Financial Literacy
The Best Money Advice Any Finance Guru Will Tell You
Finance can be a tricky thing to navigate, that's why we often rely on the advice of experts. Here are some of the best pieces of money advice from finance gurus who have made their fortunes. Whether you're running your own business or not, paying yourself first is critical to your financial well-being. This means generating savings by putting money into a tax-free savings account, or TFSA. By putting money into a TFSA, not only will those savings be tax-free, but you'll be paying yourself without even realizing it.
Automate Your Savings: After you've created your tax-free savings account, you should set up an automated deposit. This can be done every time you get paid and because it's automated, you don't have to think about it. By not thinking about it, there's less chance of you reneging on your savings contributions.
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Conquer Your Debt Before You Save
If you've racked up significant debt, whether that's credit card debt, student loans, or any other form of debt—you should always pay your debts before you start saving money. Not only do certain forms of debt accrue interest (therefore costing you more), they follow you around for as long as they exist. Pay off your debts as quickly as you can to free up that money for savings.
Most financial institutions will offer one form or another of a high-interest savings account. These can be great to build your savings over a short period of time, but the interest earned is taxable. This is unlike a tax-free savings account, where no part of the funds are taxable, even when those funds are withdrawn. Use TFSAs over HISAs, as most high-interest accounts only offer promotional rates for short periods anyway.
Hidden fees are absolutely everywhere, but particularly when investing in mutual funds. Most mutual fund fees are between 2% and 3% per annum, meaning that over the course of your lifetime, you'll have paid a third of your investment in interest. If your mutual fund fees are below 1%, that's considered acceptable, but anything over that should be avoided. Getting a return on your investment can be an exciting prospect, but it's important that you are realistic about what you expect those returns to be. Financial growth is a marathon, not a sprint.
It's great that you're excited to invest in stocks, but the difference between a good stock broker and a great stock broker could mean that you make more money on your investments. It's important to vet any stock broker you choose to work with, including seeing whether they're licensed and have a good employment history—and don't forget to check for disciplinary action.
The financial landscape of the world is constantly changing. Be prepared to respond to this change quickly by keeping an eye on how your investments are doing. While passive income is a wonderful thing, you don't want to lose money because you didn't respond to changes in the market fast enough. Before you put your hard-earned money into something, learn all you can about what you're investing in. Whether that's bonds, mutual funds, stocks, or even just a simple TFSA, take the time to consult with your local financial experts and ask questions. Or, if you're choosing to invest in a particular product or industry, learn all you can about its current and, more importantly, projected value.
It's easy to lose track of your investments, particularly if you have a large portfolio. Try your best to keep track of where your money is and how it's performing. If you've opened a TFSA, or other account where your money is locked away, you may not be able to see the growth until the account is unlocked, but you might be able to calculate your expected ROI when you initially set up the account. It can be easy to get bogged down in the minutiae of investments and money moving around—it's important that you keep the big picture (your entire portfolio) in mind, even if one investment experiences a downturn. Try not to panic buy or sell your stocks, stay the course and you'll most likely be rewarded.
There are generally two paths to take when investing: diversification of stocks to increase earning potential across multiple stock options, or investing heavily in one (or a couple) of stocks that you're more certain will be successful. Finance gurus generally follow one method or the other, but most say that diversity of stocks is the way to go. Risk is an unavoidable part of investing your money in anything that isn't a TFSA, it's important that you bear that in mind going into any investment portfolio. However, there are unnecessary risks—such as buying speculative stocks, which are essentially gambling. Avoid these like the plague.
If you're buying insurance on your home, vehicle, or even life insurance—give all your money to the same company. Not only will this make it easier to manage what's paid and what's not, but you'll lower your premiums over time. Even though you may want to sell your house, it's important that you not spend money to renovate your home just so that the market will pay more for it. Invest in renovations for you and your family—you may not sell your home for months or even years after you originally anticipated doing so, so don't invest that money into appeasing a market that's constantly changing.
