The Best Money Advice Ever Received

There are a lot of really smart people in this world.  How often do you get a chance to intentionally seek them out for some advice in your life?  Today, we’re going to get “The Best Money Advice Ever Received” from some really, really smart people.  In the process, I’m giving you access to a secret club where these “elites” hang out.

Where Do Smart Money People Hang Out Today?

When I think of people who are really smart about money, my mind inevitably drifts to my financially blogging friends.  There are hundreds “out there”, and as a group they harness incredible knowledge about all things money.

Financial bloggers are an interesting lot.  We’re all a bit obsessed with this whole “personal finance” thing, all pretty good in managing our money, most of us are pursuing some sort of early retirement, and we all love to write. In short, we share a lot of common bonds.  For those of you not in the “inner circle” of the blogosphere, you may wonder where we all hang out?  Beyond the mega-event of the year, FinCon (which I’ll be attending for the first time in Oct 2017), where do we all meet?  How do we communicate?  How do we share ideas?

Today, I’m giving you an exclusive peak into the inner workings of the blogging world.  A network seldom seen from the “outside”. The Smartest Money People I Know can be found there, in a secret place known only to “insiders”. As a reader of this blog, you’re getting a “Special Guest Pass”, and are being let in on this previously unknown hideout of the financial elite.  (No conspiracy theories here, please.  My tone is a bit more dramatic than the reality, for the sake of a good article.  Have I gotten your attention yet?)

Recently, a “Rockstar” in the world of personal finance blogging made a major announcement:  The Launch Of A New Community Forum!  The announcement was made on Twitter, and has been an IMMEDIATE hit.


rockstar-forum


Within just one week after the official launch, the forum is now home to more than 250 personal finance bloggers and enthusiasts from around the world, all sharing ideas on finance, blogging and all things money.

j-money

Kudos to the founding Rockstar, J. Money!  He’s a legend in the financial blogging community, and just turned down a $1 Million buyout offer for his online sites.  He’s innovative, bright, a gifted writer, and well on his way to creating real financial wealth.  He also looks pretty cool, with the spiked mohawk and all.

He just gave the world a gift with his new forum.  Check out the forum here, you don’t have to be a blogger to participate in the fun!  Welcome to The Secret Club!  Look around, you’ll find me there (if you join because of this article, let me know with a comment in the forum, it’ll make my day!).

 


The Best Money Advice Ever Received

To take advantage of this new gathering of “money smart” people, I decided to start a thread as the basis for this post.  I asked “I’m starting to work on an upcoming blog post, and would like to build it around “The Best Money Advice Ever Received.” Help me out?” The question has generated a LOT of response, which I’m excited to present below.  In fairness to my fellow bloggers who responded (THANKS to all of my really smart friends!), I’ll be presenting the advice in the order in which it was received.  Where I differ with the advice from the world’s smartest people, I’ll add some commentary.

The Smartest People In The World, Giving The Best Advice Ever! Click To Tweet

Without further adieu, I present to you The Best Money Advice Ever Received:

Don’t Max Out Your 401(k)

T.J. Pridonoff starts us out with this counter-intuitive advice, which he received from his Dad.  I would modify it to add “beyond your employer match”.  Always optimize the match, but realize that any money you put in above this amount does have some negative implications.  Since it’s tax defered, your ability to access the $$ can be severely constrained before retirement.  If you expect you may need to tap into the extra savings, keep it in an after-tax account.

Saving Is Not Optional

MrsBita chimes in with advice from a friend, which she received shortly after she immigrated to the USA (yes, it’s a very global group out here in the blogosphere).  Saving in your 401(k) to the full extent of your employer match should not be viewed as an option, but rather as a mandatory act.  Don’t give up a free raise, make sure you’re capturing all of the employer match that you’re entitled to.   Make sure you’re not part of the $24 BILLION that’s lost by people who don’t contribute enough to their 401(k) to max out their employer match.

It’s Your Money

BigDaddyG isn’t a blogger, which proves my point earlier that you don’t have to be a blogger to play in the forum. He tells a story of his mother always responding with “It’s Your Money” when he asked her if he could buy something with his allowance.  He learned to take responsibility for his money, about opportunity cost, and the fact that a dollar spent today takes away from something bigger he may want tomorow.  Take ownership of your money, and realize no one cares about it more than you do.

Time Is A Far, Far Greater Asset Than Money

Pete_McPherson reminds us that time is our greatest asset.  Don’t let your life slip by while pursuing materialistic gain.  Be intentional in how you spend your time, it’s worth more than money.  My add on this one:  I recently wrote about Time, and included the quote:  “Time, The Rarest Of All Investments. You Get It For Free, And Spend It Until It’s Gone.”  

