#1: Spend less than you earn. It’s tough to do these days because we live in a consumer-driven society with easy access to credit, but the only way to progress towards your long terms goals is to spend less than you earn, every single month. If you don’t heed that advice, chances are your debt will go in the wrong direction and you’ll be facing an even bigger challenge in 10 years.
#2: Plan on getting rich slowly, not quickly. What is common amongst most ‘get rich quick’ schemes is that the promoter is typically the one who gets rich (or moves on to other things quickly). Everyone else is left wondering when the money is going to start flowing! The power of time combined with compound interest is probably the 8th Wonder of the World. Double your money several times over your lifetime through steady, strategic and sound advice, and small becomes big – guaranteed.
#3: Maximize your RRSP and take advantage of any company or government give-aways. If your company has a matching plan, take advantage of it. This is free money, and free is good! If you are saving for your children’s education make sure you are benefiting from the 20% CESG offered by our government. Tax-free compounding is wonderful in both RRSPs and TFSAs, and both are great vehicles for long and short term saving respectively.
#4: Keep your investing simple. See point #2. Watch your fees, stay diversified, and understand what you are invested in. Let inertia and time do its thing by staying out of the way and avoiding high fee mutual funds. Don’t challenge a sound long-term strategy every time the markets turn; that’s the equivalent of pulling a tree up by its roots every year to see if it’s growing. Trust me, it will die.
And the bonus step: ‘Keep money in perspective’. Part of maintaining a healthy relationship with money is recognizing what it can do for others. A little bit of generosity can go a long way, and can make you feel better about why you are earning a living. There are hundreds of charities and religious organizations that rely on the support of our community so find one that means something to you and give back.