Some of my best personal finance advice – so you don’t have to make the same mistakes I did!
Human behaviour is a funny thing. Some folks like to talk a big game about lessons learned but fail to act accordingly.
Why is that?
What makes our behaviours so painfully difficult to change?
We’ve all heard “where there’s a will….there’s a way” but that’s just part of the behaviour-change equation in my opinion.
In my workplace role, change is all around me; it’s what I do and what I help manage but I certainly can’t do things alone. I require teams, a good culture/environment, skills (some that I certainly don’t have) and much more to be successful.
Some years ago, I reflected Prosci’s ADKAR® model for change – one that I believe can work for your personal finances too.
In their change model, they identify five key ingredients for change that must be present, arguably in different quantities depending upon your context or situation to have a hope:
ADKAR® stands for:
- Awareness – including change drivers such as the need for change, “the whys” and includes “what’s in it for me.”
- Desire – ultimately the personal choice about motivation.
- Knowledge – knowing how to change.
- Ability – the skills to actually get the know-how done.
- Reinforcement – forms of recognition, rewards, and celebrations.
*ADKAR® is a registered trademark of Prosci (used with permission), a global leader in change management.
Over the years, thanks in help to running this blog, I’d like to think I’ve changed my personal finances for the better. I have some awareness, desire, knowledge, ability and I see the rewards that come with saving, investing, paying down debt and simplifying my life. My lessons learned have been harsh at times but in most cases, they have made me a better CFO at home.
For today’s post I thought I would recap some common money fails and why you should avoid them.
Carrying a balance on credit cards or on a line of credit
We don’t carry a balance on our credit cards and never intend to. Credit card debt is one of the highest forms of debt. If you can avoid credit card debt by paying off any balance every month, I suspect your future self will thank you.
If you can avoid using your HELOC (Home Equity Line of Credit) like an automated teller, and you pay that debt down religiously each month I know you’ll have more money in your pocket over time.
Having no emergency fund
We have a small emergency fund at the time of this post and we’re working harder to increase it.
We figure about $10,000 or so in cash is a good amount for us. (I arrived at that number based on this older data here – average household expenditures so maybe it could be lower for you.)
Unfortunately, whether you like it or not, financial $hit will hit the fan at some point. I know we’re thankful to have our emergency fund in place but it wasn’t always that way.
Buying too much house
Guilty as charged!
Look, we loved our larger home but we decided to downsize and move back into the city.. My advice is to avoid taking on too much debt (to afford any home) you can’t reasonably pay off in 10-15 years.
Whether you want to acknowledge this or not – buying coffees is not hurting any retirement plan at all. I encourage you to enjoy your specialty coffees all you want just remember it’s these two expenses that are killing your retirement dreams.
Two expenses stealing your early retirement dreams (that are not coffee)
Not (always) saving for retirement
If you think the government or your workplace pension might be enough for retirement, think again Gen X. The story is even worse for Gen Y. This is the new (minimum) savings rate for a decent retirement and it’s not 10% folks.
I came to my senses in my early 30s. I knew if I didn’t take charge of my early retirement future no one would.
To help me save for retirement, I started making our savings for retirement purposes automatic – like a bill payment to Me Inc. I think saving anything less than 10% net income today will leave you with less options down the line: working longer or spending less. Either one isn’t ideal for me.
Some of my best personal finance advice summary
I’ve got more money regrets but you get the idea. Avoiding these money mistakes should make you wealthier, less stressed and far more financially resilient. My blog is here to help!
What are your lessons learned for a better financial future?
“And….even if you don’t really want to take anything I wrote to heat, at least you read enough of this article today for your chance to with a MacBook!”
that’s a hot line Mark 🙂 (sorry)
Biggest mistake – to many mutual funds with too many unclaimed capital gains, held for too long – painful position to unwind. At least there are gains rather than loses. Also guilty of investing in Yellowpages – ouch! learned my lesson.
Your link to ADKAR is very useful am passing it on to a number of friends.
Ah crap, thanks for that, I fixed my typo. It helps to have an “r” in heart 🙂
Yes, I like the ADKAR model from that change management group. One I’ve used at work with colleagues on my projects a few times.
