Things I Would Tell My 18-Year-Old-Self

Here are some great links to read with some good financial basics.

Budgeting

• University of Alberta: Decision Making & Spending Guide

Banking, Loans, Mortgages

• Government of Canada Financial Guide

Taxes

• How to do your taxes, a guide from revenue Canada
• Understanding your pay stub, a guide from the Ontario Securities Commission

Investing

The guides below will show you how money can work for you instead of you working for your money.

• How Compound Interest Works
• Compound Interest Calculator

RRSP Basics

• What is an RRSP and how does it work?

TFSA Basics

• The basics of a tax free savings account

2. Spend less than you earn

Seems logical but this is sometimes hard to do when you are just starting out. This discipline early in life will reap big benefits later in life.

IMPORTANT: In first-year university, don’t buy your bed on your credit card. You won’t pay that off for another 4 years. Find a way to pay with cash.

If you are just starting out, here are some ideas:

• Set a minimum of 10% earnings aside into savings
• If you are living at your parents’ home and working – look to save 70%-80% of your employment income while mom/dad are still paying a lot of the bills
  • This financial slingshot won’t last forever, so maximize its benefit
  • For example: if you earn $4,000 net of tax per month
    • 80% = $3,200/mo which equals $38,400 in a year
    • If you earn 5% on this money for three years you would have $124,010. Not bad for three years
  • Keep in mind, these easy saving days don’t always last once you move out, have kids, etc.

3. Don’t fall prey to get rich schemes

If it seems too good to be true, it is. Yet how often we humans get suckered into the opportunity of “easy” money. Instead, make use of the power of compounding by investing in things that make a reasonable return and get us to the destination with minimal bumps along the way. When we first start out, we will work hard for our money, and it will sometimes seem like we aren’t getting anywhere. Trust me in this, if we invest in good quality investments early, when we get older the reverse will be true, our money will be working hard for us.  I see this now, starting to look at the other side of life.

The power of compounding

Here is the power of compounding at work. Let’s say we started with a penny…yep one cent…and our money doubled in value every day. Here is what it looks like after 30 days.

Notice how long it takes to break $100…15 days. That is halfway to the end. But look at it move from there!! This is the power of compounding; time is your friend. What is one thing you have on your side that your parents don’t have…time. Let’s maximize it.

There are other things that I would love to add for my younger self, but I am only allowed three financial things.

Oh, one last thing, VERY IMPORTANT! You will meet a stunning beauty (inside and out) when you are 20. You won’t be able to miss her. Marrying her will be one of the best decisions you will ever make!

Enjoy!

Vince, your older self