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?
The three day rule: Whenever I see something I think I want while walking through the streets or scroll through amazon I wait for 3 days until I buy it. Most of the time i do not buy these things.
Great article .Those who follow these writings at the beginning of their careers will find life very smooth and free from financial stress.Thanks a lot for publishing this wonderful article
Great article .Those who follow these at the beginning of their careers will find life very smooth and free from financial.Thanks a lot for publish this wonderful article
For small purchases (cloths, books e.g.), we try to practise the 14-day-rule: if I want something (because I saw it on TV, internet, in a shop, on somebody), I wait 14 days. If I still think about it and want, then I can think about buying it. We train our childre to do the same with their pocket money for toys or books. More often than not, they forget about it before the 14 days.
Three things:
Tithe.
Get no more than a 15 year mortgage.
Pay off credit card balances every month.
Great advice! These three things have worked well for us too. I have always lived by “work hard, save hard, be generous.”
Owe no one anything but love.
A 15 or 20-year mortgage instead of a 30-year mortgage will save so much in interest and payments over time.
Proactively set aside a specific percentage to give of your earnings. Get cash for the amount and put in an envelope. Be on the lookout for needs to share it and spontaneously meet the needs with it. It makes such a difference sharing from what is designated for needs instead of wondering if you can afford to give when you learn of a need. Life changing for us.
Best Financial advice: God first,savings second, expenses third.
Good article, but on number 2, check your gendered assumptions:
– why not save the husband’s salary? sure, women statistically earn less, but this is something we should question and challenge along the way and not just subsume this as an accepted reality.
– second, and related to the above. Why wouldn’t the husband stay home? once the child is weaned (and sometimes even before that), i’m sure many men would like the opportunity to utilise their skills in that way. Assuming women stay home with kids is damaging for both men and women.
Thanks for the comment Danielle. But those aren’t gendered assumptions, that is our story.
“My greatest skill has been to want so little.”
(Henry David Thoreau) – who else?? ;O)
Lifestyle design – live close to where you work and play and ride your bike and/or walk everywhere you can. Both the short and long term impact on your financial wellbeing is multiplied since you will save money on gas, insurance and maintenance if you need a car at all. Also, the physical fitness benefits are tangible and you will save the planet’s precious resources.
If you need a simple formula, give 10, save 10, spend 80. You will be fine.
Best advise from my full of wisdom mother, ” if you live like a pauper now one day you will live like a king.”
Don’t think what you will buy, but how you will earn it. Before spend, earn it.
More days than not…(and that a lot of days????), when I am tempted to upgrade, redo, be fashionable, sign-up and add to, I say to myself what I always say to myself;
Use it up.
Wear it out.
Make it do; do without.
It always makes me stop and remember all of the “good” that is around me. And I “feel” rich!
Count the cost.❤????????
You advice is so spot on for our homes. After 30+ years in the design business, we still advise to buy the best you can. Nothing more and nothing less. -Laurel Bledsoe
1.) Don’t be car poor (they are bad investments) and always pay cash;
2) Pay cash for home improvements–save, then improve;
3) It’s OK to use credit cards as long as you can pay them on time, in full, down to zero each month. If you can’t you’re in trouble. Get out immediately.
The spending plan is a great idea!! Thank you
I’m about to be a new mom and I had the realization this week that the cost of my newborn will be almost zero dollars. We will be bed sharing, cloth diapering, using cloth wipes, and breastfeeding. We knew we wanted children and so we had started buying these items last year (before I was even pregnant) when we would find awesome deals on used ones so now at 5 months pregnant, we’re almost totally set for her first year of life. Good for baby, good for the environment, good for our wallets. Win win win.
When I had my first job as a teenager my mother reminded me to think of any purchases in terms of how many hours I’d worked to earn the money to buy them. Helped me to really see the value of things.
I do this, as well. It causes me to think twice before flippantly spending money on something. It’s really been a game changer.
We have done (and still do) all seven. It id freedom! I would add, don’t use a credit card unless you can pay it off in full every month.
In college I was talking about getting my first credit card in front of my then-boyfriend’s family. His father worked in finance and he strongly advised to never carry a balance–to pay it off 100% every month. 15 years later, I have done that, and so I don’t have to worry about credit card debt and my credit score is great. His advice started me off right during a time when I had no financial literacy.
Take a year, any year, and give the entire year’s pay to charity. There are so many lessons from this: the value of giving, the discipline of living on savings, the simulation of retirement, and the fantastic feeling of waking up every day making the world a better place (like “do what you love”).
I’m on year two out of three on this plan. I keep my 401(k), HSA, my tax refund if any, and whatever was in my checking account on January 1.
These last few weeks has caused me great Anxiety. I am the Stay-at-home-Mum who manages everything; kids, home, shopping, finances, etc. We had to declutter and clean our rental home for an inspection and I lost it with everyone. Every item we picked up and I asked them, Why do you need this? Why do want this? Where are you keeping it? When did you last use it? etc, etc. It is great getting rid of the storage bags and boxes that held the monstrous clutter! Finally, I have the home space that works for everyone, not just me and my anxieties. But today, was a difficult day. Today, I sat my Fiance down and told him I no longer trust myself with our finances. There were tears and smiles but I don’t trust myself to manage finances on the scale of an Inheritance from his dear Father. It’s been invested since his death in 2011 and only now have we decided to use some of it. As someone who grew up eating the barest essentials so that my hardworking Mum could provide for 5 of us, knowing that there is a good comfortable sum in there, will only tempt me and definitely set our whole family (goals) back a few years. My Fiance has worked so hard, for 8 years I’ve managed one income pretty well thus far, but the temptation is too great. Becoming Minimalist has helped me to see my strengths and challenges. I’m very grateful for the articles, especially the ones related to marriage, couples and families. Please keep posting these, so people like me don’t lose our focus. To think, I’m reading about Minimalism and Dave Ramsey and Decluttering and others compared to fashion and home interiors and latest trends… thank you for a new day :)
Find your date of ‘economic freedom’, the date you could stop working, but choose to continue working at what you love. Imagine working at a job you feel ‘meh’ about, and discovering you could have cut hours or quit three years before! I’m there now, and choose to work 10 days per month.