Millionaire on the Prairie

Tag: TFSA

  • Three Simple Steps to Master Your Money.

    Three Simple Steps to Master Your Money.

    At the time of publishing this post, there are less than 60 days left in 2024. You might want to start thinking about your dreams and goals for the new year. Whatever yours are, I’m going to suggest that learning to master your money should be one of your goals. After all, you’re the person earning the money and you should be firmly in control of what your money does. Trust me. Life is better is when your money works harder for you than you do for it.

    There’s no need to wait until January 1 to make the following suggested changes. Believe me when I say that you’ll want to master your money sooner rather than later. Start today.

    If you’re a person who likes to make resolutions, then you can implement these three steps on New Year’s Day. Everyone else, I would strongly encourage you to do start following these steps immediately.

    Top Up Your Emergency Fund

    The goal is to have one year’s worth of necessary expenses set aside. I know that most experts recommend 3-6 months’ worth of expenses. Personally, I don’t believe that this is enough. You’re free to disagree with me, of course. The reality is that it’s better to have a bigger emergency fund than you might need. When your income disappears, you’ll want to have as much set aside as possible to tide you over until you get another paycheque.

    Your next job might pay you less than you were earning before. It might take you longer than 6 months to find your next position, or to start earning money from your own business. Being unemployed is a bad situation. Going into debt to pay for living expenses while unemployed makes the situation considerably worse.

    Do yourself a favor and set aside more than you need. Your necessary expenses are your shelter costs, your basic utilities, your food, your transportation, your medications, and your phone. If you have pets, then you need to cover their costs too. Everything else should be put on hiatus until you get another source of income.

    For most people, it will take some time to hit this target. Setting aside a year’s worth of expenses won’t be quick. There will be many, many temptations along the way to spend re-direct money away from the task of building your emergency fund. Do yourself a favor. Set up an automatic transfer from your chequing account to your emergency fund. This way, you don’t have to think about funding your future emergencies as it will happen automatically through the magic of technology.

    Invest Your Money

    First things first – track your expenses. Ideally, you’ll do this for a month. Write down what you spend. Figure out which expenses were necessary (see above) and which ones weren’t. Of the second group, identify the ones that don’t make you happy and promise yourself to eliminate those ones in the future.

    Whatever money is cut needs to be re-directed towards your investment portfolio. Your investment portfolio consists of registered accounts and your brokerage account. Your registered accounts are your Tax Free Savings Account (TFSA) and your Registered Retirement Savings Plan (RRSP).

    Fill your registered accounts before you start contributing to your brokerage account. The TFSA will not generate a tax deduction but the money will grow tax-free forever. You can also withdraw money from your TFSA without paying taxes. The RRSP money is tax-deductible, and money inside an RRSP will grow tax-free. Once you start to withdraw the money, you’ll pay taxes on it. Fill your TFSA to its limit, then focus on filling your RRSP.

    Once you’ve filled your registered accounts, then you can open a brokerage account and re-direct your investment contribution. Money invested in your brokerage account is not tax-deductible, and you do have to pay taxes on it every year. Ideally, you’ll be investing in securities that generate dividends and capital gains for you. Dividends and capital gains are not taxed as heavily as interest earned in a bank account or from GICs.

    Follow this order of investing every year: TFSA -> RRSP -> Brokerage Account.

    If you’re starting from scratch, it might take you a few years to fill up the registered accounts. That doesn’t matter. You’re trying to build a nice, fat money cushion for Future You. Consistency is key, so don’t worry about how long it will take. Just start today and don’t stop.

    Pay Off Debt

    Ridding yourself of debt is just as important as long-term investing. I don’t want you sacrificing one for the other because you need time on your side. You need to have money invested so it can compound for as long as long possible. This is why you should be investing at the same time that you’re paying off debt.

    After you’ve eliminated the debt, you will have a hard-working investment portfolio in place. This is a wonderful thing! It means you won’t be starting from $0 if your debts aren’t gone until you hit your 50s or 60s.

