Wednesday, September 12, 2007

simplest ways to ensure financial difficulty your entire life

List compiled with inspiration from young, (age 25 - 35), friends and relatives (ie they helped me compile this list without realizing they did so)

1. Buy a vehicle without looking at total cost of ownership (financing, gas, insurance,maintenance)

2. Buy a home for your maximum lender pre-approval amount.

3. Do not start an RRSP because you have debts to pay off.

4. Do not make proper (higher interest to lower interest) debt repayment a priority.

5. Maintain a short-term view of your finances.

6. Fail to coherently plan finances around life events.

7. Fail to work as a team with your partner when it comes to your household finances.

8. Fail to realize that how you spend and manage money matters more than how much money you make.


Torbjorn said...

Nice. I wish I had thought of this one.

Thicken My Wallet said...

Good list. What about mistaking investing activity with profitability?

MG said...

Thanks for the comments.

I'm not sure what are driving at though thicken...

Anonymous said...

With respect to #3, it doesn't make sense to start a RRSP while in debt, unless there is a reasonable probability that you can select investments that will exceed the pre-tax interest expense associated with the debt one is carrying.

I would also suggest another one:

9. Being in non-deductible debt while also an owner of taxable investments.

Brip Blap said...

Great list - it's always good to list out the negative activities, because sometimes it's easier to recognize what you're doing wrong that way.

I think thicken is trying to say that some people who invest money stop there - they say "I'm investing, so I'm doing OK". But investing isn't a worthwhile activity unless you have a clear idea of what you're doing so as to turn a profit. I used to be like this - I thought as long as I was trading, I was at least trying and that was important. I realized after many wasted years of 'investing' like this that I needed to concentrate more on profitability and less on volume of trading.

venter said...

Many people will carry some form of debt for most of their lives (mortgages, car loans etc.)You can't wait till you have no debt to start an RRSP (compounding, time-in). I agree to paying off all high interest debt first though.

FinancialJungle said...

Great list.

What drives me crazy is asset allocation. Too many people believe cash & bonds are necessities in their portfolio even when they could be earning more by paying off their mortgage.

nancy (aka money coach) said...

I would also add: "don't have any kind of emergency savings". Without it, life events which absolutely will happen from time to time, will impair your other financial objectives.

MG said...

Thanks for all the great comments.