Track Your Net Worth

J. Money (yes, the Rockstar I mentioned above) chimed in with:  “Track your net worth – the best thing you can do to grow your wealth!”.  I couldn’t agree more, and encourage you to read my article on the subject, or have a look at the Free Net Worth Template I’ve built for my readers.  If you don’t track your Net Worth, get yourself set up to fill in the template with your year-end statements this year.

Focus On Your Priorities

Steve Goodwin adds a classic Dave Ramsey quote that changed his life:  “Nothing happens without focus, so when you try to do six things at once, nothing seems to happen. You can’t get out of debt and fund retirement adequately and fund the emergency fund. When you attack one thing and let the other things sit while staying current, things happen.”  Steve learned from personal experience the power of focusing on the highest priority, and wrote about it on his blog.  Not much I can add to that one, spot on.

Double Your Money With The Rule Of 72

PhysicianOnFire is a really smart Doc, and he recently wrote an article about this powerful concept, “Double Your Money With The Rule of 72“.  The point is that you can double your money, if you’re patient and give it time to work. As for the rule, simply divide 72 by your expected rate of return to calculate how long it will take your money to double.  12% return?  You’ll need 6 years  (72/12).  4%? 18 years.  It’s a handy rule to help you remember you need to generate good returns, and you need time.  Start as early as possible in building your investments, and give them time to compound.

Avoid Lifestyle Inflation

KeepThrifty gave some great advice with this gem:  “The fact that your income just went up (for whatever reason) should have no bearing on your spending.”   Shnugi added to the theme with a reminder to “eat and spend like you’re still in college because it’s a lot easier to save when you’ve never known what it’s like to spend that much money.”  Bottom Line:  Don’t let your spending go up as your income increases.  Instead, save the increase, and build your wealth.

Live like no one else so you can live like no one else

ChiefMomOfficer came in with this Dave Ramsey classic, which I’ve cited numerous times in my life.  The concept, a foundation of Ramsey’s teachings, is to make smart spending decisions now (e.g., don’t buy that new car!  Pay Off Debt!) so you can have a future which will be out of reach to those who aren’t managing their money well (retirement, anyone?). Don’t keep up with the Jones’, but rather avoid materialism and focus on the long term. MediumSizedFamily highlighted the concept with their comment:  “Discipline is choosing between what you want now and what you want most.”

Mom also points out the power of compounding interest, which I wrote about here (Albert Einstein called it the 8th Wonder Of The World, for good reason).  It pays to start early, don’t procrastinate.

Stop The Fear!

10_Rocks shared an article he had written called “Stop The Fear”, where he shares his Father’s lesson to him that media sensationalizes issues to sell their product.  Be an optimist, and don’t let fear paralyze your life.  Be persistent, and over time you will achieve success.

Put Your Finances On Automatic

Mrs.Groovy, a longtime friend who just retired early, suggests you automate your savings.  In her words:  “We automated saving/investing first, and then set up automatic payments for all recurring expenses.”.  I couldn’t agree more.  My wife and I have all of our savings (401(k), Vanguard Mutual Funds, etc. etc.) set up so they automatically transfer from our paycheck or checking account, every month.  Over time, it’s encouraging to watch your savings grow.  Move it out of your account before you have an opportunity to spend it!

Grow Your Career

ESIMoney came in with a late tip for this article.  His advice?  Grow your career.  In his words: “Most people don’t realize that your career is a multi-million dollar asset that you can make even more valuable by taking a few simple steps.”  His blog focuses on 3 steps to wealth;  Earn.  Save.  Invest.  The more you earn, the easier it is to save.  You can cut expenses, but even extreme minimalistic living has a limit.  Focus on earning more, that’s where you can create true wealth.

You Can’t Have Everything You Want

Steve@ThinkSaveRetire came in with an “after the deadline” piece of advice, I decided to be generous and “let him in” (he’s a pretty cool guy who’s living in an Airstream, so I gave him a break!)  His dad taught him:  “You can have anything that you want, but not everything that you want.”  Great message, reminding us that life is about choices and trade-offs.  Decide what’s most important for you, then go for it.  If it’s Early Retirement, pass on that new car.  If it’s the new car, realize you won’t retire early.  Be intentional, pick what’s most important to you, and don’t look back.

By the way,  there’s also one incredibly helpful blogger in the Forum named Grant, who writes @ Millenial Money.  He deserves a “shout-out” for some amazing SEO (Search Engine Optimization) work he’s been doing for some of us in the Forum.  If you need ANY SEO work done, reach out to this guy, he does it for a living, and all of us in the Forum would agree he is the first place anyone should go for SEO work.  Thanks, Millenial Money!! 

