It’s easy to write off advice you’ve heard again and again as a simple cliché. But the truth is, advice that we hear over and over again — long enough to be bored by it — usually offers the sharpest, most-reliable take on how to master your money.
Here, 5 classic tips that have been around long enough to count as serious wisdom:
“Pay Yourself First”
This little gem has been credited to several different people through history — including George Samuel Clason in the 1920s and Robert Kiyosaki who made the phrase famous more recently — but no matter its source, the lesson is undeniable. Basically, the idea is that if you only save what’s “left over” after you pay bills and live life each month, you are cheating yourself. Instead, you should “pay yourself first” by taking a certain amount — even if it’s small — and putting it away.
The goal of “putting it away” isn’t just for savings, either. It’s the idea of creating enough savings that you can start to use that money to make you more money — passive income. This way you turn your income into a true building block of wealth.
This is not an easy task for most of us — but the self-sacrifice it requires leads to financial stability and security that will give you a solid foundation for your whole life.
“Live Below Your Means”
An absolute surefire way to be financially secure is to spend less than you earn and set aside the rest for savings. And that’s exactly what “live below your means” means. That concept is easy to understand, but it’s really, really hard to do.
Why? Because of “lifestyle creep” — a memorable term that is about our inclination to increase our spending, upgrade our home, get a new car, indulge in a fancy vacation whenever we gain an increase in earnings. It makes sense that when we are first starting out, we get pretty excited when we can buy real furniture for the first time and ditch all those milk-crate bookcases. But the trick is not to keep upgrading. And also not to think that you will be on an eternal treadmill of earning more each year. (If COVID taught us anything, it certainly taught us that.)
Think of it this way: the greatest luxury in the world is financial stability and independence. Having those two things in place means you are more in control of your time, what work you do, how much you work, and how you plan your future. So take a look around you and ask yourself: are there easy ways to downgrade your lifestyle? Move into a smaller apartment or buy a smaller house? Buy a used car and turn in the newly leased car? Eat out for special occasions only? Making these decisions by choice now will afford you great freedom later. So the next time you get a raise or promotion, do something really bold: nothing. Put away that extra money and keep living your life just as you have been.
“Expect (and Save for) the Unexpected”
Another reason to live below your means is because life is full of surprise expenses and emergencies. We know: when times are flush, it's hard to imagine having to deal with an out-of-nowhere medical emergency or a job layoff. But in the course of your lifetime, you can definitely count on these types of events happening. And it pays to be prepared — mostly by ensuring you do not have to go into debt and add further stress into an already stressful situation.
This is where the gold old “emergency fund” comes in. Saving in a dedicated place for life’s unexpected events will guarantee you can be more resilient. Start with small deposits if you need to; even putting away $10 a month teaches you the habit of saving. Over time, you’ll want to stash at least one month's take-home pay — with the eventual goal of saving enough that you could manage being out of work for three to six months. You will thank yourself when the next life crisis hits.
“Put Your Money to Work for You”
Setting aside money for savings is a very important piece of financial planning. But the regrettable truth is that, these days, stockpiling cash in a typical bank savings account is a lot like stuffing your money into a mattress and hoping for the best. There isn’t that much reward for putting your funds into an account where it will barely earn a 0.5% return. (Right now the average savings account interest rate is a how-low-can-you-go? 0.39%.)
Let’s be clear: having readily accessible cash in your savings account for emergencies is a smart move. But once you have a few thousand dollars put away, you need to invest in different financial vehicles that can offer higher returns. This is the move that will put your money to work for you, making you even more money.
This does not have to mean you throw yourself into the stock market and take on a lot of risk. You can look into low-risk CDs (certificates of deposit) available at your local bank, consider investing in managed funds, which are generally put together to perform solid returns at manageable risk. (That’s because the funds are naturally “diversified” — meaning that their success or failure isn’t dependent on a single stock.)
Educating yourself is a key part of making your money work for you. But it is likely to give you many happy returns in the long run.