    Tighten your belt and learn to say “No”. If you have debt, then I want you to do the following.

    Take half of your contribution amount and direct it towards your debt. Allow me to be very clear. You’re already paying the minimums on your debts every month. Half of amount that would’ve otherwise gone to your investments will be added to the minimum payment of one of your debts. An increased payment dramatically shortens the time it will take to pay off a debt. Once debt #1 is gone, add that entire former payment from debt #1 to the minimum payment of debt #2. When debt #2 disappears, add the entire former payment that was going to debt #2 to the minimum payment for debt #3. Repeat this cycle until all of you’ve paid off all of your debts.

    Do not get bogged down in deciding whether to use the Debt Snowball Method or Debt Avalanche Method. It truly doesn’t matter. The only thing that matters is your decision to start paying down your debt today.

    Both methods will get your out of debt. Personally, I like the Snowball Method since it eliminates the smaller debts first. Paying down debt sucks, so seeing wins as soon as possible makes people feel good.

    Once you’ve paid off your debts, take the former debt payments and re-direct them to your registered accounts and your brokerage account.

    That’s It. That’s the Plan.

    Once you’re out of debt, stay out. Save up for large purchases so that you don’t have to finance them. The one exception is your mortgage. Even I will admit that this is the one purchase where financing is nearly unavoidable without a lottery win, a big insurance settlement, or an inheritance.

    Keep your emergency fund fully-funded. If you need to use it, then make it a priority to build it back up again. Life can be funny. There’s no rule saying that only one emergency is headed your way.

    Invest for the long-term. Put your money into well-diversified, equity-based securities. Personally, I like exchange traded funds (ETFs) more than I like mutual funds. For nearly the same security, ETFs will cost you atleast 80% less. Read The Simple Path to Wealth by JL Collins. While it’s written for an American audience, the savings & investing principles are equally applicable to Canadians.

    You’re already doing all of these things, you say? Fantastic! Use this time to tweak your system, if necessary. Consider increasing your emergency fund by 3%, just to keep up with inflation. It’s never a bad idea to increase your contributions to your brokerage account by an additional 1%. Taking this step every year will make a big difference in how much your accumulate. It bears repeating – once your debt is gone, keep it gone.

    That’s it – that’s the plan to master your money. If you do these three things, then you’ll be setting yourself up for success.

    Everything else is details.

  • It’s Time to Assess Your Financial Progress.

    It’s Time to Assess Your Financial Progress.

    Well, we’re already weeks into the final third of the year. Tempus fungit, which is why you should take 20 minutes or so to assess your financial progress. Is your debt decreasing or increasing? Have you added more money to your emergency fund? Did you set up an automatic transfer? Are your sinking funds in place for your short-term goals?

    You’re the only person who can honestly say whether you’ve taken the actions needed to get you where you want to be. After all, you’re responsible for doing what’s necessary to make your dreams come true.

    How many of the following actions have you taken so far this year?

    • tracked your expenditures each month
    • directed some portion of your paycheque to your emergency fund every month
    • created sinking funds for your short term goals
    • eliminated recurring subscriptions that no longer make your happy
    • ensured that your credit card is paid-in-full every single month
    • paid off your debt by making extra payments over and above the minimum payment amount
    • funded your RRSP and TFSA as much as you can
    • set up an automatic transfer from your chequing account to your investment account
    • opened a brokerage account so you can invest your money into ETFs
    • ensured that your securities in your investment account are set up on a dividend re-investment plan
    • started making financial plans for 2025

    Ideally, you will have completed all of these tasks. It’s okay if you’ve only done a few or even only one of them. Getting good with your money takes time and practice. It’s about building habits, which will eventually become financial reflexes if given enough time. The sooner you start, the better for you.