Conclusion

It’s amazing what you can learn by asking a simple question to a bunch of willing experts.  In just 3 short days, a simple question in the “secret insider forum” yielded 13 amazing pieces of advice.

Apply a few of the above items in your own life, and never stop looking for opportunities to learn.

Oh yeah, you may also want to click here and check out the Forum, too.  You’ll be amazed at what you’ll learn from the experts (and, perhaps, you’ll find this one old guy name Fritz, who’s writing about his transition with the goal of “Helping People Achieve A Great Retirement”.  He goes by the name of “RetirementManifesto”.  I spend a lot of time with him, and heard he’d be most appreciative if you’d check out his content!).

 

trm-on-the-forum

32 comments

  1. Great article with some awesome advice! I’m so glad you compiled this wealth of knowledge into a fun to read article! It’s amazing seeing so many top of bloggers getting together in one place to talk about our passion, personal finance!

  2. I love it, Fritz!

    This post turned out awesome. You are a fantastic writer.

    Thank you for the opportunity to share my two cents in this post. =)

  3. Oh man, not fair! You told me you’d publish at 9:45 (maybe that was a typo) and I didn’t get the first comment in. WAHHHH!!!!

    Thanks for sharing my advice, Fritz. I particularly like your inclusion of ESIMoney’s comment about growing your career. Oh, I think we all concentrate on making more money, but it’s helpful to view that in the right context which is – your income is the one thing you have control over that is most capable of generating wealth (and of course how much of it you save and/or invest matters, too). This is a tenet I hear over and over from Ric Edelman on his show.

    1. Oops. Blogger’s liberty (ah, one of the last remains of true freedom, my own personal blog!!). I decided to launch it early since my wife and I have a busy day (heading to an AWESOME mountaintop vista in a few minutes to take in the gorgeous Fall Colors here in N. GA, which have been lasting forever this year, thankfully!). Forgive me??

      I agree that ESI’s “career” advice was a good one, though I was impressed with all of the well thought out responses to on “my thread” in The Forum (including one very groovy cat, who gave some great advice about automating your finances!)

  4. Lots of good stuff there, but I’ve got to quibble with # 1.

    Don’t max out your 401(k) is terrible advice for many reasons.
    # 1 – It helps people to save more because it gives them a goal
    # 2 – The tax advantages are huge. That money is often saved at a 28%-39.6% federal deduction, then removed at 0%, 10%, 15%, and 25%. In short for a high earner, maybe in at 33% and out at 15%. That’s a winning combination.
    # 3 – It’s even better if you move from an income tax state to a no income tax state in retirement. Then it might be 42% to 15%
    # 4 – In addition to the higher returns (due to lower taxes), you also get better estate planning. Thanks to beneficiaries, retirement accounts are passed outside of probate.
    # 5 – In addition to the higher returns, lower taxes, and better estate planning, most states offer superior asset protection to retirement account money.
    # 6 – Getting to your money before 59 1/2 is no big deal at all. You can take money out for basically any legitimate reason, including just to retire early as discussed here: http://whitecoatinvestor.com/how-to-get-to-your-money-before-age-59-12/

    1. I don’t disagree with any of that, WCI and I’m not at all surprised at your opinion based on my experience as a long time reader (and newsletter subscriber!) of your blog and reading your comments on Bogleheads.

      You and the majority of your readers are in the American minority position of being in highly lucrative fields where you are still going to have a massive taxable investment account after maxing our your retirement accounts. Not everyone is in that financial position. So obviously you should max out any tax shelter you have. Why wouldn’t you?

      Part of the disconnect here is that the context of why this was good advice for my circumstances are too specific for the post. I still think it’s good advice for a good portion of people.

      My father gave me this advice because he thought I might want to have more flexible access to my money to potentially start a small business or do something else…..and something else is exactly what I have chosen to do. And indeed, from his life perspective, most of his capital is tied up in things other than retirement accounts, such as real estate, small business, etc.

      My immediate life plans is to take a year off from work to travel nomadically. That’s not something I would have been able to do while maxing out my 401(k) for the past 7 years.

      1.) Bypassing the 401(k) does not prevent you from saving outside of a 401(k).
      2.) I can’t take a 401(k) loan if i’m not working by choice.
      3.) I consider medical expenses, disability, education and homebuying to be rather limiting exceptions to the 10% penalty.
      4.) Starting a SEPP for a year off in your 30’s would be insane and would cause higher taxes when I go back to work.
      5.) I’m not raiding my Roth accounts with anther 40+ years of growth just to take a year off from work.
      6.) I don’t have any heirs or dependents or prospects for future heirs or dependents.
      7.) I’ve never been above the 25% tax bracket and don’t expect to be, unless I inherit my way into it, marry my way into it, or hit the blogging jackpot. None of those scenarios are expected.
      8.) By staying under the federal taxable 25% bracket, my capital gains and dividends, aka my total return, is growing tax free. And the more assets I have in taxable, the more I can fill that 0% qualified dividend tax bracket. That is MORE tax efficient than a 401(k). Obviously, I will plan to take advantage of more tax deductions when I go back to work to save for permanent early retirement and tax efficiency becomes a greater focus.

