10 ways to master your money in 2019
Regardless if we’re talking personal finances or not, I believe true success usually comes from taking meaningful action based on any lessons learned – and trying again.
Life-long lessons don’t always stick unless you make a few missteps along the way.
When it comes to our personal finances, we’d like to think we’ve learned from what’s working well and what hasn’t over the years. Here are some examples:
Here are some dumbass financial moves. Don’t make these ones either 🙂
“Success consists of going from failure to failure without loss of enthusiasm.” – Winston Churchill.
MoneySense recently offered a few ways to master your money.
With a new year around the corner, leveraging that article, here are my 10 ways to master your money in 2019.
- Make a plan
What should your financial plan cover? Lots!
Financial plans go far beyond what funds or stocks or bonds to own where – although that’s important stuff too.
As we march into 2019, here are our key focus areas for the coming years:
- Kill debt to become debt free. In doing so it will provide some significant financial flexibility – income earned will be ours to enjoy.
- Continue to generate (retirement) income security. We continue to save and invest for our financial future by striving to maximize contributions to our TFSAs and RRSPs every year. We do so even though we have some small workplace pensions in our future. Our TFSAs should be maxed out of contribution room again in early January 2019. My RRSP is almost full of contribution room, it will be maxed out by March 2019. We believe my wife’s RRSP contribution room could be maxed out by early 2020.
- Worry less about money. With a modest emergency fund in place – we have money available to us for a few months if we need it.
- Have fun.We set aside money every year for international travel and long weekend experiences. I suspect if our debt plans keep coming together, there will be more travel together in 2019 and 2020.
While no financial plan is perfect, at least having a plan will guide your decision making.
- Track your expenses
Blah, blah, blah right?
Just like my workplace wonders from time-to-time, why some work takes so long; why some work can be so expensive – you can’t manage what you don’t measure folks. It’s that simple.
When it comes to personal finances, most of us spend more than we think – a lot more!
Given that, try tracking your expenses in 2019.
Not sure how? Email me and I can provide some help or maybe I can write a post about your situation and give you some pointers in the process. Ultimately, tracking your expenses doesn’t have to be about saving either.
Track your spending in 2019. See if it aligns with your values.
- Pay yourself first
Arguably the best and most popularized term in personal finance for long-term financial success – because it works.
Heard of the 50/30/20 rule?
Popularized by Harvard bankruptcy expert Elizabeth Warren, she suggests this approach will provide an appropriate level of balance with your money:
- 50% needs include rent/mortgage, groceries, utilities, insurance and other essentials.
- 30% wants may include travel, dinner out, events, festivals, other.
- 20% savings and debt repayments also include emergency funds and retirement savings.
While a decent model we don’t subscribe to this advice ourselves.
- Earn more money in 2019
Yes, they say ‘mo money comes with potentially ‘mo problems but let’s be honest – it also provides a new world of opportunities.
Businesses excel because they make more money over time. In that light, you should consider your household like a business too.
If you’re serious about financial independence sooner than most, you need to increase your income. Otherwise, you’ll need to save more, work longer, or both.
How to increase your income in 2019?
- Start a small side-business – earn income from your hobby or passion.
- Work hard at work – get a promotion.
- Invest in you – further your formal education in a skill or service that’s in demand.
- Sell crap stuff you no longer need.
- Rent out your space, if you can.
- Invest in income-producing stocks or securities.
- The list goes on.
- Mind the debt
Debt, just like evil, is also a four-letter word. Watch out for it.
While we still have debt, we’re working to slay the beast every week. You could argue there is good debt and bad debt but at the end of the day, owing other people money first long-term is, for the majority of us, a wealth destroyer (not a wealth builder).
- Got a credit card? Pay it off every month.
- Got a mortgage? Make lump sum payments where you can.
- Got a car loan? Bad idea (because you are borrowing money on a depreciating asset…) so kill it off too.
As long as you are doing these things above, one could argue that paying off your mortgage as fast as possible is not essential to financial success. There can be a case made that in today’s lower interest-rate environment, you’re better off investing inside your registered accounts as much as possible while meeting your debt obligations.
