Over the years, I’ve picked up a lot of money advice and financial guidance from family, friends, and books. These lessons have shaped my relationship with money, and have given me the tools I’ve needed to prepare for the future, while still enjoying the present.
Here are three pieces of the best money advice I’ve ever received. They are the things that stand out the most and that I carry with me every day.
#1. Start Saving as Early as Possible.
Arguably the best money advice I ever received is to start saving as early as possible. This means from your very first paycheque at your very first job. And if you haven’t been doing that, then I would encourage you to start with your very next paycheque.
Because the power of compound interest means that starting to save early can be even more powerful than saving more money and for a longer period of time.
Check out this example from Windgate Wealth for an illustration that brings this concept to life. It’s WILD.
Worried you don’t have enough to save, so why bother? Even small investments, started early, can add up to huge savings down the road.
#2. Pay Yourself First.
As I’ve mentioned in my post How to Save Money Automatically, On Repeat, this is one of the greatest lessons I learned from The Wealthy Barber. (It’s a must-read for anyone seeking financial freedom, and it was the perfect guidance when starting my first full-time job!)
The concept is that after receiving your paycheque, you should put aside a set amount (the book recommends at least 15%) to go towards your savings. The book shares more details on how to invest this and what to put it towards.
By taking your savings out immediately, you’re making saving money a regular habit. You’re also learning to live on a smaller income.
I’d also encourage you to set up a continuous savings plan and automation to have these funds transferred the day they are paid. This post covers that in more detail.
Looking for a monthly budget that incorporate this concept? Download the FREE Monthly Budget Template in my Resource Library! Get the password when you sign up below.
#3. Take Advantage of Government and Employee Programs.
Depending on where you live, you may have access to government programs like a Tax-Free Savings Account (TFSA), or a Registered Retirement Savings Plan (RRSP). Since I’m Canadian, I don’t have a ton of knowledge about U.S. or international government programs, but I would encourage you to do some research to find out which ones are available and take full advantage of them.
Depending on where you work, your employer may offer some sort of stock ownership, group RRSP, or similar program. These often involve allocating a percentage of your paycheque to be automatically invested in the program. These funds are taken off the top of your paycheque, so again, you’re paying yourself first and automating the process.
Some employers even offer matching programs. Let’s say, for example, that you contribute 5% of your bi-weekly pay to an employer stock ownership program and your employer matches up to 3%. Every paycheque, you’ll be investing 5% of your income into the program and they’ll be contributing another 3%. Your employer’s contribution is pretty much free money!
Getting our financial lives in order isn’t always glamorous, but it’s one of the best gifts we can give ourselves.
What’s the best money advice you ever received? Are there financial principles you live by? Leave a comment and let us know.