Here’s a blog post I never thought I’d write! Travel? I could write about travel endlessly. Fashion? Yes – it doesn’t get boring! But personal finance? Definitely not something I’m well-versed enough in to be giving advice about. So, let’s start there – this isn’t a blog post meant to be instructional in any way (I literally bought bitcoin at the worst possible time 😊) – but it’s a topic that has come up enough with me and my circle of friends that I thought I’d share some observations.
Money isn’t something to be afraid of, and it isn’t hard to understand. Unfortunately, not everyone is taught the basics, so it can seem like a daunting task to try and venture beyond a chequing and savings account. I think personal finance should be a compulsory course taught throughout high school (along with women’s studies and indigenous studies, but that’s a blog post for another day). Typically, if you aren’t taught about personal finance at home, then you’re not going to become familiar with it until you really have to be. We all know those super nerds (I use the term endearingly) who got into the stock market and game theory early on out of personal interest, but that’s not typical. The sad truth is that those who aren’t taught about money early on start off life and their careers with unequal footing. And unfortunately, I find that it’s women more often than men who are in the dark.
Where to start? I have talked to at least 5 girls (coworkers and friends) who did not know what a mutual fund was, or what the difference was between a TFSA and RRSP. This is not a judgment, this is a litmus test. If you don’t comfortably know the answers to these questions, then congratulations – you are in the perfect place to teach yourself something new, which will pay off for the rest of your life!
A good place to start would be online – there are many great blogs and resources that can clearly break down the basics of things like compound interest, MERs, and more! Are your eyes glazing over? Stick with me, I promise you’ll be better off after perusing a few articles:
Wealthsimple’s Investing 101 is one of my favourite resources – yes it’s slightly promotional, but it’s very informative. For beginners: How does a TFSA work? Why should I have an RRSP when a TFSA is similar and has no early withdrawal fees? And How to Invest $10k. Full disclaimer – I use Wealthsimple for a portion of my investments, as well as their Roundup feature, and have really enjoyed my experience with them.
Ok, that was a lot of text all at once. How about some helpful videos? YouTube is a goldmine for short, educational clips. Learn about mutual funds, and ETFs. When I first started at my job in the financial industry, I had a basic understanding of these products, but I had to very quickly learn more. In order to carry on a conversation with my colleagues, I had to understand how segregated funds work, as well as private investment pools, and a whole load of other investments.
I didn’t grasp the concepts immediately, as you may not by just reading these articles or watching a couple of videos. But if you read and re-read helpful articles, and watch and re-watch the videos, the concepts will start to stick. It may also help to talk things over with a friend (shoot me a message!), so that the concepts really sink in.
Now that you’re a little more comfortable, it’s time to think about your financial habits. I came across this article at the beginning of the year, and loved some of the tips that the financial advisors give. Here a few that stood out to me:
Stephen Gaskin, adviser at Hollis Wealth: “Pay yourself first by setting up preauthorized transfers to a high-interest savings account. Small regular amounts make the job seem manageable, and they add up quickly and prepare you for the unplanned expenses that life inevitably throws your way over the year that cause anxiety.”
^I love this tip, because it touches on one of my favourite money mindsets – paying yourself first. Yes, buying that beautiful pair of ankle boots on sale at Zara may seem like a score now, but putting that $60 into a savings account and watching the interest grow is way more rewarding.
Gordon Stein, author of Cashflow Cookbook: “Examine recurring expenses. Virtually every one of them can be reduced and the cash used for debt repayment or incremental investment.”
^This is so true! Can you get a better policy on your car insurance? Can you negotiate a better deal on your phone plan? Are you still paying for your gym membership or magazine subscription that you don’t use or need? Yes, it’s definitely a hassle to dig into your bills, but it could save you lots in the long run.
Meghan Chomut, CFP: “Is there anyone that you respect that you think is a few steps ahead of you financially? Reach out to them. Ask them a question, mention that you’re struggling and ask if they have any tips for you.”
^This is literally how I got to a place where I felt comfortable with my finances. I asked my dad, trusted friends, and even colleagues. You don’t have to share information you’d rather keep private, and I guarantee there will be people out there willing to teach you what they know!
Now that you’ve changed your habits, start making your money work for you. Whether you choose to go with a financial advisor, a robo-advisor, or DIY, choose a method that you’re comfortable with in order to start earning (interest, dividends) and saving.
One last resource I’ll touch on is Canadian Couch Potato. The author is a portfolio manager and financial planner, who writes about index investing. I use his model portfolios for my TD investments.
I have many, many more resources (podcasts, textbooks, other blogs) that I find helpful, and would be happy to share if you’re interested! This was a lot of information all at once, and I didn’t want to overload this post. Just know that it’s never too late (or too early!) to start managing your money. Even if you only have $100, you can still start investing and learning these habits now.