Generally speaking, I think you should be debt-free in retirement but that’s a decision you need to make.
- Watch the tax
We must all pay our fair share of taxes – such is life – but don’t pay any more than you should!
Here are some pro tips on tax management:
- Take advantage of your RRSP account. Taxes deferred today and tax-deferred growth inside the account going forward. Win-win!
- Learn about available tax credits and deductions. Yes, our tax code is unnecessarily complex but knowing what you might be able to claim/deduct can save you a bundle. Here are tax tips you can find on my site:
- Make sure you name beneficiaries on your RRSP, TFSA and other important accounts so your hard-earned savings are not subjected to unnecessary taxation.
- Avoid too much house
Buy a house you can afford long-term. Sounds simple. Hard in practice.
Nobody can predict the financial future with any accuracy. Same goes for the real estate market.
Sure, looking at Toronto or Vancouver over the last decade, one could argue it’s like winning the lottery. Folks owning homes in those cities have seen HUGE price appreciation gains. Good on them! Those gains might not last forever. Compare those urban home prices with some folks that live down East. Not only have some of their prices not appreciated very much, some house prices are regressing.
Buy a house first and foremost because it’s a great place to live and care for your family.
- Invest long term
Burton Malkiel, the famous author of A Random Walk Down Wall Street, once said trying to pick winning (mutual) funds is like running an obstacle course through hell’s kitchen.
To make matters worse for flame-fearing investors, the stock market always appears volatile in the short-term. When to buy? When to sell? When to stay in cash or gold or bonds?
Then you’ve got the former U.S. Chair of the Federal Reserve saying this dribble: “run for cover”.
I mean really?
This is why you need to take the long road if you want to grow your nest egg.
Here are some simple tips to avoid losing your shirt when the stock market sky seems to be falling:
- Learn to celebrate falling stock prices. It means stocks will be on sale!
- Avoid letting your emotions get the best of you. Make an investment plan and stick with it.
- Don’t get swayed by the talking heads on TV, or Alan Greenspan or anyone else. Be mindful they need to put food on the table like you and me.
- Consider passively managed, low-cost Exchange Traded Funds (ETFs) as the best way to invest. This way, you can achieve market-like returns and avoid major market under performance over time.
- Consider dividend investing if the market noise is too much for you. This way, you can focus on the income your portfolio generates to assist your queasy stomach.
- Retire on your terms
I’m not a huge fan of the FIRE (Financially Independent, Retire Early) crowd.
Sure, I want to work on my terms sooner than later, but I can’t see myself becoming nor staying “retired” for long. I far prefer my own term: FIWOOT (Financially Independent, Work On Own Terms).
How will your retirement measure up? What’s your game plan?
Some additional tips and what I’m starting to think about:
- Retirement is not a switch. It’s not a destination. It’s simply a new phase of life.
- Plans change. Plans get derailed. Be flexible. I’m trying to.
- Modelling is a must. It’s never too soon to crunch some retirement numbers.
Retirement is not a number. What works for some at age 55 might not work for you at age 75.
10. Pay it forward
Exactly what it means.
Just like the story of a social studies teacher that asks his class to make things better for all, setting in motion of wave of goodness by one particular student to pay it forward, you too can help others.
You don’t need to run a blog. You don’t need to write a book. You don’t need to be an expert. In fact, it’s better if you’re not.
Learn the basics, practice them often, and you’re well on your way to help others do the same.
As you learn about what works, and what doesn’t for you, pay it forward. Share what you know. Be honest in what you don’t know. Be open to new perspectives. Be respectful in sharing your opinions.
Got kids? Teach them about money including your mistakes.
Got aging parents? Remind them life isn’t about material goods for your family – it’s about time and experiences.
We all have limited time and resources on this earth. By helping others, we can make the most of it.
These 10 tips are not the only ways to master your money in 2019 but they’re a damn good start.
I hope your holiday plans are coming together fans – enjoy.