10 Saving and Investing Truths

To quote the late Dr. W. Edwards Deming, a world famous author and quality management guru:

“If you can’t describe what you are doing as a process, you don’t know what you are doing.”

In my work, Dr. Deming’s wisdom is referred to frequently. I think his wisdom also applies quite nicely to an investment strategy. Once that’s defined it’s much easier to execute on. I live processes and systems stuff in the workplace every day and for whatever reason, it took me until my 30s to adopt this quality management philosophy to our personal finances. Now that I have, having our investment strategy defined a number of other things have fallen into place:

We are by no stretch perfect savers, we certainly splurge yet we pay ourselves first, live within our means and invest in a manner that’s designed to meet our future financial obligations.

In support of Dr. Deming’s wisdom I thought I’d share some other saving and investing truths to abide by.  Following these things won’t guarantee financial freedom but they will certainly put the odds of achieving it in your favour.

Here are 10 saving and investing truths:

  1. Get out of mortgage debt and stay out of mortgage debt.
  2. Avoid carrying any credit card debt, ever.
  3. Have a small emergency fund for the ‘what if’s’ in life.
  4. Minimize money management fees and expenses as much as possible for as long as possible.
  5. Your savings rate is (and will always be) one of the most important keys to financial success.
  6. On the subject of savings, save 10% of your net income every year and keep striving to save more as your income grows over your career.
  7. Maximize registered accounts first (like Tax Free Savings Accounts (TFSAs), Registered Retirement Savings Plans (RRSPs), Registered Education Savings Plans (RESPs)) before investing in non-registered accounts.
  8. Diversify your investments across companies and countries as much as possible.
  9. Ignore economic forecasts, treat them as entertainment.
  10. To help take the emotion out of investing, reinvest all dividends and distributions whenever possible. Money that makes money will make more money.

What are your saving and investing truths to behold?

Mark Seed is the founder, editor and owner of My Own Advisor. As my own financial advisor, I've grown our portfolio from $100,000 to well over $500,000. Our next big goal is to own a $1 million investment portfolio for an early retirement. Come follow my saving and investing journey by subscribing to my site. Enter your email address: Delivered by Subscribe to My Own Advisor by Email

16 Responses to "10 Saving and Investing Truths"

  1. Hi MYO,

    Nice list you have here. I especially like #5: Your savings rate is (and will always be) one of the most important keys to financial success.

    This rings true to me and I try my best to save as much as possible. The more you save the more you can put to invest!

    I also notice that most of these things are more defensive in nature than offensive, I find it interesting as much as I agree with it. Playing good defense is just as, if not more, important than playing offense in the world of wealth-building.

    Best regards,
    Dividend Beginner

    Reply
    1. Thanks for stopping by Dividend Beginner. Yes, #5 is VERY important 🙂 As for offense, maxing out your TFSA and RRSP is definitely offense. If most folks could do that they’ll be well on their way to financial freedom. Good luck with your saving and investing journey.

      Reply
  2. I agree with DB above that #5 is super important. Oddly enough though many people don’t even know what theirs is. They have no idea how much they save every year, if any at all. I admit we used to be one of those people but not any longer.

    The one thing I’ve learned about personal finance over the years is that if you don’t have any numbers documented you have nothing to fall back on except what you remember in your head. This is not good enough for us.

    We had a small mortgage due to a large down-payment but now that we have our son and have been running numbers to maximize investments we realized that if we were to save that much when we had the mortgage that would be a hell of a lot of money every month.

    Then add that 10% and the emergency savings and wow… that can get overwhelming for anyone. I haven’t even spoken about credit card debt or any other debt. It’s no wonder many people have little to nothing for retirement savings. It’s not easy so I often say it’s better to invest something than nothing at all.

    Since our mortgage is gone now if I retire at 65 (hopefully sooner) I have around 28 years left to save even more money. Like you mentioned maximizing the investments. What I need to do though is catch up as I’m $33,000 behind on my RRSP and have plenty of TFSA room even though I’ve been contributing.

    The game of money is just that, a game that we have to continually stay ahead of.

    Reply
    1. Great to hear from you Mr. CBB.

      I have a bias, I think all of these truths are important and most go hand-in-hand. I think you’re right though, most folks have NO IDEA how much their savings rate can make a difference.

      No doubt since your mortgage is dead…another 28 years is a lot of time to save more for your future. We hope to be out of the workforce for good at age 55. Time will tell!

      Reply
  3. Great list! Hard to go wrong if you do these things regularly and consistently over time. Love #9!
    Goes without saying but the key to successful saving and investing is to make it a habit (ie automatic), keep it simple and follow your plan. Smart investing is boring- stay invested through market cycles and buy strong,solid companies for the long term. Warren Buffet says it well.

    Reply
    1. I think so Patricia…the more you can make savings simply second nature, the better off, literally financially you will be. Thanks for the comment and following along.

      Reply
  4. Like that Deming guy! My realized truth is, if you want to live the happy life, learn to live on less than you have coming in, and invest the rest… Rewards come to those who are patient and willing to commit to the process of compounding over time – Cheers.

    Reply
  5. Good stuff, I agree with all of them. I would never have credit card debt as it’s basically a never ending cycle. Ironically though many of us (especially those with a higher net worth) pay for items using a credit card – they just pay the balance off monthly

    Reply
  6. Oh boy! I’ll be honest, I didn’t follow much of that! lol Especially number 1 to 4. I’m better with the second half of the list! 😉 Still, I think I did pretty good and will do even better when I reach FI in a couple months.

    There might be a large straight path and then some others that have light curves but still join the same goal in the end.

    Cheers,

    Mike

    Reply

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