It’s natural to doubt yourself when you first start something new. However, the great part is that those doubts diminish over time as you get better at doing the new thing. Gaining some experience goes a very long way towards quelling the nagging voice in your head that tells you that you’re out of your depth. If you do anything over and over and over again for a long enough period of time, eventually you’ll approach it by telling yourself that you’ve got this!
Personal finance is no different. No one starts off doing it perfectly from the very first time they do a budget, or save money, or pick an investment. If it were easy, then everyone would do it. We would all be rich – none of us would have consumer debt – we’d all be retired by 35 and spending our time doing what we love best.
That’s not the reality though, is it?
In the real world, it takes a bit of time to gain confidence with our money. And that’s perfectly fine! I started at age 16 with $50 from my part-time job at the grocery store. Every two weeks, I would manually transfer $50 from my chequing account to my savings account. At one point, I had $8,000 in my savings account. (There was a condo up the road from my house that was for sale for $40,000. I had the 20% down payment, but I was still in school and I knew my parents would never co-sign a mortgage for me… Sometimes, things don’t line up for you and investment opportunities are missed. That condo is now worth over $200,000!)
Back then, I was young and un-knowledgeable about personal finance. All I knew how to do was save a little bit of my paycheque while spending the rest of frou-frou stuff that has long been forgotten. I shouldn’t be too, too critical of Young Blue Lobster – atleast I had the brains to pay myself first. Saving $50 bi-weekly was a good start, but I hadn’t realized just how much was yet to be learned. A savings account is not the place to invest money. By the time I’d finished my undergrad, I’d learned about mutual funds… so I started investing my money with in a bank’s lineup of mutual funds.
Better than a savings account, but still not great. Bank products generally had very high management expense ratios. I eventually learned about MERs, and how higher MERs lower my overall return. Once I had that knowledge, I I learned about investment companies and how they have lower MERs. I moved my money. Anyone remember Altamira?
Though hardly glamorous, each time I learned more about some aspect personal finance, I adjusted course. When I paid off my student loans, I turned my focus to paying off my vehicle loan. Debt was bad so I had to get rid of it. Renting was bad – or so I thought at the time – so I bought my first residence, a condo in the university district that became my first rental property. When I started thinking about retirement, I funnelled money into my RRSP and then, when they were introduced in 2009, into my TFSA. In my 30s, I switched from mutual funds to exchange-traded funds. The more I learned, the more I refined my money management skills.
Am I an expert today? Gosh, no! There’s still so very much more for me to learn. However, I can tell you that I’m more confident today than I was decades ago. I’m not frozen by indecision anymore. My trial and error, and my past mistakes, have taught me to ask better questions. I don’t invest in products that I don’t understand. Today, I’m far more prepared to do my own research before investing my hard-earned money.
Create your own plan of action.
Figure out what you want. These are your priorities, aka: the things you want to do/be/have in order to live the life that you want. Money that’s not spent on your survival should be channeled towards funding your priorities. Don’t spend your money on things that don’t get you closer to your priorities. Studying abroad? Six weeks in the Riviera? Starting your own business? Taking a sabbatical from work? Creating a scholarship fund? You can have what you want if you can figure out a way to get it. This blog is about the financial aspect of your priorities. Figure out what you want, then spend your money in a way that helps you to get it.
Determine your savings per diem. This is the daily amount of money that you will set aside to turn your dreams into reality. I don’t care how much you start with. My $50 bi-weekly amount worked out to $3.57 per day. Maybe you can afford more, maybe you can afford less. It doesn’t really matter. If you save $0 per day, then you will have $0 to create the life you want. You must save something. When it comes to money, some is definitely better than none!
Find the balance between enjoying the present and planning for the future. It’s taken me a very long time to learn how to spend a little bit in the here-and-now. Some would say that I still invest too much of my money. And they’re entitled to their opinions. For my part, I know that I’ve found a balance that works for me. In the Before Times, I’d started travelling to Europe each year. It was important to me to see another part of the world while I was still young and energetic enough to do so. I bought coffee a little more often than most FIRE gurus would suggest. My last two vehicles were purchased brand-new rather than used. Oh, I’ve spent money in countless ways on today’s whims – there’s no doubt about that! However, those whims were only and always funded after I’d paid myself first.
Finally, don’t be too hard on yourself. Personal finance is personal because there’s no one exact right way for you to handle your money. Your priorities are different than mine, as are your responsibilities and risk tolerance. You may hate the stock market so you’re investing in real estate. Or maybe you’re into cryptocurrencies and are getting in sooner rather than later. Maybe you’re running your own business, or you have a side hustle on top of your regular job. However you choose to earn your money, you owe it to your self to save then invest your funds in a way that gets your closer to living your dreams.
Never, ever stop learning. Remember the wise words of Dr. Maya Angelou – when you know better, you do better.
It’s all good, because you’ve got this!