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?
I love this list and shared it on facebook. I live in an area where housing prices are astronomical, statistically 90% of people’s income where I live (near Vancouver, BC) is spent on housing. How is that possible?! I added on FB my own best financial advice, which goes along with your #1– from my mom, when I moved out in 2003: “Never have your mortgage or rent be more than 25% of your take-home pay”, which has served us well over the years. When we didn’t follow that advice, we felt strains in more than a few aspects of our lives.
Buy experiences, not stuff. Travel. See amazing things, places, and cultures. You will gain happiness, peace, knowledge, and richness by having experiences; much more so than buying a new car. Expand your knowledge of the world, and don’t stay inside a bubble. Also, the more stuff you have, the more stuff you have to fix. The more stuff you have to fix, the more frustrating your life becomes. I’ve had close to nothing and I’ve had plenty. Having plenty comes with having plenty of stuff to fix all the time. Sure, you need a place to live and a vehicle, but make them affordable and put more money into experiences. Most people, at the end of their lives, say they regret not traveling more. They don’t say they regret not having a nicer car. Think about people and the experiences you can share with them. Make memories. That will be your legacy, not the fact that you had a cool car.
A friend, who is also a sometimes mentor, advised me to always consider opportunity cost when thinking about saving and investing. It may seem like simple advice but when I first started investing, I often didn’t look at my full financial position or consider lost potential. This helped me think about how best to get my money working for me, rather that simply saving. The adage, “you can only spend it once” also rings in my ears at times.
To spend only one income and save the other, not to have credit card debt or line of credit, to always be aware of where your money is going on the “little things”
I’m very grateful for a financial advisor that gave me the above advice. We are in our fifties now and looking forward to retirement in the future. When we start over spending, we get back to the basics and move forward once again.
Never buy a brand new car. Instead, buy one that is at least 2 years old. Let someone else pay the depreciation.
Say no to most credit cards and keep only one or two for emergencies and travel (Visa/MC) and with low totals like $500 or $1000 if you don’t trust yourself to be responsible (been there!). There’s no need for 10 credit cards in the wallet.
Pay your mortgage bi-weekly and it will be paid off that much quicker.
Don’t let society pressure you into multiple expensive vacations a year. Living a simple life and spending time as a family at home or staycation is a valuable lesson in contentment for everyone. You don’t have to go away every weekend in the summer! Go to local beaches and lakes and just spend time together. I feel jealous sometimes of what others are doing but who knows what their financial situation is–are they vactioning in debt? Do their parents pay for the yearly trip to Maui? Did they save up so they can go away 12 times throughout the year? Either way, comparison does not lead to contentment.
“Comparison does not lead to contentment.”
Amanda
What a brilliant piece of advice right there. Thank you so much for that thought, I shall hold onto it for all those times I start to slip into discontent.
Denise
Calculate your hourly pay (after taxes) and evaluate every purchase against the time it would take you to earn the money (Joe Dominguez, Your Money or Your Life). I have taught my son to do this and he is very, very savvy with his money.
1. Pay extra on principle of Mortgage every month
2. Always have a car savings account.
3. Pay your credit card balance in full.
4. Only go into debt for a home.
5. Live below your means.
These are lessons learned from my parents and they saved me after my husband was killed in an accident, because we had both lived by these rules. ????????
Best advice I ever got-
Do what you love and you never have to work (after struggling for many years I am now a professional guitarist!)
Invest in yourself- it always pays the best dividends
Knowledge is your biggest asset and nobody can take it away from you
Use other people’s money (Borrow money to buy assets and tax deduct the interest payments)
As the wealthy barber next door mentioned to any of us who wanted to listen, pay yourself first (yes, that means put money in the bank instead of paying bills).
If you increase your home equity with blood sweat and tears as a do it yourselfer, add 5-10% to each project for a good quality tool, rather than for extra just-in-case materials.