyone.
My grandfather’n’law shared “do your grocceries every 8 days” vs. doing grocceries the same day every week, and you will save 1 week of grocery money every 8 weeks. For us in Australia, that’s $300 every two months just for stretching the grocceries by one day ????
Another one – buy milk for a week and freeze so you don’t have to drop in to the shop when you run out because the average Aussie will spend $30 on a drop in shop from impulse buying!
But i swear by Budget tracking software integrated with your bank – it categorises your transactions automatically, no paper n pencil or time required! We discovered just how much we were spending on take out and dine out in one year and have changed our eating habits – saving us heaps!!
This is really cool, will have to try it
What budget tracking software do you use? Sounds like a great idea!
We were advised by a car salesman (in his late 60s): If you need to borrow money for a car purchase, don’t do it through your mortgage, even though it seems so much more manageable (due to lower monthly payments compared to a car loan ) The interest- though lower- will compound to a much higher cost over the longer, housing loan time. Refinancing & “cash-back” features from one’s home mortgage has become a common practice and is crippling many families who are unable to pay off their homes.
In Australia we now apparently have 1 in 5 couples unable to pay off their mortgages by retirement. That’s scary!
The salesman said this was why he was still working- he got caught & stayed in way too much debt.
Best advice, we paid the car off in 3 years- did it tough. Moved to a cheaper suburb, despite the snobs. (It’s a great place with great people who aren’t go-getters). Paid off the mortgage yay!
Those cash back /loan top-ups allow the banks to keep you in debt & paying them interest for ever and a day.
I’ve finally worked this out myself. I’ve had the redraw facility on my loan for quite a while, and it’s taken me this long (how embarrassing!) to work out that it’s the primary reason why I can’t get on top of my debt. That is about to change, though… :-)
So many great ideas, but there is one I haven’t seen yet. It goes along with the “watching your pennies advice.” My husband and I have always been very careful with our money. We’re both retired teachers, each with 30+ years. Instead of buying our lunches in the school cafeteria every day, we made our lunches at home and carried them with us to school. Same with our 2 sons when they were in school. At around $2-$5 a day, for 30+ years, we saved an amazing amount of money very easily.
Also, we’ve only used ONE credit card (American Airlines Mastercard) all these years, which we pay off every month. We’ve earned so miles, we’ve taken several trips where we flew free because of our accrued points.
Thanks for a great article, Joshua!
Not an actual advice but staying home with my son made us realize we could very well live on one income. When I got back to work part time, my salary went for retirement plan and savings.
Hi
Mine has been to take 10% out of your paycheck each month before you’ve spent anything and forget about it. That way you learn to live on 90% of what you earn and you get into the habit of saving.
That 10% goes to retirement/down payment/whatever is most important an investment for you.
That’s your minimum savings each month.
It’s a good way to keep spending realistic as well if you convince yourself you only make 90% of your total.
Hi my parents always told me to save 50% of the paycheck. I did for years then with mortgage and kids single income dropped back to 30%. It works for me. I always put that 30% into another account.
Rightly mentioned. and have just two points to add that could benefit all
1. Today’s life style problem is we dont have habit of keeping money aside and that is key differentiating point.. You are doing a great job there
2. As you are keeping money aside for many years..means that you are not investing,you are only saving. It would great if you could get awarenes/education to know diff between savings Vs investing..
My dad always said ” remember, you don’t always need everything right now”.
There’s a saying in Panama that I often tell myself (when I want to buy all the nice things for my house right now!) “Little by Little”. So, I think of that, and I’m still working on decorating my home to where I want it 3 years later, but I’ve not lived beyond my budget yet.
It’s not for everyone but we had a ‘line of credit’ mortgage. So all our earnings went into the mortgage account, but we could withdraw from it as needed as well. We paid our mortgage off within 10 years!
I’m in Australia and student loans are paid off through extra taxes once you start earning a certain wage. I made extra payments every year to reduce the amount owing and thus the accumulated interest, so it was paid off much earlier.
Our family has private health insurance with extras, but with premiums increasing I now doubt the value of having it. So we are planning on cancelling our plan, and instead putting that money into a separate savings account – essentially creating our own medical insurance plan. Once we get to a certain amount, say $10,000, Further ‘payments’ will go to us, not an insurance company.
And it’s been said before, but I absolutely agree that the credit card needs to be paid off every month.
By living within our means, making extra payments and saving along the way, I am debt free at 36. With my husband, I own a house, nice car and have savings for a holiday.