Personal finance is complicated. There can be unlimited variables that go into making a single “good” financial decision, let alone everything that contributes to a lifelong quest for wealth, security, and happiness.
That being said, we recently asked people in the NewRetirement Facebook group to simplify their money philosophies. We asked, “What is your best financial advice in 8 words or less.” The group delivered (usually within the word count) a tremendous amount of wisdom.
The greatest number of responses – more than one third – involved guidance for how to spend (or not spend) money. The second most popular category involved advice for savings and investments – these tips were varied, but complementary.
Overall, each tip is smart and worth consideration. However, Howard may ultimately be right. He suggested that the best financial advice is: “Don’t limit advice to 8 words or less” to which we might add, “Do what is right for you, not everyone else.”
Best Financial Advice: Pursue Health and Happiness
It is somewhat surprising, but out of 200 responses to the question about financial advice, there were only two that seemingly challenged the premise. Are these perhaps the best answers?
One word: health. (Long)
- Long agrees with his wife who prioritizes health above everything. He wrote that she says, “If you don’t have your health, what’s the use of planning, calculating, worrying, and saving.”
The only benchmark is happiness. (Darol)
People had a lot to say about how they thought money should be spent and not everyone agreed with each other – especially related to boats and horses.
Below we separate all the spending advice into 5 categories:
1. Boats and Horses
Boats and horses are notorious for being expensive to maintain and not used as often as hoped. However, not everyone agrees that they are a bad use of money.
Don’t buy a boat. Don’t buy a horse. (David)
Buy the horse… It is cheaper than therapy. (Michele)
Buy the boat. (Pat)
- Pat says the boat was the best decision he ever made, other than having kids. And, included a gorgeous sunset shot.
Don’t put your horse on a boat. (John)
- Can we all agree this is most often a good rule?
2. Limit Fun and Convenience
Remember that convenience costs money. (Barbara)
- David applauded this one, adding: “That’s a great expression. Reminds me the cost of a bag of potato chips compared to buying a bag of potatoes.” However, it is important to note that behavioral experts have found that buying convenience can be one way to “buy happiness.”
Drink water when you go out to eat. (Rick)
Don’t go to coffee shops. (Amy)
Don’t go to the Superbowl. (Bill)
3. Be Financially Responsible, but Enjoy Life
Always take free beer whenever it is offered. (Glenn)
Travel as much and as soon as possible. (Anita)
- Anita explained that you don’t want to put off doing what might get increasingly difficult as you grow older.
15 year mortgage. No car payments. Enjoy life. (Jim)
Don’t buy what you don’t need or use. (Valerie)
Debt free. Professional guidance. Be smart. Enjoy life. (Gerard)
Live within your means and still enjoy life. (Trisha)
Be frugal, but don’t forget to live now. (Mark)
You can’t take it with you. Enjoy today! (Pat)
4. Spend Judiciously
Every dollar you spend now is worth $300 in retirement. (Kathy)
- Kathy makes a good point, not often considered. There is an added cost to the money you spend today. You are missing out on the opportunity to invest and grow that money for your future.
Be modest with big spends – houses and cars. (Rob)
Limit spending on depreciating assets. (Larry)
- Larry added the examples of new cars and diamond rings both of which rapidly lose a lot of value.
Cut wasteful spending. Buy needs not wants. (Eileen)
Learn to distinguish between “needs” vs. “wants.” (Tish)
It’s what you spend, not what you earn or save. (Tim)
- Most people focus on saving. And, this is right for the vast majority of people. However, it is important to remember that you don’t necessarily need to earn or save a lot IF you spend very little.
Create a budget. Stick to it. (Kimberly)
Create, update and review your budget, regularly. (Glenn)
5. Live Below Your Income and Avoid Debt
Avoid debt, invest regularly, make coffee at home. (Joe)
Live below your means, stay out of debt. (Melissa)
No debt. Home cooking. Mutual funds. Savings account. (Stephanie)
Live within your means and save and invest. (Daniel)
Spend less than you make. (The Retirement Manifesto)
Spend less than you make. Invest the gap. (Rebecca)
Pay cash for everything. (Dave)
Can’t afford it? Don’t buy it. (Patty)
Best Financial Advice on Income
While income is the foundation of most people’s finances, there were surprisingly few tips offered in this category.
Pay yourself first. (Doug, Scott, Elaine, Shirley, Kristine and Tom)
- While not a lot of income advice was offered, this particular tip was written (not including “likes”) by the most number of people.
Rental property is a big pain. (Pat)
Some money is not worth having. (Steve)
- Steven points out that sometimes what you give up to get money is not worth the exchange.
Own your own business. Live below your means. (Richard)
Keep working. (Elaine)
Earn, save, and invest. Repeat. (Kevin)
Get a second income. Like a spouse. (Brad)
- We think Brad is probably joking, but his tip has merit on two fronts: 1) Sharing expenses in one household is a good way to limit spending and 2) Second incomes are one of the secrets of the FIRE community. Figuring out how to make more money can be key to getting ahead of achieving an early retirement. Learn more about passive income sources for ideas for second income.
Saving and Investment Advice
It is clear from the genuinely sage savings and investment advice offered below that many people who use NewRetirement are disciples of Jon Bogle (Vanguard), Warren Buffet, JL Collins, the experts and many of the ideas behind behavioral finance.
If you want more in depth (certainly more than 8 words) guidance on savings and investments, browse 28 retirement investing tips from today’s financial geniuses.
Or, listen to the NewRetirement Podcast where you’ll find discussions of many of the themes hinted at below.
Read A Simple Path to Wealth. (Bobby and JD)
- A Simple Path to Wealth, by JL Collins grew out of Collins’ desire to prepare his daughter for life. She didn’t want to be a financial expert, so he kept things simple. People love this book. And, it delivers on the title offering simple and sane advice that is easy to implement.
