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?
Rosie says
Does anyone have free a recommendation for what to do when you’ve paid off your mortgage? Those regular payments could so easily be wasted, or used somehow into something good? We don’t really want to invest it in another house, because we don’t want to be landlords over useless tenants.
Lisa Rosenberg says
Congratulations! Put the “extra” towards retirement!
Sibylle says
Why don’t you just put it into a savings account? If I have some kind of regular payment ‘finished’, I simply put the same amount there – you are used to not having that amount anyways, and it will help building an emergency/vacation/new furniture/early retirement fund.
Kathy says
Why would the tenants be “useless”. Renters are people too. There is such a thing as good landlords.
Or, if you don’t need it give to charity.
Rosie says
Hi Rosie, read the Barefoot Investor by Scott Pape. You will love it.
Lauren says
A very specific one, and just for women: see if a menstrual cup works for you. A friend who lived in France–where they’ve been wildly popular for years–told me about them. I spent $50 on one about 5 years ago and I’m sure I’ve saved hundreds on disposable feminine hygiene products. And, I feel good not using up natural resources and adding to landfills.
Teresa says
Along the same lines, my husband and I both use double-edged safety razors. The initial cost for one is about $40. BUT, we bought two boxes of replacement razors for $15 each and it took us almost three years to use up one box!!! Prior to that, I was paying about $30 a month for replacement razor cartridges for us both. There is a bit of a learning curve using a double-edged safety razor, but it is so worth it to us!
sallyann says
Yes I have saved a lot the same way.
Ann says
Single most important advice came from watching my parents: Adjust your spending plan to fit below your income…so you can build up an emergency savings fund for the “unexpected” or the large purchases instead of using a credit card.
Second most valuable: when I see something I want, I don’t say, “I can’t afford this,” or “I shouldn’t be doing this. ” Too negative. Instead I say, “Not today… Maybe I’ll get it tomorrow. ” Rarely have I returned “tomorrow!”
Sam says
It’s not always about how much more money you can make, sometimes it’s about hanging on to the money you already have !
Irene says
I grew up before credit cards existed (!), and I was taught “If I have a quarter, I can spend a quarter, no more.” So, luckily, I use my credit card for almost everything now (air miles!) but pay it off completely every month – automatically withdrawn so I don’t “forget” and end up paying late fees. I clearly remember my mother dashing off to the bank before it closed for the weekend to take out the money that we’d need for the weekend, generally groceries. No ATMs, no credit cards, just cheques, and “they cost money to use”.
Thanks, Joshua and Everybody, for these fine and varied ways of dealing with money. Never too late to learn!
Eve says
I listen to Dave Ramsay every night and although we don’t have the money amounts he is talking about, I still save what I can. I started saving all the $1 that ended up on the counter and made an emergency fund. That was working so well I started another fund for a washing washing machine & dryer. Any extra money goes in these funds.
I found if I save for a particular thing, I am more likely to keep it up. Over the last few years I’ve started quite a few funds and closed them out. I decide how much I think I’ll need and when it reaches that amount I start something else.
Yesterday our dryer went out. I had the money. Earlier in the year our AC unit stopped. I had the money saved for a new one. We only have about $1500 SS a month to live for the two of us on so if I can save anyone can. Just do it. It gives such peace of mind.
Sandy says
Good plan Eve! Thanks!
Cidney says
Great idea! Thanks for sharing.
Anita says
When handing my customer her change, she shared her plan for saving. She wanted to go to Alaska, so she made an envelope for it and delegated any dollar’s serial number starting with a certain number to that trip. She had an envelope for each of her grandchildren, too, and had a particular number for each child. It was exciting way for her to check numbers when she got change.
BobbiJo says
“It’s not my money anyways. (It’s God’s)”. When I truly live by this value, I’m much less anxious about all aspects of finances and I make better decisions.
Liz says
Amen!
Susan says
For many years we have paid our mortgage weekly, paid extra payments and kept our savings in an off set account against the loan. This has saved us thousands in interest as well as significantly reducing the time it will take us to pay off the home.
Bette says
Never buy a new car — the second you drive it off the lot, you throw away 10% of the total cost.
Never carry credit card debt — but if you do have debt from before you became savvy (!), transfer the debt to a zero interest card, pay it down until the month before the interest rate rises back up, and then transfer it again. Do this until it’s paid off — and then move forward, wiser and richer.
Finally — pay attention to and learn about finances. Don’t have an ostrich’s head-in-the-sand approach to money. Face it — learn about it — deal with it weekly. Don’t ignore money problems, as they will only be compounded (no pun intended ;-)
Lowell Hummer says
Credit card debt: I owed about $17,000 when I got a no-interest-for-the-life-of-the-transfer credit card offer with a $25,000 limit. I transferred the debt and thus eliminated the interest I would have had to pay on that balance and never had to pay any more interest. That amount was low enough that I paid it off interest free in about five years fewer than I would have otherwise. Never heard of anyone else dong this but financial good fortune came my way just when I needed it.
Leland Dickerman says
If you want to retire as a millionaire, ensure that you save enough, and purchase an IRA or Roth IRA annually.