1: Too much cash in my registered accounts. Waiting for a buying opportunity. I know, it’s an investment account, not a saving account. I believe the stock market is going to take a hit much greater than the one blip we just saw.
2: Too many tools. Often find myself buying tools to solve an exaggerated problem. I don’t own them, they own me. Some require maintenance. These assets sit while I’m at work. Having a truck means no shortage of heavy work other people can give you. At least I will have lots to do when I retire.
I’m with you Hogarth. I think some dark days might be coming…
How are you preparing for that? More cash? My low-cost equity ETFs to buy? More bonds? Other?
my biggest mistake is definately buying precious metals when the market was down. It was my intro into investing, so got me started…
Now it just sits there bringing 0 % interest while my dividends keep stacking.
Im guilty of the too much house too. We can afford it but sometimes i think of selling it and buying a small house with the proceeds…
The wife aint cool with that though..
Ha, too much house. Well, my wife and I don’t need what we have Passive hence selling for the condo next year. I hope we enjoy that space 🙂
great article Mark !
My biggest mistake i guess is contributing to my RRSP at a later time of my life , I guess I was obsessed with real estate when i was young but it paid off being mortgage free on two properties by the age of 43.
i was reading this past couple of days comments on reddit how guys are panicking with the way the stock market is acting up and those guys chose a 100% equity portfolio , i guess part of being a human is that we expect things to always go our way but like what they say what goes up must come down at least for while .
one thing for sure i’m glad for the bond portion in my portfolio it keeps the ride smoother when things are a little rough.
Two properties mortgage free at age 43? Geez…impressive Gus.
What are you doing now? How are you investing now? Curious….
Yeah, what goes up must come down, and then go back up again. I figure having a decent cash wedge in retirement/semi-retirement is the way to go. I wrote about that here, our plans if we reach our $1 M milestone in other 5 or so years.
This way we can largely live off dividends and not spend the capital in a bad market. The upcoming market climate might be a VERY good test case for us to see if my assumptions and plans can be fulfilled.
Yes believe it or not i bought my first one at the age of 21 and the second at 30 , mind you the whole mortgage for the first one was 155k and the second at 145k but the interest rate was so high can’t remember exavtly ( 1989)
paid them both of in about 5-6 years by doing double payments on mortgage and pay the 10% at the end of the year , i remember watching the statements for the balances going down sharply by the month.
I regret that at young age i had nothing in mind but to work ( i’m a bit of workaholic u know :)) , barely have my high school diploma and as a first generation immigrant i had nothing in mind but to work work work so yeah i had two jobs for the longest time , now it paid off in a way but i look back and i think how
i missed all the fun time at a younger age . now that i’m 48 with a family i’m gonna make sure my kids get the education that i never had the chance to get and i make sure on going twice a year on a vacation with the family .
I’m down to one job now but still a physical kind of job ( warehousing) and at the beginning of 2016 i bought a pre-sale here in vancouver for a three bedrooms condo that we’ll be moving to it in april 2019, so yeah i\ll have 3 properties soon 🙂 like i said in older posts that i was kind of a real estate fanatic and in a way it paid off in value and soon i’ll have some steady income coming in .
as for my investing i\ve got a ccp portfolio that i started doing it myself about a year ago and it’s around 300k.
I guess it’s not bad for a guy with less that a high school diploma because i look at co-workers of mine and i would say 90% are living pay cheque to pay cheque so I thank God for everything that i got and even though i regretted in the past for not having fun in my 20’s and 30’s but now i look at myself and i feel proud , so yeah it can be done even without stocks if u have the stubbornness in your head that you’re gonna achieve something .
oh boy i think i got carried away with my comment and talked a lot 🙂
Great success story Gus.
You’re on an impressive track. Best of luck building the equity/FI assets now, so you’re not so real estate heavy.
Thank God even though i barely had a high school diploma ( never paid attention to school beside i was born in a place where u go to school for a week then stay home for a month thanks to the civil war :)) .
as for not being so heavy on real estate sorry didn’t understand what u meant in that but for me i feel it did really great see i paid for both about 300k and they’re about 1.5 mil now as for the presale we bought for 538k now it’s selling for 780k before completion , this is why i told Mark in previous post that i do love real estate because if you bought for the right price you’ll get a regular stream of income plus price appreciation and like stock investment i do like the buy and hold strategy on real estate as well 🙂 ( it worked for me at least ) .
hopefully I can retire comfortably and be able to give back to the community because it’s as important as anything else.
