As schools are back in and fall creeps up on us, it’s a great time to focus on improving our financial literacy. Here’s are a few important things to remember along the way;
Set Financial Goal: Start by defining clear, achievable goals—whether it’s saving for a down payment, building an emergency fund, or planning for retirement. SMART goals will guide your learning and keep you on track.
Saving can be more important than investing. You can make a lifetime of smart, savvy investment moves, but if you haven’t saved enough to begin with, you’re not going to hit your goals. As the saying goes, “Save a little bit of money each month, and at the end of the year, you’ll be surprised at how little you still have.”
Don’t try to predict the future: The coming decade will be filled with just as many surprises. Learning to deal with them is more important than being able to predict them. Because no one — no one — will be able to predict them all.
Tune out the majority of news: A 24-hour news cycle is built for people who can’t see more than 24 hours ahead. Most people’s relationship with daily business news should be either (A) nonexistent or (B) something that incrementally helps you understand how the world works but rarely compels you into action.
Most financial problems are caused by debt: I have met people who earned several hundred thousand dollars yet struggle to save for their future and will probably need to work well into their 70s. I know others who never earned more than $50,000 a year but have retired comfortably on their own terms. The only substantive difference between the two is that one exploited debt to live beyond their means while the other avoided it and accepted a realistic standard of living. Income and wealth aren’t as correlated as people think.
Forget about past performance: One of the worst (but most common) ways to size up an investment’s potential is by looking at past returns. In fact, investments that have done exceptionally well in the recent past should be a red flag, as they have a higher likelihood of being overhyped and overvalued. A proper investment strategy looks at the merits of an investment looking forward and how it fits into your plans for the future.
Lastly, find someone you can talk to about your money: Investing isn’t easy. It can get emotional. It can make you angry, nervous, scared, excited, and confused. Most of the time you make a decision under the fog of these emotions, you’ll do something regrettable.
So talk to someone before making a big money move. A trusted friend. A fellow investor. Better yet an experienced advisor. Just discuss what you’re doing with someone.
Disclaimer: Equity Associates Inc. is registered as a Mutual Fund Dealer & an EMD Dealer in selected provinces. The opinions expressed in this communication are those of the writer and do not necessarily reflect those of Equity Associates Inc.