We all know that utility bills are a drain on our bank accounts, but there are plenty of creative ways to save on utility bills that don't cost an arm and a leg—or, even if they do cost a little more upfront (like installing a heat pump system), their savings overall generally mean they pay for themselves within a year or two. Installing low-flow toilets and showerheads, and purchasing highly energy-efficient fridges or other appliances are excellent choices to save money on your electricity.
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You can pay off your mortgage faster in two ways: paying a higher percentage down upfront, or making larger monthly payments than the minimum. Even if you're going to be staying in one location for the next 20 or 30 years, the quicker you pay off your mortgage, the more you'll have in your pocket for other things every month. If your job allows you to, working from home is a fantastic option to save money on things like gasoline and vehicle wear-and-tear, along with smaller bills like lunches out.
While this is a bit of a motto for life, it's important to spend your money on experiences that you'll remember for the rest of your life, rather than items that depreciate in value, like a fancy car. Taking that trip across the country to see friends or family will always be a memory you'll have to cherish. If you feel like you're paying too much for something, don't be afraid to negotiate for the price you want. Be polite and ask, "Are you at all flexible on the price?" Obviously, it's ultimately up to you to decide whether you're paying too much for something, but negotiating for a more favorable price could add up to big savings for you.
Even if you're getting ready for retirement, you should continue to use a tax-free savings account to maximize the amount you'll save without paying taxes on it. If you find yourself struggling to make ends meet, you can always look for a part-time job or a lucrative side hustle to bring in some extra cash. That few extra hundred dollars a month could go right into a TFSA or other investment option, or be used at home to take the pressure off. Regardless of how large your investment portfolio is, it's important to keep at least 25% of it in stocks that are inflation-resistant. By doing this, you'll minimize the impact that inflation has on your money—you may not be able to control the market, but you can control how you act within it. Financial knowledge and literacy is one of the greatest gifts you could give to your children. Learn all you can about investment options and do your best to pass that knowledge on to your kids. They may roll their eyes when you begin discussing money at first, but as they grow their own bank accounts, they'll definitely thank you for it later in life. Sometimes, making smart money decisions means sacrificing short-term happiness for long-term gains. You might want to spend money on that new car, game console, or other expensive item—but putting yourself into debt or taking that money out of your bank account for no other reason than frivolity isn't a way to ensure a secure financial future.
If you have a subject that you're passionate about, see which companies are involved in that field and whether they would be worthy of your investment. Is there growth potential in any one of them? The world's greatest investors are often visionaries that see the potential in a company or idea. Choose an investment avenue that you believe in and you'll be happier when you reap the rewards. Personal finance legend, Benjamin Graham, is often thought of as a pioneer in the investment industry, pioneering many of the investment techniques and philosophies that other great investors of our age adhere to. Although Graham died in 1976, his 1949 book The Intelligent Investor remains a finance must-read. If you're searching for your first investment option and don't have much money to invest, consider index investing. These investments make it possible to invest in a wide variety of assets, each at a reasonably low cost. It's a soft entry into the stock market and perfect for beginners.
Paying for things with credit cards can be more convenient, but it's a fantastic way to ruin yourself financially, particularly if you can't afford to make payments. Warren Buffett always advises paying for items in cash, if possible, that way, you're guaranteed not to spend more than you have and put yourself into debt to make a purchase. Even if you make a decent wage, continuing to live beneath your means is a great way to build up savings by habit—and eventually develop a savings routine that you don't even think about. You don't want to live paycheck-to-paycheck if you can help it, and adjusting your eating or spending habits is a great way to give yourself some extra funds at the end of each month. Even if you're just getting started on your investment journey, 15% is generally a good benchmark to begin investing in. Utilize automatic transfers that we've alluded to above to make that 15% investment an automatic thing with each paycheck. Annual salary reviews and possible raises are an exciting prospect. But, they can also come with the risk that you'll simply adjust your spending to account for the extra income and be no better off than if you were at a lower income level.
