The Best Financial Advice I Ever Received

The Best Financial Advice I Ever Received
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Recently I got to thinking about The Best Financial Advice I Ever Received.  My goal is simply to make sure I shared it with my kids and anyone who wants to learn.  In my case, I believe it was teachers and books.
Call them Influencer, Mentor, Teachers they all have a special place in our hearts as they helped us down the right path. I remember two of mine vividly, both were old and had learned many of life’s lessons.

My college personal finance course professor was seventyish with 10 children. It was well before there was a fire movement and It was before many of the fire movement pundits were born. I remember the lecture as if it were yesterday “I buy my cars a couple of years old because I get better value”. “my son is at college and told me he is living on $2 a day”. Mr. Money Mustache’s philosophy before there was a MMM.  I loved that class but, the funny thing, I got an A, but it didn’t gel, at least right away.  No one I knew had any money, thus none could give any advice.  

A few years later I was sitting in my first graduate finance course. The professor received his Ph.D. from Columbia in his late sixties.  He was old school and walked around the class checking homework (yeah in graduate school).  I spent hours doing the case study homework on yellow legal pads. Pages and pages of them. I learned many valuable lessons for both my trade and my personal financial life from him. What I remember most were the time value of money and sunk cost.  Key concepts even for the non-financial person.  

I asked a group of people interested in finance to share The Best Financial Advice I Ever Received Specifically, who that influencer and what were the lessons you learned.  The answers were sometimes surprising:

BC said: “The Best Financial Advice I Ever Received is rather modest but I followed the advice and it has done me well. When I started my 1st real job out of college my father pulled me aside and told me “pay yourself first and put it in the 401k” I could tell by the look on his face this was important to him and he needed for me to listen. I did this on the very first check (like a 90-day wait I think) and have continued doing it for nearly 22 years.
 

Thanks, dad, I’m going to be alright when I leave the workforce.”

 

I did exactly the same and those 401k accounts have the bulk of our retirement pile.  Think of it as: set it and forget. Time and the magic of compounding will do it all for you.  There is one other element you need, that is to take risks.

Sue R wrote: “My aunt. Who lets fear drive every decision in her life. She feared losing money in the market so much that she now has very little. She showed me her bonds the other day… $100 invested 27y ago, will be worth $200 in another 3y. She’s so happy because she “doubled her money”. It’s very sad.”

 

It is sad because it is all too common.  I have bright, successful colleagues that kept their retirement funds in the “safe fund” not making much more than inflation.  Real growth (above inflation) is a game-changer.  Will there be downturns in the market? Sure, but if you are in for the long hall think of them as great buying opportunities.  One of my greatest joys was at a retirement dinner for an older colleague, Lucille.  “If it wasn’t for you, I wouldn’t have anything”. Years before I got her into investing.

Frank P wrote: “When I was up to my eyeballs in consumer debt, with no real savings, making a 6-figure salary, lying in bed realizing my next paycheck won’t cover all the bills due. That was a HUGE lesson.”

Robert H wrote: “My parents…..who were awful with money.”

 

Sometimes you need to experience or observe the train wreck and that becomes your influencer.  More than likely you will seek out help.  I wonder just how many people found Dave Ramsey looking for a way “out of this mess”.  I grew up in a house always waiting for the next shoe to drop. I never felt in control and like Kris T, I wanted to change all that.  Education, earnings, and savings were my way out of the mess.

Cindy P wrote: “I grew up hearing my single mom cry at night trying to pay the bills. She was highly educated and sacrificed much to try and give us the best life, but she made terrible decisions. I was on my own financially from high school on because there was no college fund, but benefited from loans, grants and work study for which I am grateful. But I did not learn from her mistakes and used credit in my 20s to get by. I slept on the floor for months out of college and drove a manual everything car so not exactly an extravagant lifestyle and honestly do not know if I could have avoided credit card debt without being miserable. I was saved by my eventual high income that allowed me to pay off consumer and educational debt, but my life would be very different if my chosen vocation were something less well compensated. My husband introduced me to the idea of paying off a credit card every month, and eventually, I became debt-averse as well. I think where we end up financially is impacted by so many factors – many outside our control or at least decided without a full understanding of the repercussions. I worked my butt off, but I was lucky as well.

From the many people that responded I learned that The Best Advice I Ever Received was not advice at all.  It was leading by bad example.   The stress of parents ‘ bad with money is something many of us desperately seek to avoid.    

I wrote: Make sure you and your significant other are on the same financial page. 

I have a confession to make that my wife is a better saver than I am.  I am and always was a big save first guy, but Mrs. is a coupon clipping, buy on sale maniac. I must admit after 30 years of marriage I have learned to look for deals/coupons on large purchases. True ‘Mixed marriages’ of spender and saver can be a recipe for disaster.  So The Best Financial Advice I Ever Received or given may not be actually financial at all.

Albert H wrote: “I was young with lots of student loans and thought I was doing great with putting 3% into my 401k so I could get my company match. A coworker chastised me very publicly, saying that I really would not feel the difference between 3% and 10% before taxes. I did feel the difference, but I adjusted pretty quickly and will be forever grateful that I started saving that much more early in my career and was much more conscious of when I could continue to increase until I maxed.”

In most things I suggest do not worry about other people’s money, but you have to wonder if you are out of sync.  I and the math I have done suggest that for most people a savings rate of 10% is necessary if you do not want to be working at 70.  I have created a spreadsheet here:https://excelandvbacraftsman.com/my-savings-life/ 15% would be better.

Herman t wrote: “The first ones, I guess, were actually my little brothers, and my mom.  See I grew up in a single-income family with six kids.  I am fourth in the line-up and spent almost seven years as the youngest.  Then along came my younger brothers when I was 6 and 8, and we stopped buying ice cream and cheese.  I learned that you do not buy the stuff you do not have money for.”
 

Learning the difference between needs and wants will be critical for most people on their financial journey.  For most of us, too many toys can be a real disaster.

I would be remiss if I didn’t include the following books in my The Best  Financial Advice I Ever Received. I would like to say these books helped me greatly in my financial journey.
1. Dave Ramsey’s First Book Financial Peace
2. The Millionaire Next Door –the first one
3. The Simple Path to Wealth – a recent addition and a great read.

If you have enjoyed The Best Financial Advice I Ever Received  may I suggest my post:
10 Steps to Build Your Freedom Nest Egg

How I Learned About Personal Finance

Raymond Mills, M.B.A., M.S. has spent over 30 years of his career as a Controller and Investment Bank and Credit Card Technical Auditor.  He now spends his time writing short stories and running his boutique Microsoft Office software customization business.

You can contact Ray @ by emailing him Here or by using the contact form in the right border.

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