Million Dollar Journey

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Building Wealth through Saving and Investing

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The Best Time to Start is Now

I get a ton of email from people asking "How do I start" or "I can't start my financial journey because I'm in debt".

The best time to start improving your financial life is NOW. 

Are you in debt? 

  • Start a plan to reduce spending, and putting more money towards that debt.  You'd be surprised how much an extra $100-$200/month can reduce the loan term.   If it's the worst kind of debt like high interest credit cards, cut them up, start paying them back and go on a cash only based system.  You can't spend what you don't have right?  I would even go as far as saying forgetting about RRSP/retirement contributions until all high interest debt is eliminated.
  • Remember, paying down debt IS increasing your net worth!

Are you just getting out of University/College and got your first job? 

  • Yes, you deserve to splurge a little. However, this is your opportunity to really kick start your financial future as you have TIME on your side.  I would say that the single most powerful wealth builder is compounding returns over time.  Get in the habit of putting aside 10% of your pay and you'll come out ahead in the years to come. 

Are you in your 40's or 50's and don't have a retirement fund

  • Start now!  Don't look back and regret what you "should have" done, look forward and work with what you have NOW.  Look into RRSP's, paying down your mortgage, or starting a non-registered portfolio.  As your investment time line is shorter than someone who just graduated from University, you'll most likely have to budget a little more savings for every month to meet your retirement goals.  Better late than never.

If your financial life is in turmoil, there is always a way to improve your situation.  Start looking for solutions and get started today.

photo credit: garryknight







21 Comments, Comment or Ping

  1. If it’s the worst kind of debt like high interest credit cards, cut them up, start paying them back and go on a cash only based system. You can’t spend what you don’t have right?

    This works for people who only use their cards in physical stores. What about those of us who use our credit cards online?
    Cutting up a card (or freezing it in the freezer, or any of the stop-using-your-cards tricks short of cancelling the account outright) just doesn’t work when you know your number and all you need to do is type it in.
    What do you suggest to stop online spending? There’s got to be a trick similar to cutting up your cards that works in the digital world, eh?

  2. Caitlin, good point. I was thinking to cancel the credit card, but then how would one pay it back? I wonder if credit card companies will allow the balance to be converted into a term loan and have the credit card cancelled.

    Perhaps a better solution would be to get a line of credit with a decent interest rate and pay off the credit card balance. Then cancel the credit card and pay off the LOC as aggressively as possible.

  3. You could call your card provider and ask them to reduce your credit limit as you pay it down. But like any method, it’s going to require discipline more than anything.

  4. I liked the second suggestion. So many young people are unaware of the power of compounding. If you invest 15,500 in a 401k now and 4000 in a ROTH IRa and you are under 26, you will be expected do acheive $1,000,000 by the time you retire..

  5. 5. PatMunits

    To calm down your online spending start doing this:
    - every time you come across the deal of the month/year/century on some website think whether you can actually continue to live without the item.

    Consider also that the price you pay now, is not how much it actually costs you. This is because you’ll still need to add to the price at least as much interest charges as you currently pay on your highest-interest-rate debt. So, is it really worth it to save $12 bucks on a hard drive deal of the month, if you already have one, and it’s not yet full, and you pay 18% interest on your credit card?

  6. 6. Daniel

    You can report your card(s) lost. Then when they send you new one(s) Keep them in the envelope.

  7. 7. DAvid

    WDAMMG said “You could call your card provider and ask them to reduce your credit limit as you pay it down.”

    Be careful with this option. If your credit consumption is too close to your credit limits, it raises a red flag on your credit report. That is one of the reasons the CC companies raise your limit when your spending increases.

    No matter how you accomplish the goal, you need to find the way to change your behaviour. My suggestion is to obtain an amortized loan for the consolidated debt with a regular payment tied to your paycheque, then close the credit card account if necessary.

    DAvid

  8. I think one of the things that prevents people from getting started with improving their finances is spending too much time trying to figure out the “best” or “optimum” thing to do. They get caught up in calculations and complex strategies to try to shave a tiny bit off their debt or to squeeze an extra 0.5% return out of their investments over 20 years.

    For most people it’s much better to just do “something” and (like you say) do it now. Anything at all to get them headed in the right direction is better than agonizing over whether you’d be slightly better off buying or renting, or contributing to an RRSP or a TFSA, or investing in fund X versus fund Y.

    Just start saving, paying off your debt, reducing expenses and worry about the complicated stuff later.

    Peter

  9. I think for anyone who isn’t investment savvy the best move is to pay down debt. With such a variety of investment options, and the volatility of markets these days, making an investment just for the sake of doing something might actually result in a loss (even with a long time horizon). In the meantime, educate yourself. Don’t bother with investments until you fully understand them. In the meantime you are getting a guaranteed rate of return, risk free by paying down your debt.

  10. I think one of the things that prevents people from getting started with improving their finances is spending too much time trying to figure out the “best” or “optimum” thing to do. They get caught up in calculations and complex strategies to try to shave a tiny bit off their debt or to squeeze an extra 0.5% return out of their investments over 20 years.

    lol – Peter, you’ve just described the entire personal finance blogosphere perfectly!

    Mike

  11. 11. Gates VP

    Peter:
    For most people it’s much better to just do “something” and (like you say) do it now.

    Thank you!

    FP got it and I’m really happy that FT made this post. I’ve posted about this before, but it’s important to reiterate from time-to-time:

    We in the PF blogosphere are talking about optimizing the last percentage points of an already optimized system. The average person has so many they can work on that it’s just time to start.

    It’s all just constant refinement, most of the people in this blogosphere have been studying and working with money for so long that we’re dealing in details that are simply too much for the average person. I’m OK with that, completely, it’s what keeps me coming back. It’s just good to give a hello to those 2600 blog readers that don’t comment every week :)

    So FT, may I add:

    If you’re new to this and you’ve decided to turn your financial life around, just pick the worst financial offender in your life and fix it up. Rinse and repeat. Expect to be at it for a year or two, especially if you have a complex life with kids and cars and mortgages and two jobs and credit card debt.

  12. 12. Little Ms.Scrooge

    Dear readers,
    My dad encouraged us to keep a check on splureges with this strategy and it has worked for me till now. (I still do give in at times!)He said if you see some thing you like, take a good look at the price, and come back in a few days time- typically a week. If you have lived well without it, it means you din’t need it in the first place and you can live without it for future too. This distinction between wants and needs is an important financial lesson for children nowadays, (It is a concept that my kids are yet to learn!)especially when they are surrounded by TV ads and peer pressure to keep up with the little Joneses.

  13. The first step is the hardest to take. Once it’s taken it’s much easier to maintain the momentum.

  14. This may be too drastic for most, but ever since moving from suburb to a small downtown condo, our discretionary spending is virtually halted. Every time we want to buy something new off a store, we’re always reminded of our new minimalist life-style. There’s no space for that giant TV, second couch, large painting, pool table, and etc. It’s also comforting to know that we’re living smaller footprints in our environment.

  15. Sometimes you just have to quit talking about it, thinking about it and just do it. Planning is great, but it has to lead to execution before you can enjoy success.

    Best Wishes,
    D4L

  16. 17. Isabelle

    PatMunits
    Good strategy… You can also estimate what that amount of money would be worth down the road? I often ask myself questions like do I want to spend $500 on cable tv this year, or would I prefer to let it grow into an estimated $6,633.84 (I used a 9% interest rate) over the next 30 years?

  17. Just starting is definitely the most important. Even if you can only start with $50 per month, you can try to raise that by 10% every month and you’ll not notice the slight increases as much.

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