Tuesday, March 16, 2010

simplest ways to ensure financial difficulty your entire life

Classic moneygardener; Revisiting an old post from September 12, 2007.....

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.


Anonymous said...

I don't agree with #3:
"Do not start an RRSP because you have debts to pay off."
Why would I invest money if I currently owe money? Chances are pretty good that your current debt (not counting mortgage here) has a higher interest rate than your return from investment (including any tax savings).

Kenny said...

@Anonymous: Because if you don't get in the habit of saving now you'll *always* be paying off debt. Better to start small with even $50/month and ratchet it up as the debt decreases.

Also if you do need a loan in the future the banks look at your savings history, so even a small RRSP/TFSA can go a long way.

Finally, money paid toward a debt is gone. If you have a family emergency then you have nothing to continue paying the debt with, and your credit rating goes out the window. Savings provides a financial safety net. No one wants to raid their RRSPs, but in case of emergency that option is there.

If I've convinced you and you're looking to get started, I'd recommend looking at INGs Streetwise fund. Has the best MER (management fees) of any of the banks at the moment (1%).