Automate Your Savings: After you've created your tax-free savings account, you should set up an automated deposit. This can be done every time you get paid and because it's automated, you don't have to think about it. By not thinking about it, there's less chance of you reneging on your savings contributions.
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Conquer Your Debt Before You Save
If you've racked up significant debt, whether that's credit card debt, student loans, or any other form of debt—you should always pay your debts before you start saving money. Not only do certain forms of debt accrue interest (therefore costing you more), they follow you around for as long as they exist. Pay off your debts as quickly as you can to free up that money for savings.
Most financial institutions will offer one form or another of a high-interest savings account. These can be great to build your savings over a short period of time, but the interest earned is taxable. This is unlike a tax-free savings account, where no part of the funds are taxable, even when those funds are withdrawn. Use TFSAs over HISAs, as most high-interest accounts only offer promotional rates for short periods anyway.
Hidden fees are absolutely everywhere, but particularly when investing in mutual funds. Most mutual fund fees are between 2% and 3% per annum, meaning that over the course of your lifetime, you'll have paid a third of your investment in interest. If your mutual fund fees are below 1%, that's considered acceptable, but anything over that should be avoided. Getting a return on your investment can be an exciting prospect, but it's important that you are realistic about what you expect those returns to be. Financial growth is a marathon, not a sprint.
It's great that you're excited to invest in stocks, but the difference between a good stock broker and a great stock broker could mean that you make more money on your investments. It's important to vet any stock broker you choose to work with, including seeing whether they're licensed and have a good employment history—and don't forget to check for disciplinary action.
The financial landscape of the world is constantly changing. Be prepared to respond to this change quickly by keeping an eye on how your investments are doing. While passive income is a wonderful thing, you don't want to lose money because you didn't respond to changes in the market fast enough. Before you put your hard-earned money into something, learn all you can about what you're investing in. Whether that's bonds, mutual funds, stocks, or even just a simple TFSA, take the time to consult with your local financial experts and ask questions. Or, if you're choosing to invest in a particular product or industry, learn all you can about its current and, more importantly, projected value.
It's easy to lose track of your investments, particularly if you have a large portfolio. Try your best to keep track of where your money is and how it's performing. If you've opened a TFSA, or other account where your money is locked away, you may not be able to see the growth until the account is unlocked, but you might be able to calculate your expected ROI when you initially set up the account. It can be easy to get bogged down in the minutiae of investments and money moving around—it's important that you keep the big picture (your entire portfolio) in mind, even if one investment experiences a downturn. Try not to panic buy or sell your stocks, stay the course and you'll most likely be rewarded.
There are generally two paths to take when investing: diversification of stocks to increase earning potential across multiple stock options, or investing heavily in one (or a couple) of stocks that you're more certain will be successful. Finance gurus generally follow one method or the other, but most say that diversity of stocks is the way to go. Risk is an unavoidable part of investing your money in anything that isn't a TFSA, it's important that you bear that in mind going into any investment portfolio. However, there are unnecessary risks—such as buying speculative stocks, which are essentially gambling. Avoid these like the plague.
If you're buying insurance on your home, vehicle, or even life insurance—give all your money to the same company. Not only will this make it easier to manage what's paid and what's not, but you'll lower your premiums over time. Even though you may want to sell your house, it's important that you not spend money to renovate your home just so that the market will pay more for it. Invest in renovations for you and your family—you may not sell your home for months or even years after you originally anticipated doing so, so don't invest that money into appeasing a market that's constantly changing.
We all know that utility bills are a drain on our bank accounts, but there are plenty of creative ways to save on utility bills that don't cost an arm and a leg—or, even if they do cost a little more upfront (like installing a heat pump system), their savings overall generally mean they pay for themselves within a year or two. Installing low-flow toilets and showerheads, and purchasing highly energy-efficient fridges or other appliances are excellent choices to save money on your electricity.