    If you haven’t done anything to progress financially, then chastise yourself for no more than 10 minutes then move forward to the next step. In case you had any doubt, the next step is to start. Yes – that’s right. Start by doing one thing. If you can find time to mindlessly scroll various apps on your phone, then you have time to start taking the steps to improve your financial future.

    I promise that if you continue to do nothing about your money situation, then your financial circumstances will never improve. Believe me when I say that you’ll be in the same position tomorrow as you are today if you don’t make any moves to earn, save, and invest your money.

    Start where you are today and go from there. Do not assume that you have to know everything about money before you begin. There is no perfect way to do money. Good money moves are unique to each person. That said, spending every penny you earn, going into debt, and living without an emergency fund is a recipe for financial strife. That particular course of action benefits no one. You have to start today. As you learn better, you will do better.

    When I started my own financial journey, it was with $50 every two weeks for my part-time job in a grocery store. I would go to the automated teller to transfer $50 from my chequing account to my savings account. Eventually, I had $8,000 in my savings account. Like an idiot, I used half of it to buy my first car. Sigh…

    The good news is that I learned from my mistake. As I earned more money, I started saving a bigger amount from my paycheque. Reading about personal finance became my hobby. That lead to me opening my RRSP at age 21. I managed to fully fund my RRSP every year that I had contribution room. In 2009, the TFSA was born and I started to fill that up too. Over time, I learned about exchange traded funds so I switched my investments from mutual funds with high MERs to ETFs with low MERs. As a result, more of my investment returns stayed in my pocket instead of going to the fund manager. (Check out this calculator to see the impact of MERs on a portfolio’s returns over time.)

    It took a while but, I eventually paid off my student loans, a car loan for my second vehicle, my mortgage, and a car loan for my third vehicle. When I was finally out of debt, I made much better use of my investment account by using my former debt payments to buy more investment securities. Without debt, I finally had some extra money over and above what was required to fully fund my RRSP and my TFSA each year. Once I was investing a third of my take-home income, I established sinking funds for travel and renovations to my home. Future Blue Lobster would be provided for by my long-term investments so it was time for me to focus on some short-term and mid-term goals that would make my life’s journey a little more comfortable. In short, I wanted to add a few little luxuries to my life so I did.

    For me, being debt free was a key element of making substantial financial progress towards achieving the things that I wanted from my life. One of the biggest things I’ve always wanted is financial independence. I desire to be in a position where my investment income can replace my entire salary if necessary. That day is very nearly here as I’ve finally reached what is called Lean FIRE. Personally, I’ve never been a huge fan of Lean FIRE, but I do see its utility for some folks who want to do something else with their time.

    I don’t know how much debt you have, yet I’m pretty sure you’ll be better able to fund your heart’s desires when you aren’t sending so much of your money to your creditors. Figure out a way to eradicate your debts sooner rather than later. Avalanche method or snowball method isn’t terribly important. The most salient factor is getting rid of your debt. If you do nothing else financially for the rest of 2024, please work on eradicating your debt. The sooner it’s in your past, the sooner you will have the money to make your dreams come true.

    While you’re paying off debt, don’t forget to invest some of your money. It can be $5 per week or $50 per month, or whatever amount above $0 that you choose. Just start investing! The more time your money has to compound, the bigger it will grow. You really can’t afford to wait until your debt is completely gone before you start investing for Tomorrow You.

    No one is saying this will be easy, but it’s not impossible either. Depending on the size of your income, it may take a few months to achieve all of these goals or it may take several years. I can promise that none of these goals will be achieved if you’re not willing to take the steps to make them your reality. No one is perfect at money, and there is always more to learn. That shouldn’t impede you from trying. Start today, from where you are right now. If you invest nothing today, then you will have nothing tomorrow. It’s as simple as that. You and I both know that you want to be more financially secure tomorrow than you are today. What’s stopping you from moving towards that goal?

