The Financial Facelift articles in the Globe and Mail are usually pretty interesting – and a recent one got my attention. A recent edition of this series profiled a mid-40s couple with two teenage children earning a combined $244,000 per year. That income-level might have stopped some readers from reading but I kept going…
The article went on to state the couple is “financially comfortable”, but the couple admitted they are “clueless” when it comes to investing their money.
It’s not a surprising statement. I’ve read this before.
I was somewhat guilty of being “clueless” or at least “in the dark” with money too – not that I had a high income nor as high as that couple has now. Given personal finance and investing principles are not taught in school – you’re on your own to seek out this information. Information is everywhere but the accurate, trusted information is hard to find. Unfortunately there is a ton of misleading information out there: “fake news” goes far beyond Tweets from Donald Trump!
Luckily you have this blog where you can get some straight-talk on what works (and doesn’t) when it comes to saving money and investing – at least from my perspective.
Here are takeaways and what you can learn from anyone that has a great income but little financial literacy.
Great income reflections
- The irony is, some people with great incomes don’t have to be financially literate – there is no incentive to do so. I would argue that middle to lower-income earners have a much more vested stake in learning where all their money goes than higher-income earners by necessity. I think regardless of how much you make you should be mindful of how you spend your money, what value your spending delivers, and what you consume at it relates to your impact on others and the environment.
- If you have a defined benefit or defined contribution pension plan – there is less incentive to care about your money. From the article: “Margaret and John are in good financial shape, thanks mainly to their defined-benefit pension plans, but they are a bit behind in saving for their children’s higher education…” says the independent Toronto financial planner. Pension plans are however going by the wayside as time goes on. I suspect this is forcing more people to think and act on their own. This could be a great thing.
- If you’re not tracking your expenses, I believe you’ll never get on the right financial path. I’ve read hundreds of these articles over the years and one thing continues to stand out. Most of the individual’s profiled question if they should “…hire an investment adviser or planner” to whip them into shape. In my opinion these are not the people or what you need to turn to first. The answer of what you need to do first is starting at you in the mirror every day (or online). It’s you. It’s your credit card bill. It’s your hydro bill. It’s your property tax bill. It’s what you bought last week sitting in your closet. It’s many other things. It’s expenses in general. Regardless of your income I believe if you’re not willing to track your expenses (something you don’t need an adviser or planner or anyone else to help you with) you might have no help or hope at all.
Tough love? Maybe. The truth sometimes hurts. It hurt me too when I wasn’t tracking my expenses many years ago and I started to question everything. I’m glad I did. I wouldn’t be where I am now if I didn’t use my brain.
OK, that brings me to this. Here’s what you can do regardless of your income to improve your financial literacy.
Suggestions on any income
- Track your expenses. Don’t worry about doing it every day or even every week. Pick a day, any day, and start recapping what you spent and how much. Write it down. If you’ve never done this I have no doubt you’ll be surprised at some of the results.
- Read something. I don’t care what it is – preferably not Trump’s Twitter account for any ideas though. It doesn’t have to be the Globe and Mail that I got this article from – that costs $27 per month for my subscription! Read this blog, forward this blogpost to someone you know. Read another blog. Read a personal finance book. Ask me to giveaway a book on my site or write another article on this site. Leave a comment and tell me what you want more of. Take 5 minutes this week on a money-related subject and just read. You don’t even have to understand everything you are reading (yet). Just read something related to money management.
- Ask lots of questions. When you think you’re done asking questions, ask more questions. Ask stupid questions. (There are no stupid questions.) Here are some starters for you:
- What happens if I don’t pay this minimum payment on my credit card?
- I’ve heard about “buying RRSPs” – should I do that?
- I’ve heard about the TFSA – what is this?
- What is a mutual fund?
- Would I have enough money on hand to pay for an emergency car repair tomorrow?
- I’ve heard people only lose money in the stock market – is that true?
- Do I pay fees at my bank? How could I find out?
By now you should see the key to financial literacy is not unlike anything else in life – just start doing something different. It doesn’t cost you anything to read your credit card statement. It doesn’t cost anything to visit my site.
My suggestions are to take all of 5 minutes this week to write down your expenses, read a little, and ask yourself a few questions. Eventually you’ll get the answers you are looking for and maybe you’ll consider making a change. Regardless of your income these three small steps can be your keys to financial literacy. Just start.
Where did you get your financial literacy from? I’m still working on mine. What about you?