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?
Lisa Rosenberg says
Best advice I’ve received: Cash-flow college, say no to student loans.
Denise says
Your Money or Your Life made me see that, yes, I, me, I could be that person who takes care of their own needs, and who comes to learn just what is “enough” for me.
My mother (a poorly-paid nurse in the NHS here in England) always drummed into us that we start saving for retirement on the day we started earning. Luckily, that’s the good bit of advice which I have absolutely stuck to following for the past thirty (thirty!!! Aargh.) years.
Sadly I didn’t know of, or create for myself, the ethos of early retirement. I fell for the “earn more, spend more” materialistic game – but over the past few years, having found the Joe Dominguez book, and then Joshua and other minimalist writers, I have started to turn it around.
Mike says
I became debt free at 49. This is what I took away from the experience. No debt. I pay cash for everything. (sitting in a campsite by the snake river while I reply). Have a budget. Every dollar has a purpose. Don’t worry about the credit score. Mine does not exist. In 5 years of not having a credit score, it has not affected me at all. Give during good years and bad. Enjoy not owing anything to anybody.
Susan says
To add to what many said about paying your credit card bills in full each month: If you are carrying even a small balance on your credit card, you will be paying interest on new charges from the day you charge that item because the interest is calculated on your average daily balance. No grace period for new charges! I learned that lesson the hard way years ago.
If you have multiple credit cards with balances, pay one off in full, and then use only that one for new charges and pay it in full each month.
Sylvia says
Asking for advice….
I truly believe in NOT buying a new car, but when is it prudent to trade? How many repairs do I make to my paid off car before it becomes unreasonable?
M says
For car repair, the first consideration is whether the vehicle is reliable enough to get you to work, and whether you have a reasonable back-up if it breaks down (spouse? co-worker? bus? taxi?). A lot of employers will fire somebody who is late frequently.
The second consideration is the cost to you of replacing it (price + interest if you’d do a loan + insurance + fuel). We have put up with occasional repairs on a 15-year-old car because the repair costs are not enough to justify replacement yet.
We drive cars until they get unreliable and then donate to our local PBS station. Their value by then is under $500, so donating is less trouble than selling.
Mike says
In general, if you are going to buy used, buy a 2-4 year old one owner low mileage car and keep it 4-6 years and repeat. There was a study years ago that if you buy new, maintain it well, and keep it for 10 years, sell it and repeat, that would be a very efficient way to own a car.
Rachel says
Never carry a credit card balance! If we can’t pay for it in full by month end we can’t afford it.
Carol says
Best advice from my dad:
Do you want it?
Or, do you need it?
If you need it, then buy it.
If you just want it, don’t.
Meleka says
When I got my first credit card at University many, many years ago, my dad told me it was just for emergencies. He wouldn’t even let me take him to lunch with it! At that time, I misunderstood that having credit cards was equivalent to being wealthy. Thankfully his lesson stuck with me and all these years later, the credit cards are still paid off every month and discretionary spending is kept to a minimum.
John Vercellino says
Back in the ’90s, I worked for a crusty old fellow. One day, he called me into his office and handed me a statement from his tax-exempt money-market fund. He said, “Look at that John, and tell me what you see?” The statement showed a balance of $750,000, which still is a lot of money. I told him what I saw, and he said, “Do you know what that really is? It’s my F*ck You money. Because if I ever get tired of this place, I can just say ‘F*ck You’ and leave. And you need to get some F*ck You money, too.”
I took that advice to heart and it’s given me the confidence to do what I want without worrying how I could pay the mortgage, the credit card bill, etc. Because that money’s given me freedom, and that’s pretty darn valuable in my mind.
I’ve passed that advice along to my children and now they have some, too.
Nicola says
Ah yes, I call this a FOF (F*ck Off Fund), and I strongly believe everyone should have one. Whether you need to FO from a bad relationship, a bad job, or just because you need a life change, you need to be able to walk away with enough to live on for several months at least.
Beth says
My grandmother who raised me, always taught me to be thankful for what I have and take care of it. If you practice this, your wants and needs become few. You are happy with a little and do not miss out on all the stuff.