    Let’s say that you’ve reached the point of being debt-free with a fully-funded TFSA and RRSP. You’ve also got atleast 6 months of income stashed away in your emergency fund and a nice chunk of each paycheque is being invested into ETFs. Your sinking funds are replenished every year so that you can pay for those large, irregular expenses that show up every year. Now what?

    First, congratulate yourself on being very, very good with your money! So many people will read blog posts like these without taking any steps to implement the suggestions therein. By following these steps, you’ve set yourself up to be financially secure. Second, keep doing what you’re doing right now and continue to learn more. Stick to your knitting and watch the financial wins multiply in your favor.

    And if you’re not yet at the top of your money game, then it’s time for you to start. Tomorrow You will be thankful that you did. Again, if you invest $0 today, then you will have $0 tomorrow. You need money until the end of this journey call life. Today is a great day to begin targeting some of your time and energy towards building a solid financial future for yourself.

    Assess your financial progress and take the necessary steps to get yourself where you want to be with your money.

  • The Debt Is Gone. Now what?

    The Debt Is Gone. Now what?

    I spend a lot of time talking about paying off debt. Why? For the simple reason that debt impedes you from spending your money on the things that you really want.

    Once the debt is gone, what should you do with your former debt payments?

    This post isn’t for those of you who already have a plan for your money.

    If, however, you’re a person who doesn’t have a good plan for your money, then you should stick around while I drop some pearls of wisdom. Feel free to pick them up as you see fit.

    Whatever your former payment amount, I want to divide it by three. One third will go to your emergency fund. The next third will go to your retirement and/or investment account. The last third will go into your chequing account so that you can spend it on upgrading your life.

    Build Up Your Emergency Fund

    Emergencies can strike at any time. They’re inconvenient that way. And while I don’t know what kind of emergency will land in your lap, I can pretty much guarantee that it will have a financial component. You need to have an emergency fund to handle it.

    Some people advise having 3 months’ worth of expenses in the bank. I’m a lot more conservative than that. I think everyone should be aiming for atleast 6 months’ worth of expenses in their emergency fund. Let’s say you lose your job. That’s definitely when you will need your emergency fund to carry you until you can persuade someone else to pay you for your skills and expertise at whatever it is that you do.

    It will take a long time to build up 6 months’ worth of expenses. (For those of you who are really, really conservative, aim to build up 6 months’ worth of income!) Debt is a barrier to building a sizeable emergency fund. That’s why I dedicating one third of former debt payments to the task of weaving your financial safety net.

    Give Your Retirement & Investment Accounts Some Love

    The next third of your former debt payment should go to maxing out your Tax Free Savings Account and your Registered Retirement Savings Plan. These are the two registered accounts where you should be investing money for your retirement. Future You will thank you for doing so.

    In the fortunate event that you’ve already contribute the maximum allowable amounts to both your TFSA and your RRSP, you should open a non-registered brokerage account and invest one third of your former debt payment. Your investments will grow tax-free, so it’s to your advantage to invest your money sooner rather than later.

    Unlike the TFSA and the RRSP, there is no limit on how much you can invest in your non-registered account.

    When your debt is gone, set up an automatic transfer from your chequing account to one of these accounts – TFSA, RRSP, or non-registered brokerage account. Max out the first 2 before you start investing in the last one.

    Inflate Your Lifestyle With the Last Third

    That’s right. I’m encouraging you to spend your money. After all, you worked hard for it. Now, instead of sending it to someone else, you get to keep it. You can spend it on whatever you want. That’s the beauty of being debt-free!

    Maybe you’ve been dying to take a trip? Or maybe there’s something new you want for your home? Perhaps it’s finally time to join that wine club you’ve found? Whatever it is, I want you to buy it. You now have the cash and your purchase won’t impact your ability to invest for the future, nor your ability to save for emergencies.

    Maybe there’s nothing you want to buy right now. That’s fine too. You don’t have to spend money if you don’t want to. Keep the money in a sinking fund labeled “Whatever I Want”. When you figure out what you want to buy, if anything, the money will be there waiting for you.

