Imagine having the opportunity to go back in time and talk to the 19-year-old you, having the knowledge you do now? I turned 69 this year so going back 50 years to when I was 19 and having that “talk” with myself would have had a dramatic effect on my over all financial health.
Here are 8 things I learned and would do differently:
1 – Learn how money works in High School
- While I had frugal immigrant parents who were savers and not spenders, they didn’t understand equity market-based investments such as stocks, bonds, mutual & segregated funds.
- To their credit they paid for everything in cash but there is “good debt and bad debt” in life, and I didn’t understand how credit could be utilized to better one’s quality of life.
2 – Establish a credit history immediately with a financial institution that you can work with
- Again, because my parents paid for everything in cash, I assumed this was the correct path for me as an adult. I was shocked when in my early twenties I had no credit history and even acquiring a small loan was challenging.
3 – Buy what you need and not what you want.
- There is a huge difference between want and need and I learned the hard way that having the coolest, fastest most exciting toy comes with a price. Finally, a decade ago I become comfortable with owning a 7-year-old car that is paid for, vs. having the latest model and financing it with large
4 – Spend less than what you earn
- For generations, this valuable information has been passed down, but I really didn’t understand it 30-40 years ago. I paid a lot of unnecessary interest to banks and credit cards that could have gone into RRSPs way earlier in my life.
5 – Avoid get rich schemes
- There is a reason “penny stocks” are valued as low as they are. No longer are gullible investors like me buying gold mines in the Yukon or BC Interior, instead they are buying dubious cryptocurrency schemes – but the results are the same.
6 – Consider the source when getting financial advice
- Just because someone is driving a leased Maserati doesn’t mean they are financial experts and have wealth. Ironically, I found those with serious wealth didn’t flaunt it by driving expensive vehicles to impress people.
7 – Don’t chase bad money with good money
- The analogy is like a gambler doubling down to make up for a previous gambling loss. Back 30 – 40 years ago I would do that with penny stocks, buying more as it dropped from ten cents to five cents to zero. The only people who made money was my stockbroker buddy who I played racquetball with, and the promotors who flogged those penny stocks on commission.
- Sometimes you must just walk away from a loss, lick your wounds, and call it a life lesson.
8 – Don’t get on the bad side of Canada Revenue Service with dubious tax schemes
- Back in the 1980’s CRA did not give advance rulings on tax driven schemes and investments. Many of these operated like pyramid schemes and played in the “grey zone” of what was legal.
- Years after buying one of these tax driven programs that had the approval of my accountant, I, along with hundreds of other investors were reassessed by CRA. Current interest rates were more than 14% and CRA demanded repayment of not only the amount we saved in taxes but over 5 years of interest payments on the same amount. The debt doubled and CRA was unwilling to waive $1 of what was owed, and my only recourse was to get a Home Equity Loan to pay them off.
So, what did I learn? Teach yourself how money, including debt, works by doing the homework. If you want to deal with a financial advisor, find someone you can trust who will collaborate with you as your assets grow – but always ask questions!