Friday, February 28, 2014

Best financial advice...

I’ll never forget the day my dad sat me down when I was 16-years old…I was desperate to buy a car, and equally desperate to spend every last dime I had saved to purchase said vehicle. To me, the math was remarkably simple: more money = nicer vehicle = cool cat. According to my dad, the equation had a few more variables. His lesson in depreciating assets and delayed gratification went something like this:

"You have $10,000 saved up. Good for you. You’ve made a choice to buy a vehicle…you can’t afford to buy new, so you’ll have to look at used ones. And even if you can afford to buy a new vehicle one day, don’t. It’s one of the quickest ways to lose money…repeat after me…depreciating asset. It’ll substantially decrease in value the moment you drive it off the lot. Let someone else lose that hard-earned money. So you’re buying used – you now have two more choices. First you have to ask yourself this: what’s it worth to you? You can use all the money you have worked to save, and spend it on a car. In 7 years from now, you’ll have two things: a piece of crap worth nothing, plus an empty savings account. Or, you can spend $5,000 on a vehicle, and leave the other $5,000 in your savings account. In 7 years from now, you’ll have two things: a piece of crap worth nothing, plus almost $10,000 in your savings account. What’s it worth to you? If it’s just to get you between point A and point B, then the choice is easy. But if your worth is tied up in the wrong thing, then you’re likely going to make a bad decision. May I suggest you make the smart one.”

 Of course interest rates are noticeably different than they were in 1990 when my dad and I had this discussion. Back then, your money had the potential to almost double in 7 or 8 years, depending on the compounding and type of investment fund. But in theory, the lesson remains the same. Before you buy anything, always ask yourself this: “What’s it worth to you?”  I have yet to purchase a brand new vehicle, and can safely say I never will. It’s not worth it to me, simply because our vehicles house three small, slovenly children and are often mistaken for transitory nuisance grounds (both the vehicles and the children). If you opened our van door on any given day, you’d likely have two distinct thoughts: (1) These people have scant regard for personal property and (2) If thoroughly cleaned, we may stumble across the remains of Jimmy Hoffa. And hey, I don’t judge people who do buy new - rather, I’m quite grateful for your constitution. I thoroughly enjoy hopping into your brand new car with you…that smell is intoxicating. I’m not made of wood, am I? After all, smart cats still like to hang out with the cool cats.

 Here forthwith, is the best financial advice you’ve ever received.

 Beer at the liquor store is cheaper than buying it at the hotel.

Take out life insurance at an early age.

You want something? Save for it. Have good credit but don’t over-extend to buy stupid, useless shit.

To quote my mother when I got married: “It he wants to share your bed, he can share his bank account”, which is useful when you are the one staying home raising the kids. That, and every woman needs a credit card in her own name.

Don’t spend more than you make. I’m still learning that one.

Don’t worry about the money. Do your best at a job you enjoy and the money will follow.

Stay in the black!

If you can’t afford something, then don’t buy it!

Save some money for a rainy day.

If you can’t pay for it with cash, then ask yourself if you really need it.

My dad and I went to pick up an older gentleman at harvest time and I said, “Wow. How old is this guy?” My dad said, “He’s pushing 70, why?” I said, “It’s cool that he still wants to come out and combine with us!” and my dad said, “He still has a mortgage so he has to come out and combine for us. Even if he wants to, he doesn’t have a choice. Don’t ever let that happen to you.” This has stayed with me all these years, clear as day.

Don’t go into debt unless it’s an investment, like your education, a home, or something that you can get back in the long run.

Start saving from the moment you get your first pay cheque, no matter how little it is.

You can’t take it with you.

Balance your chequebook and never spend more than you have.

Financial advice – what’s that?

When it comes to saving, or paying off debt, every penny makes a difference. Nothing is worse than the feeling of: “I have so much to save for, or pay off, where do I even start”. Just start anywhere.

Invest in yourself first.

I pay no attention to finances. I should, though…

My mom told me to always have my own money so that I’d be able to take care of myself. I fear I take it too far sometimes, and can be very stubborn and too independent. But that has always stuck with me and has served me well. I know that I can make it on my own and support myself and my daughter if I have to.

It’s OK to be in debt if it’s for the right reasons.

Pay off your mortgage prior to building up a nest egg for the future.