      See this post for more of my logic:
      http://tjpridonoff.com/demystifying-tax-brackets/

    2. I LOVE this debate, it gives readers a taste of what it’s like to live in The Forum. I can see both sides of this argument. Personally, I max out our 401(k) AND contribute additional After-Tax, but I’m a very aggressive saver. The reason I KEPT TJ’s advice was based on comments I heard Joshua Sheets make on Radical Personal Finance. He stated one of the biggest mistakes he made was maxing out his 401(k), using the exact same logic as TJ made in his recommendation.

      Clearly, whether or not you max out your 401(k) depends on your personal situation. For many, it may make sense to contribute only enough to get your employer match (NEVER contribute LESS than what gets matched, everyone would agree that’s a mistake). For others, the arguments presented by The White Coat Investor may well apply (heck, they apply to me!).

      Can you see why I love The Forum? It makes you THINK, and that’s a great thing!!

      I love this debate. All views welcome. Other thoughts?

  5. I’ve never before been grouped with the “smartest people in the world” (and I suspect I never will be again, so I’m going to enjoy this moment). Well written, Fritz! See you back in our not-so-secret club.

    1. I wish I started earlier too. 😀

      I went back and looked at my 2004 W2 from delivering pizza and am asking myself why I didn’t roth it. =)

    2. Starting Early is absolutely one of the best pieces of advice anybody under the age of 30 can receive. I’ve written extensively about this, and have started our 22 year-old daughter out with a ROTH IRA since she just started her first “real” job as a policewoman. Start early, and let compounding work for you. There’s a reason Albert Einstein (no dummy, himself) called compounding the 8th wonder of the world!

  6. A lot of great advice above, and a little disagreement in the discussion, which is always good for improving our understanding and financial education. TJ’s advice highlights how not everyone’s situation is different.

    My advice for TJ? Close the gap by marrying a newly single woman with a successful blog about finding a sugar daddy. You’ll have the marriage, inheritance, and successful blogger in one package. Not sure about integrity, though. 🙂

    If I could add anything to the list above, it would be to understand the tax code, and know every strategy to legally minimize your tax burden. So much money is left on the table (or in the government’s coffers) due to inaction or a lack of knowledge on the taxpayer’s part.

    Best,
    -PoF

    1. Gees, Doc, are we running a finance blog or a dating service here!? 😉

      Good point on taxes. Especially after you retire, it’s critical to have piles of cash of different tax status to minimize your overall tax burden. Personally, we’re building pre-tax 401(k) IRA, after-tax ROTH in both 401(k) and a personal Roth, tax-free muni bonds, and after-tax investments to bridge us to 59 1/2.

      A comprehensive discussion on tax strategy is well beyond the scope of this “comment” section, but I will say that it’s very helpful to build these different accounts “as you go”. Sprinkle money in all tax status accounts, a bit each year, and you’ll be smiling after retirement. One other reason that TJ’s comment about being careful maxing out your 401(k) was sound advice.

    2. @PoF

      I’d demand a prenup, to protect that person’s interests and save my integrity. 😀

      Not that I’m plotting to locate a higher earner so that I can experience the marriage tax penalty. lmao. 🙂

    3. Thanks for the love Fritz. You seem like such a chill dude. I can’t wait to see you find your beach!! T Minus 2 years…. Happy to have met you on the Rockstar Forum. BTW your comments think I’m a bot! I wish!

  7. What a great article and recognition of others. I’m finding that the community is pretty awesome! I particularly loved the quote you let in ‘after the final whistle’: “You can have anything that you want, but not everything that you want”….that is spot on. In the past, I never realized that I was going for everything and it was causing me to achieve, well, nothing. Now the older, more focused me is doing a whole lot better! Thanks for the article!
    Cheers,
    Paulie

    1. Hi Mom! I love your comment “everyone…should definitely check out the forums”. That was my main purpose in writing this post, and I love the fact that the “Comments” section has turned into a living example of what life inside “The Forum” is like.

      Thanks to all of you for your active participation in the comments, you’re giving folks a real view into our “private world” in the “Secret Club”. Just don’t teach anyone the secret handshake! Fun stuff!

  8. Hey man – thx for spreading the word on the forums! Appreciate that! It’s been so fascinating seeing how people are harnessing them so far. Our community is smart for sure 🙂

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