    And if there truly isn’t anything want to purchase, then you may want to fill up your emergency fund even faster. No one has ever complained about having too much money during an emergency. You could also send more money to your retirement and investment accounts.

    I’m not encouraging you to squirrel away every penny for the future, or for emergencies. However, if you don’t see a need to increase your day-to-day spending, then those are two great options for the final third of your former debt payment.

    Another fantastic option is making a charitable donation to causes that you hold dear to your heart. It’s good karma to help others and money is very helpful for those who need it.

    So there you have it – Blue Lobster’s suggested use of your former debt payment. Again, take what you need and leave the rest. You earned the money so you get to decide how best to use it to make your dreams and goals your reality.

  • Have You Decided How to Spend Extra Money?

    Have You Decided How to Spend Extra Money?

    Most of us dream of winning the lottery, but there are times when smaller lump-sums come into our lives. What should be done with that extra money?

    In my humble opinion, you should split that extra money in the following way:

    • 50% to your investments
    • 30% to your debts (if you have any)
    • 10% to your emergency fund
    • 10% to whatever you want

    Investments need to be funded.

    My advice is to invest money when you have money. Your Tax Free Savings Account and your Registered Retirement Savings Plan will not fund themselves. It’s up to you to put the money into both of these accounts. Once you’ve made the contributions to your TFSA and RRSP, you have to invest that money so that it can grow over a long period of time.

    If you’ve already maxed out your TFSA and RRSP contribution room, then put the money into your non-registered brokerage account. The government taxes capital gains and dividends earned in your brokerage account less than it taxes income received from your employer. This is a very good thing.

    So when that “extra money” lands in your bank account, invest half of it.

    Pay down your debts.

    In an ideal world, you don’t have any debts.

    Most of us don’t live in an ideal world. Debt is a part of many people’s lives via student loans, credit card debt, medical debt, mortgages, car loans, etc… I view debt as a financial cancer. Debt prevents you from building your own financial cushion. It prevent you from accumulating wealth. When you send money to your creditors, then you’re unable to invest those same dollars for Future You. Debt limits your ability to make life a little bit easier for Today You.

    So when extra money comes your way, send atleast 30% of that amount to your debts. If you want my opinion, pay off any debts that can be paid in full. I subscribe to the Debt Snowball method of repayment because it feels good to get rid of debt. Positive psychological boosts are generally good motivators, so I’m a fan.

    Top up your emergency fund.

    It takes a very long time to build up an emergency fund. While some people are comfortable with a smaller one, my goal is to work my way up to 12-months worth of expenses. I’ve yet to meet this goal and I’m still working towards it. Thanks to my automatic transfers, I’ll get there eventually.

    In the interests of transparency, I’ll tell you that I recently had to pull money from my emergency fund. Accordingly, refilling my emergency fund has moved up my priority list for my money. I need my cushion to be replenished as soon as possible because there’s no way to know when the next emergency will arrive.

    When extra money comes your way, it’s an extremely good idea to put atleast 10% of that money into your emergency fund. You don’t know when that emergency is going to land. There is a high likelihood that there will be a financial component to your emergency. Right now, there’s no way for you to know how big that financial hit will be. Trust me when I say that you will be very happy to have some money salted away the day that you have to deal with your emergency.

    Spend the rest however you want.

    That’s right. I want you to spend the last 10% of your extra money however you want.

    While I firmly believe that it’s important to save for the future and to get out of debt, I realize that one of the main benefits of money is buying those things that will make you happy today. Is it a nice dinner out? Maybe a day on the links? Or you need to refill your wine-rack? Perhaps you want to upgrade your phone or your computer? Is there a getaway that you’ve been wanting to do?

    Whatever it is, make it happen with the remaining money without going into debt.

    Let your priorities guide you.