Give up on small dreams today and save to make big dreams come true.

Don’t buy it if you can’t afford to take care of it.

Invest in fun, because it is the most important part of life.

I was given a piece of a puzzle that was meant to go into my wallet, so every time I reached into my wallet, I would see the piece of puzzle and it would remind me of a question I was told to ask myself at that time. The question was, “Is this a want or a need?”

Save, and spend. In that order. Save for a crisis, and for the future of course, but don’t forget to live for today. What’s the point of all that education, and building up a decent career, if all you do is wait for retirement to have some fun?! Sometimes the right answer is to run off to Disneyworld and to hell with the cost – we’re building memories over here!

Follow your gut. That, and pay off your credit cards in full every month.

Put away money for your retirement. I started in my early twenties and I’m so glad that I did.

Track your spending.

When saving for a big purchase avoid impulse buying by saying to yourself, “Do I want those shoes MORE than I want a house?”

Lead with your heart and the money will follow.

Live within your means. This advice has served us well.

I don’t think I have ever received any good financial advice.

Save 10%, give 10% and wisely allocate the other 80%.

Never let your pride get in the way of doing what it takes to support yourself. Always know that if your world fell apart tomorrow, you have the skills and the resources to make your own way. Never depend on someone else to support you.

After I spent some time complaining about insurance costs, my dad said, “Insurance is something you pay for and hope that you NEVER need.” And that is true.

Being advised to purchase life insurance, set up a will and start a college fund for our kids.

Don’t go into credit card debt. Have I paid attention? Sadly, no.

You may have to pay more for land that adjoins you, but if you want it, go for it. In a few years, the price will be there anyway.

When I was 26-years old, a man told me that you will be at least 40-years old before you have anything, and he was right.

Open an ING savings account. There are no fees. And contribute monthly to RRSPs instead of one lump sum per year. Oh, and read the book The Richest Man in Babylon.

Budget yourself. It’s like magic money appears when I follow that advice.

Acquiring land has always been the best decision I have ever made. I cannot consciously take all the credit for these purchases, as my wife always pushed me to buy land which has increased our net worth substantially.

A penny saved is a penny earned.

You can’t take your money with you to heaven, so you might as well treat yourself a little while you can.

Set goals first, and then track your progress. This works for all things. Be committed or forget about it.

Never steal money.

Don’t ever brag about what you have.

Learn to count!

Let's see…what do kids need to know about money other than to have lots? You will probably want a new car someday, say, one that sells for $40,000. You've got enough for a down payment, so what's the next step? If you make payments for 5 years, you'll end up paying for it twice, when you consider the interest you'll be paying. By the time you're old enough to purchase a car, the days of low interest may be history. Why not set aside the amount of dollars you would be paying each month, save for the same 5 years and pay cash for the car? Telling you this will not make me popular, obviously, and it may be one of the reasons my grand kids don't really listen to me. Believe me, 5 years goes by in a hurry. By the time you have enough money saved, you may find that a new car really isn't important. You may decide to use it for school instead.

Give what you can away, because you can’t take it with you when you go, but the things we do to help the people on earth will last a lifetime.

I'll close with this request: NEVER confuse your net worth with the numbers in your bank account – you’re not taking any of it with you. You’re worth as much as any millionaire out there. And if one day, you happen to become one of those people who make millions a year, remember this – you’re no more important than the person who makes nothing. Don’t ever forget that. A sign of true character is how you treat those who have nothing to give you in return. As the saying goes, we’re all ending up in a box about the same size, so remember that. It’ll help maintain a healthy perspective. My parents taught me that life is just one giant board game. Play a good game. Do the best with what you’ve got. Never take more than you give – and in comparison to the rest of the world, we’ve been given so much. Leave the board in good shape. Don’t chew on the corners. And one day? One day you’ll have to pass on your chips. Holding on tighter won’t help you at all. Your time at the board isn’t up to you. But your moves while you’re here, are.

p.s. I'll share the following piece of financial advice that I recently learned from my 7-year old son Jack. Sometimes it pays to just ask for shit, even if you have absolutely nothing to offer in return. The tooth fairy just might fall for it. Just make sure you add the word "respectfully" as a preface to your scandalous demand...if you're going to be a dictator, then you might as well be a polite one.

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