Money money money money (Money!)
Well, well, well… this may have been the most hyped up presentation we’ve had in class to date. I was really looking forward to this one, if only to see if any of my fancy business school knowledge would come in hand. Apart from remembering how compounding works (thank you, Professor that looked like Guy Pierce who didn’t fail me in FNCE 3P93 three years ago), I found that the majority of Brent’s advice lined up with that of another smart man I’ve known for a long time: my dad.
I’ve said it before & I’ll say it again – the entire decision to get an undergraduate degree in Business Administration came from my parent’s desire to ensure that I would never be a penniless musician. Just a stubborn one who refuses to use said fancy degree to get a respectable marketing job. While my BBA was great for teaching me things like marketing theory, how to make a really boring resume & that economics is the bane of my existence, it didn’t actually teach me that much about managing personal finance. That’s where my dad came in.
I can remember getting my first co-op job in my third year of University and deciding it was a great idea to keep my part time job as a bartender on the weekends. My parents were impressed with the emergence of my work ethic, and my bank account was impressed with the amount of cash I could live on as a 20 year old who’s only real expenses included gas, a gym membership and soy milk (I was on my first round of an on-again off-again relationship with being Vegan). My dad wasted no time in convincing me to save pretty much every paycheque from my 9-5 job as the beginning of a real life RESP. I think every friend I had scratched their head when I didn’t blow it all on Coachella that year, but instead calmly explained that I had a retirement savings account started. At 20. After I went back to being a normal student with a shitty part time job, the lesson stuck. I’ve saved at least 10% of everything I make ever since.
the pied piper of investments: let’s meet brent
Brent’s presentation was the only one that legally required me to nod my head when he stated his disclaimer. He mixed talking about the kind of stuff I slept through (yes, Sheila, even the Guy Pierce look alike professor couldn’t truly make me like finance) with a great sense of humour, which made the presentation that much easier to pay attention to. The idea that having a plan for your investments was probably the greatest piece of advice that stuck with me – I’m used to saving the money, just not doing anything substantial with it.
His background (over 20 years of professional experience in business planning & management) was a definite reassurance that he knew what he was talking about; and his simple way of pointing out everyday mistakes people make when it comes to budgeting money made it easy to understand. Like not budgeting for HST and basing your budget on your gross income, rather then your income less the taxes you’ll probably have to pay.
Here are a few of the other things that Brent filled us in on during his presentation.
The Four Cornerstones
Short Term Reserves
Planning for emergencies & opportunities, developing a financial reserve
Income & Asset Protection
For you and your dependents in case of premature death, disability, critical illness or long term care
Includes things like children’s education, purchasing a home or cottage, leisure activities and travel
Financial independence, retiring comfortably, preserving estate
Money & Stress: Yeah, that’s a thing
- According to the APA, money is the #2 source of stress in the US
- 76% of people cited money and work as the leading cause of the stress
- 23% of Canadians lose sleep over economic worries
- Since 2008, there’s been a tremendous increase in people’s stress around money
- 47% of people live paycheque to paycheque (other sources say up to 70%)
Reducing financial-related stress
- Have a professional develop a written financial plan for you & stick to it
- Review the plan regular to adapt to changes to life circumstances, tax laws & regulations
- Don’t rely on Google.
- Use professionals – people who manage their own investments only make a third the average returns of the segment they’ve invested in
- Spend what’s left after saving; don’t save what’s left after spending
- Have adequate liquid reserves so you don’t incur penalties for drawing on money originally saved for purposes other than emergencies
- Paying off debt is important, but only one part of the picture
- Start a monthly budget & track ALL of your expenses
- Get a professional to review your taxes for you
- TAKE CONTROL!
Brent’s List of Do’s & Don’ts
for a happy, prosperous life
|Know the Difference between good debt & bad debt
Turn your debt into a deductible expense
Seek professionals for your financial, tax and legal issues
Rebalance your portfolio – NO tax cost for this in an RSP and certain funds
Use Government initiatives (RESP, RSP, RDSP, TFSA) – if you can have the government give you more money, DO IT!
Defer… there are great investments which have been created to defer your capital gains & taxes
|Think you have to have a lot of money to start financial planning & investing
Think you don’t have to save because you’ll receive an inheritance or the government will take care of you
Chase “hot” stocks and be greedy – by the time you hear about it, you’ve already missed the biggest growth
Be fearful (jumping stocks) – you’ll miss the big gains and pay more to buy in after the recovery phase
Don’t spend more than you make. Don’t do it.
Think jumping credit cards with lower interest rates is a good cash management strategy
Procrastinate – start with small amounts. Pay yourself first!
Forget the rule of 72 – compounding is your friend.
There’s a lot more don’ts then there are do’s on that list… but the don’ts are all around the same idea: don’t not do anything. Being passive in this area of our lives is probably the most dangerous thing we can do. I liked that Brent spoke about being honest with what we want out of life: I’ve always thought that home ownership was just something that grown ups did. Now, I feel a lot less guilty about the fact that I’d rather rent out a room in a student house for the next 5 years and pinch my pennies to see as much of the world as possible in between singing on cruise ships and touring around Canada.
SO, when I asked Brent what his go-to number crunching jam was, I wasn’t surprised to hear that he’s a music-off kinda guy. To be fair, I probably would’ve come closer to a respectable accounting/finance grade if I hadn’t been obsessed with listening to records while I did my homework. We did get into a little discussion about what he did like to listen to, and old Motown made the list. He said the Jackson Five were his favourite, and while this *technically* isn’t a J5 song, it does feature a young MJ singing about a pet rat. And giving everybody all the feels about the friendship you can strike up with rodent friends.