    It’s your money. You’re the one deciding how to spend your extra money. My suggestion allocation of how to use that money is for those who might need help in figuring out what to do with their extra money.

    Now, the allocation suggested above is just my preference. Other people might have different priorities for their extra money. Some people might want to put all that money towards paying off their debts. There are others who will put the whole amount into their investments. Of course, there are also those who will see this as “found money” and will choose to spend the entire amount on whatever they want at the moment.

    Do what makes sense for your life. Having a plan for your extra money ensures that your priorities are met, and that you’re not left wondering where all that money went.

  • Scared of Making Investing Mistakes? Do It Anyway.

    Scared of Making Investing Mistakes? Do It Anyway.

    You learn a lot from failure. It’s a more instructive teacher than success.

    Everyone makes mistakes with their investments. Warren Buffett started investing when he was 10. Do not let anyone convince you that every investment he’s made in his entire life was a winner. If I had to guess, I’m sure that he’s made a really bad investment or two in his time. No one picks a winner every single time, not even Warren Buffett.

    The reason he became super-rich is due in part to the fact that he never gave up investing after making his mistakes. You shouldn’t either.

    The fact that Mr. Buffett has been investing for the past 83 years also hasn’t hurt him. Take a page from his book. Once you’ve started down the investing road, don’t stray from the path. Invest – err – learn – repeat. That’s the key to getting good at anything.

    You need to start investing today. My inexpert & amateur recommendation is that you start investing into your TFSA. Don’t be misled by the name – Tax Free Savings Account. This account is best used for investing your money, not saving your money.

    If you invest $0 this year, then you’ll only be harming yourself. Procrastination is your enemy when it comes to investing your money for long-term growth. Think of how far ahead you’d be with your investing knowledge if you’d started 10 or 15 years ago. Let that be your impetus to stop dawdling and to start doing.

    Start with $1/day. That’s $365 going into your TFSA. If you can swing $2/day, then that’s $730 working for you on a tax-free basis. And if you think anything less than $1,000/year isn’t worth attempting, then all you need to set aside is $3/day to have $1,095 working hard for you.

    Invest your money…and learn from your failures. No one is expecting you to be perfect the first time out. As a matter of fact, it would be downright weird if you never made mistakes with your money. I’m not suggesting that you make money mistakes on purpose. I just don’t want you to be so paralyzed with fear of making mistakes that you never invest.

    If you could remember when you learned to walk, then you’d remember how many times you tried and fell down. Each time, you got back up and you tried again. Your first forgotten lesson was that you couldn’t move both feet at the same time. You next lesson was probably that holding onto something made walking a lot easier. Couches, tables, a bigger person’s fingers – whatever was steady and handy was good enough. Next, you figured out that you could do it on your own but leaning too far back or too far forward resulted in toppling over. It took a bit of time, but eventually you got very, very good at walking. Now, you do it with barely a second thought.

    Bottom line is that you mastered walking. The same can be said for investing. Try – fail – learn – repeat. You’ll make errors. So what? Make them quickly, learn from them, then never make the same one twice. Learn from others’ mistakes too. That’s a perfectly valid way to learn a lesson. Re-invest your dividends. Increase your automatic transfer amount as you’re able to do so. Max out your TFSA. Then max out your RRSP. Then open a brokerage account and invest money there too. It doesn’t have to, and very likely won’t, happen quickly but it will happen. So long as you start today.

    If you’re 18 or over, open your TFSA. It’s easy. Every financial institution has made it a seamless process to open your TFSA online. Do you have one already? Great! Set up an automatic savings transfer. Every time you get paid, money goes into your TFSA. I would suggest $24/paycheque since we’re going into 2024. You can pick your own number, whatever your budget can bear. In 2024, the maximum TFSA contribution is $7,000. Don’t beat yourself up if you can’t put in the maximum contribution. Anything more than $0 is fantastic!