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You can pay off your mortgage faster in two ways: paying a higher percentage down upfront, or making larger monthly payments than the minimum. Even if you're going to be staying in one location for the next 20 or 30 years, the quicker you pay off your mortgage, the more you'll have in your pocket for other things every month. If your job allows you to, working from home is a fantastic option to save money on things like gasoline and vehicle wear-and-tear, along with smaller bills like lunches out.
While this is a bit of a motto for life, it's important to spend your money on experiences that you'll remember for the rest of your life, rather than items that depreciate in value, like a fancy car. Taking that trip across the country to see friends or family will always be a memory you'll have to cherish. If you feel like you're paying too much for something, don't be afraid to negotiate for the price you want. Be polite and ask, "Are you at all flexible on the price?" Obviously, it's ultimately up to you to decide whether you're paying too much for something, but negotiating for a more favorable price could add up to big savings for you.
Even if you're getting ready for retirement, you should continue to use a tax-free savings account to maximize the amount you'll save without paying taxes on it. If you find yourself struggling to make ends meet, you can always look for a part-time job or a lucrative side hustle to bring in some extra cash. That few extra hundred dollars a month could go right into a TFSA or other investment option, or be used at home to take the pressure off. Regardless of how large your investment portfolio is, it's important to keep at least 25% of it in stocks that are inflation-resistant. By doing this, you'll minimize the impact that inflation has on your money—you may not be able to control the market, but you can control how you act within it. Financial knowledge and literacy is one of the greatest gifts you could give to your children. Learn all you can about investment options and do your best to pass that knowledge on to your kids. They may roll their eyes when you begin discussing money at first, but as they grow their own bank accounts, they'll definitely thank you for it later in life. Sometimes, making smart money decisions means sacrificing short-term happiness for long-term gains. You might want to spend money on that new car, game console, or other expensive item—but putting yourself into debt or taking that money out of your bank account for no other reason than frivolity isn't a way to ensure a secure financial future.
If you have a subject that you're passionate about, see which companies are involved in that field and whether they would be worthy of your investment. Is there growth potential in any one of them? The world's greatest investors are often visionaries that see the potential in a company or idea. Choose an investment avenue that you believe in and you'll be happier when you reap the rewards. Personal finance legend, Benjamin Graham, is often thought of as a pioneer in the investment industry, pioneering many of the investment techniques and philosophies that other great investors of our age adhere to. Although Graham died in 1976, his 1949 book The Intelligent Investor remains a finance must-read. If you're searching for your first investment option and don't have much money to invest, consider index investing. These investments make it possible to invest in a wide variety of assets, each at a reasonably low cost. It's a soft entry into the stock market and perfect for beginners.
Paying for things with credit cards can be more convenient, but it's a fantastic way to ruin yourself financially, particularly if you can't afford to make payments. Warren Buffett always advises paying for items in cash, if possible, that way, you're guaranteed not to spend more than you have and put yourself into debt to make a purchase. Even if you make a decent wage, continuing to live beneath your means is a great way to build up savings by habit—and eventually develop a savings routine that you don't even think about. You don't want to live paycheck-to-paycheck if you can help it, and adjusting your eating or spending habits is a great way to give yourself some extra funds at the end of each month. Even if you're just getting started on your investment journey, 15% is generally a good benchmark to begin investing in. Utilize automatic transfers that we've alluded to above to make that 15% investment an automatic thing with each paycheck. Annual salary reviews and possible raises are an exciting prospect. But, they can also come with the risk that you'll simply adjust your spending to account for the extra income and be no better off than if you were at a lower income level.
Your credit rating is a huge indicator (at least to financial institutions) about your ability to keep on top of bills and be fiscally responsible. It's important to keep on top of your credit report and maintain a good credit score. Leave a comment below on what financial advice you have taken that have served you well.
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