No matter how you slice it, the basics don’t really change. This blog is about money, so I’ll stick to the financial basics.
- Live below your means so you have some money to save and invest.
- Invest your money so that it grows over time.
- Go back to step one and repeat.
Everything else is about the details.
- Where should the money be invested?
- How low should the management expense ratio be?
- Are mutual funds better than index funds?
- Should one invest in index funds or exchange traded funds?
- Is real estate better than the stock market for investment returns?
Start where you are, and go from there. One of the best tools I’ve found for managing my own money is a spreadsheet. Thanks to Numbers, I’ve been tracking my expenditures for the past few years. I could’ve used an app on my phone, but I prefer to personalize the spreadsheet to my own requirements. An app has a built-in structure that may not be suitable for me.
By tracking my expenses, I’ve been able to see where I splurge and where I don’t. The past two years haven’t produced as sharp a drop in expenses as one would have thought. I spent just as much in 2020 & 2021 as I did in 2019 & 2018. Yet, in the past two years, I haven’t been to a concert, a movie theatre, overseas, or inside of restaurants. I’ve been at home, partaking in Netflix, homemade food, and lots of computer games. Despite my at-home-hiding-from-coronavirus existence for the past two years, my annual expenditures have been the same or slightly more than they were in the Before Times.
I’m paying the same amount of money to purchase fewer things. That’s called inflation.
Despite the arrival of this particular money-eater, the basics haven’t changed. I still have to live below my means and invest for growth. My spending power will hold its ground against inflation so long as my returns are higher than the inflation rate.
You owe it to yourself to spend a little bit of the present thinking about the Care and Feeding of Future You Fund. It need not be a lot of time. After all, life is meant to be enjoyed and not wished away. The right amount of time is however long it takes you to set up an automatic transfer from your chequing account to your investment account. When you get paid, a chunk of money should automatically be sent to your investments. Then you forget about that money and go back to your daily life, doing what makes you happy.
Three weeks of 2022 are already in the past. Time flies so very fast! It’s important that you don’t let procrastination stop you from sticking to the basics. You need not know everything before you start. Instead, you start today and you learn as you go.
Get some books from the library. Do a Google search. Spend some time at YouTube University. Check out the education section of Investopedia. Maybe start following some personal finance bloggers. You don’t have to understand everything before you set up an automatic transfer. Have the money accumulating so it’s in place when you’re ready to make your first investment.
In the interest of transparency, I want to tell you a bit more of my story. I started with guaranteed investment certificates. I didn’t understand that GICs don’t beat inflation and that my money wasn’t growing the way I needed it to. At the time, I was concerned with safety. I didn’t want to lose my money. Perfectly understandable! You don’t want to lose your money either, right?
However, I borrowed books from the library and I learned about these things called mutual funds. They were offered by banks and they would give me better returns that GICs. So I switched my money to mutual funds. After a time, I learned about index funds and exchange-traded funds. They were better than mutual funds because they charged lower fees. Today, I’m still investing in ETFs while learning about crypto currency and NFTs. I’ve done some real estate investing but certainly not enough to consider myself an expert.
If anyone were to ask, I’d tell them that I have made many mistakes in my investments. I didn’t have all of the answers when I made my choices. I didn’t always understand the implications of my choices. If I could go back and make different decisions, then I most certainly would. That’s not possible so I continue to follow the first three rules articulated above. Save – invest – learn – repeat.
Wherever you are on your personal finance journey, you should be putting the basics to work for your money. You work hard for it. The least you can do is make sure that your money is working just as hard for you. There’s no time like the present. Take the first step today. Congratulate yourself. Then work on figuring out the next step. Take that step too. Before you know it, you’ll be saving and investing for Future You while still enjoying the gift that is today.