    And if you’re under 18, you can’t legally open a TFSA. That shouldn’t stop you from opening a savings account at an online bank. (Most youth accounts at brick-and-mortar banks are free too, but don’t use a bank where you have to pay fees.) Put your money into your savings account. When you turn 18, open a TFSA then transfer the money over.

    Everyone starts somewhere. Your journey won’t be the same as everyone else’s but you do need to start. And once you do, don’t stop. Keep that investment train chugging along by investing a portion of every paycheque for long-term growth.

  • The Secret to Wealth? Invest the Difference.

    The Secret to Wealth? Invest the Difference.

    Three little words. These three small words have the power to change your financial destiny if you make the choice to implement them in your life.

    Invest the difference. What does that mean?

    In a nutshell, it means you should be living below your means. The LBYM-lifestyle translates into always having a gap between what you earn and what you spend. Your goal is to make the difference between your earnings and you spending as big as possible while still enjoying your life from day to day. Then you’ll take that amount, ie. the difference, and you’ll invest it for the long-term. The bigger that amount, the sooner you’ll reap your investment gains. Then you’ll let those gains compound for a couple of decades. At some point, your investment gains will able to support Future You, whether wholly or in part, when you’re no longer able to send your body out to make money.

    Kindly keep in mind that staying out of debt is a key part of living below your means. If you’re constantly paying money to creditors month after month after month, then you won’t have those dollars going into your investment portfolio. Also, paying creditors 29.99% when you can only reasonably expect an average return of 8%-10% over the long-term is a losing proposition for you.

    Pay off your debts then start investing.

    If you have debts, focus on paying them off first.

    Unless you’re over 35. If you’ve hit your mid-30s, then you need to invest while you’re simultaneously paying down your debts. Yes – you’ll pay a little more interest this way, since your debts will stick around longer. In my humble opinion, that’s not your biggest concern. Once you’re solidly into your adult years, then you need to start making adult decisions. And one of those decisions is to take care of Future You by investing money for your care and feeding 30 years from today. Once you’ve hit your mid-30s, then you need your money to be working for you as soon as possible. In your case, ASAP = immediately. It doesn’t not mean “tomorrow”.

    The trick will be to not go into anymore debt. Make a plan and stick to it. As your debts get whittled away, re-direct 50%-75% of your former loan payments to your investment. The rest of the former payment can be spent bulking up your emergency fund. If your emergency fund already holds 9-12 months expenses, then spend that money on the little luxuries that make your life more comfortable.

    Maybe you want to enjoy a nice bottle of wine once a month? Or would you rather travel somewhere? Perhaps you finally have the money to comfortably handle the long-term financial commitment of a pet? You know what you want better than I do. My point is that you should use some of that money to add what you really want into your life.

    If you need a plan for how to pay down your debts, I would suggest using the Debt Snowball method. Despite the controversies that are always swirling around the man who made them famous, this method of paying off debt is an effective and straightforward way to rid your life of creditors. Do not go into further debt while paying off your current ones. I cannot stress this enough. Staying out of debt is incredibly important to Future You’s survival and comfort.

    Where should you invest your money?

    In my humble and inexpert opinion, your money should first go into your Tax Free Savings Account. Then it should go into your Registered Retirement Savings Plan. Finally, you should be investing in your non-registered investment account, aka: your brokerage account.

    Don’t feel bad if you can’t max out your TFSA and your RRSP right away. It literally took me years to max out my contributions. (And I treated myself to something nice when I finally accomplished this goal!) Invest as much as you can, as soon as you can. Eventually, your debts will be gone and you’ll have the funds to contribute. Stick to your knitting and you’ll accomplish this goal. Remind yourself as often as you need to that it likely won’t happen overnight.

    So those are the broad strokes. Think of them as the first principles of wealth. You simply have to live below your means, stay out debt, and invest the difference. If you do that consistently for a very long time, the odds of you becoming wealthy increase dramatically.