Wednesday, November 1, 2017
5 Important Investing Tips for Young People
It is now reported that Millennials, people born between 1981 and 1997, are the largest population segment in Canada accounting for 9.5 million people, or 26% of Canada’s people in 2015. This may be why you see such a large push to attract this group in the marketplace. Investing is no different. Everywhere you turn you see companies like TD Bank and WealthSimple attempting to attract young investors. Stylish sweaters and fancy scarves seem to be the investment strategy of the millennial. I look at it a little different. I give millennials a bit more credit. They are smart, savvy and eager to save. They detest the idea of debt and want a way out. They are community driven, resourceful and humble. Today I have 5 simple, yet important investing tips for young people. They don’t require pumpkin spice or avocado toast to be involved.
1) Start now
You have to start now! Actually, you should have started yesterday. I don’t care that you are in debt and I don’t care that you don’t make much money. The simple fact is this: You have to save money throughout your whole life. If you cannot afford it, then you either have to make more money or spend less money. If you have too much debt and that is preventing you from saving money, then you have to pay it off. Remember Net Worth equals assets minus liabilities. Paying off debt is increasing your net worth. Lets put it this way: If you are having a hard time getting by and you can’t save money or pay off debt, what in your life will change that, simply by getting older. The fact of the matter is that time changes nothing, actions do. Take action and start saving your money. If you need more evidence as to why you should start early, look at this chart.
2) Think efficiency
One amazing thing about Millennials is that they are the most efficient generation ever. Everything is automated and lightning quick. Let’s apply that same principle to investing your money. Efficient investing requires reducing taxes, and therefore it is my recommendation that everyone has a Tax-Free Savings Account. I have signed up over 40 in the past 2 months and there is a reason for that. It is the best investment account that we have available. No tax on growth, no tax on withdrawals. It makes me smile just thinking about it. You also have to think of the most efficient way of getting money into that account. Use automatic withdrawals that fit into your budget and have them come out when you get paid. You don’t want to forget about making your deposit and lose out on the effects of Dollar-Cost Averaging. Have that money come out before you have a chance to spend it. That is “Paying Yourself First,” and is the best way to have your money grow.
5 keys Pieces of Investing Advice for 20-Somethings – CBC
3) Don’t get cute
There is a real temptation when you are just starting out to have your money grow at unrealistic amounts. Picking stocks can be dangerous and I never recommend young people put all their hard earned money into a stock. Young people need to understand that when you first start out, it is your contributions that will make up the bulk of your investment account. It is tough to gain large amounts of interest on small amounts of money. It is also dangerous to put all your money in a few stocks in hopes of the double or triple up. Many people have lost their small amounts of savings doing that. You are better off sticking to regular contributions, spread out over several funds. It allows you to have a piece of the whole market as opposed to relying on one company. Remember that it is your hard work and discipline that will make your money grow to start, not a hot stock tip.
6 Dangerous Moves for First-Time Investors – Investopedia
4) Have a long-term outlook
Having money doesn’t happen overnight unless you win the lottery. Building wealth is like growing a tree. For the first few years, you have to watch out for that tree, because it can be uprooted by almost anything. After about 10 years the tree is solid and has spread its roots deep. Once you hit 25 years the tree is immovable and the elements can’t shake it. The same is true for your savings. You have to think long-term when it comes to growth. Things that are happening on the daily, should not affect your plan. Market fluctuations, vacations, sickness, your job, and family all can occupy your mind. Let your money take care of itself and don’t stress out over short-term setbacks. Or you can just play the lottery…
10 Tips for Excellent Financial Health – Budget Boss
5) Be strong, disciplined and consistent
Once you get a bit of money saved up there is a real temptation to spend it. You cannot and I repeat, cannot do that. I remember the first $1000 I ever saved and how it was literally burning me not to spend it. I needed so many things in my life at that time. I didn’t have a phone, a TV, and my sofa was garbage. I toughed it out and saved up more and more until the day came where I took care of those things I thought I needed before. You have to be in the mindset of saving up for things that you wish to purchase, but also saving for long-term growth. This is essentially saving for the sake of saving and when you are young it is tough to fathom that concept. Every dollar has an immediate purpose. We break that idea and get you some “Bye-Bye Money,” that is money you say goodbye to because it is gone from your life. That takes strength and discipline, so get at it.
Use these 5 tips and you will be on the right track to start investing. Getting started early is something that will pay off huge later in life. You will also see short-term benefits including more comfort and less stress when it comes to your financial situation. Millennials have a lot going for them, one of the greatest being time. They have the time and smarts to get going on the right track with their investments if they use it to their advantage.
Thanks for tuning in today as Millennials Week rolls along at Budget Boss. Join us tomorrow when we discuss insurance for young people. If you want to start investing for the future, shoot me a message at joe@budgetboss.ca. Have a great day friends!
“Good habits formed at youth make all the difference.” – Aristotle
Email – joe@budgetboss.ca
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