It’s time in the market not timing the market. (Marcos)
- Yes, many people consider investing to be about the right stock at the right time. However, the markets have gone one direction over the long haul and that has been up. Remember that and invest for a significant time horizon and you will make money.
Buy and hold. (Michael)
Rule #1: Don’t lose money. (Rule #2: See rule #1.) (Warren Buffet as quoted by Patricia)
Invest early. Invest often. Stay the Course. (Chad)
Save. Start early and do it consistently. (Kevin)
Invest early and often. (Chris)
Start saving early in life. Compound interest. (Joey)
Save the amount of your raises. (Rob)
Save more, spend less. Invest the rest. (Lemuel)
Don’t mix insurance and investments. (Sean)
Buy and hold index funds. (Saul)
- As John Bogle said, “Don’t look for the needle in the haystack. Buy the haystack.”
Buy low fee index funds. (Tom)
- You don’t necessarily need a complicated list of investments. And, you don’t necessarily need to pay a lot for someone to invest for you. Low fee index funds are a sane investment, giving you broad exposure to the market as a whole in a cost effective way.
Save. Invest. Then spend. (Nicholas)
Invest for the long term. (David)
Save early. Save often. Don’t overthink it. (Mike)
- As Jonathan Clements said on the NewRetirement Podcast, “If you have great savings habits, good things are gonna happen, everything else is gravy.”
You never lose money taking a profit. (Tom)
Rebalance portfolio every 4 months and then ignore. (Burt)
Buy low. Sell high. (Paul)
Don’t invest in something you don’t understand. (Dan)
Save as much as early as you can. (Greg)
Compound interest, the eighth wonder of the world. (Mark)
Start young and buy the dips. (Paul)
Save more. (Elliot)
Invest. Don’t speculate. (Michael)
Stop looking at your stock app. (Darcy)
Max your retirement accounts. Start early. (Andrea)
Don’t panic sell. (Wagner)
More Advice on Savings and Investments and Taxes
When you save into a tax advantaged vehicle, you get all the benefits of saving, plus you give yourself more money because you’ll pay less in taxes.
Redirect your money to tax advantaged vehicles. (Brett)
Convert to Roth IRA. (Gregory)
- Roth conversions are a hot topic. You can use NewRetirement’s PlannerPlus to get a personalized Roth Conversion strategy. See how much you should convert each year to maximize your estate value.
MAX out your retirement accounts ASAP. (Kathy)
Invest in the Roth & HSA early. (Alisa)
- When you invest in a Roth account, you invest money that you have already paid taxes on, but the money grows tax free and all future withdrawals will not be taxed. Early investment in a Roth account can be a great decision.
- Health Savings Accounts (HSAs) are another savings vehicle with super tax efficiencies. When you have a high deductible health insurance plan, you contribute funds tax free, money grows tax free, and withdrawals that are used for eligible medical expenses are tax free.
Build a Plan and Habits
Invest in your future self. (Chris)
- When you build a retirement plan, you are investing in your future self. You aren’t saving and investing because it is the right thing to do, you are doing it for a future version of you. Learn more about planning for your future self.
Start saving early. In your 20s. (Mark)
Don’t underestimate your future retirement expenses. (Greg)
- Use the NewRetirement PlannerPlus Budgeter to think through your future spending in 75 different categories. What do you need to spend? What do you want to spend? How will your spending in each category change over time.
Never too early to start planning and saving. (Gary)
Make good behaviors automatic. Add friction to bad. (Zach)
- Often people think that personal finance is a rational or mathematical pursuit. The reality is that emotions rule a lot of our decision making around money. If you understand that, you can set up behavioral tricks to help make you more likely to do the “right” things. Examples would be to automate your savings or make it very difficult to withdraw money from your account. Explore 16 ways to outsmart your brain.
8 syllables: Au-to-mate ev-ry-thing to-day. (David)
Get an expert. (Jill)
Failure to plan is a plan for failure. (Mary Lou)
Budget. What gets measured can be improved. (Mark)
Prior planning prevents poor performance. (Jack)
Have a plan for a windfall and a crisis. (Lila)
Do your research. Stay the course. (Thomas)
Follow steps [Dave Ramsey’s 7 baby steps.], in order, no changes, as is. (Bo)
There were three types of advice offered related to friends and family.
1. Avoid Divorce
It’s cheaper to keep her. (Kris)
Be good to your wife. (Mick)
If it flies or floats, (or $@#!s), rent it. (Herb)
- Here is another take on boats, but this time Herb also notes that extramarital affairs are “best” if rented not bought. Um…
Two words only: Don’t divorce. (Ryan)
- Divorce is a significant concern – financial and otherwise. Explore more about divorce after 50 and how to prevent it from ruining your retirement.
Marry the right person. (Susanne)
Love the one you are with. Divorce is expensive. (Judy)
Get a prenup. (Mimi)
Don’t Have Kids (If You Do, Limit Spending)
Duel income. No kids. (Jolene)
- Yep. Kids are expensive. Not having them gives you a greater chance of financial wealth.
Public schools for kids. (Dorothy)
Send your kids to in-state college. (Scott)
Miscellaneous Financial Advice Related to Friends and Family
Don’t compete with the Joneses. (Walter)
Do not co sign on anyone’s loan. (Sally)
- It is nice to want to help people. But, you will want to carefully consider the potential liability and how that could impact your future.
Marry for money. (Jun)
Leave the kids enough to do something, but not enough to do nothing. (Dan)
Your Priorities. Your Goals.
Make your own path. Ignore naysayers. Full steam ahead. (Eric)
- Use the NewRetirement Planner to find your path to the future you want. There are no right answers, just what is right for you.