You’re welcome Gus.
Real estate has worked for you very well indeed so far, but what I meant by that is having almost all of your assets in one class- real estate. ie if your net worth is say 2.5M and you have 300K in investable assets that might be considered risky with high exposure to one asset class 88%, or low on non RE assets 12%. Some people like me like to be more diversified. ie such as if RE in your market corrected by 30%- if Vancouver maybe. However, I’m also in a market where those kind of RE gains aren’t remotely possible, and no longer own a rental property.
That’s what I meant by “heavy in real estate”, and why I said good luck building your other assets up. On the other hand your places should continue to cash flow nicely for you. G/L
Still very impressive Gus and good on you about your kids re: get the education that i never had the chance to get and i make sure on going twice a year on a vacation with the family.
You’ve worked hard and done well for yourself and your family.
A CCP portfolio (Canadian Couch Potato) is a good, lazy-way, to invest and no doubt you’ll do well with that over many years of investing. That $300k should double give or take every 10 years if you avoid bad investing behaviour.
Biggest mistake I made was not taking control of my investments sooner. Online brokerages have really come along way to educate and make it easier to self direct. Best thing I did was to stop being scared of my money and learn how it can work for me. I committed to educate myself by reading blogs such as Mark’s to gain confidence to invest for my future. It’s working so far.
We all live and learn Bonnie and I think what from I know you’re doing rather well and have learned some great lessons to improve your financial health. Well done, that’s all we can do – just get better with time.
Well, that’s been a few interesting days in the stock market. Almost makes one rub their chin in consideration of maybe it might be time to think about some further acquisitions? Probably sit a few more days in hopes of a bit more sell off. If it happens great, if not, oh well.
I’ve been thinking about the same thing Lloyd. I’m in savings mode for the 2019 TFSA contribution right now. I need to find $11k in 10 weeks. I hope we can do it. Thinking some more utilities for the TFSA. Last time I checked we all love our natural gas fireplaces, internet and electricity.
I might buy some more VYM or DGRO for the RRSP in 2019. Otherwise, saving more cash.
Interesting yes. Likely the start of much volatility to come. Looks like globally and NA futures point to a reprieve for today.
It’s tempting on numerous things that seem to have really been hammered in the last year but I’m hanging tight here for now.
Me too, save more cash and buckle down for what’s to come!
I have been learning so much from your blog, Mark and also from the posts from many of your regular visitors so thank-you. I have decided to only hold Canadian dividend stocks in my tfsa. I would like to hear anyone’s opinion on how many Canadian dividend stocks I should hold in my tfsa. How many is too many? I intend to hold mostly banks, utilities, telecoms, pipelines. Should I be looking at other Canadian sectors? My tfsa is fully funded but not fully invested.
Nice to hear JB. We all learn from each other, even if it’s what NOT to do! 🙂
I also hold only CDN dividend paying stocks in my TFSA. I too, have gravitated to owning (likely) the same CDN banks, utilities, telcos, etc. Basically, any of the top-20 holdings in XIU.
Should you be looking at other sectors? I can’t tell you but I prefer to own established companies that pay dividends or simply index invest and then I don’t have to speculate. I figure I get the best of both worlds this way.
Our TFSAs x2 are fully invested right now – go lower every day with the stock market but I’m not too worried. If the market is down another 30% then we can discuss!
I prefer to have cash as an emergency fund – this way – the account balance doesn’t change whatever the stock market does or does not do!
I guess, I consider it more as an opportunity cost. In my 35 years of life, there have only been maybe 2 emergencies where I would have needed to sell a stock, or something. And in both cases, I was able to take profits on a stock. The alternative would have been having cash sitting there earning basically nothing. Personally I’d rather be making 3-5% in dividends with the potential for some capital growth as well. The nice thing about the TFSA is how liquid it is, and most of my holdings in my TFSA are pretty stable, so barring any crazy hiccups (knock on wood), I can always liquidate something if needed.
But I get it – it’s definitely a lot safer to just keep the cash.
Fair point Jordan…the TFSA is very versatile as an account. Our cash/emergency fund is in an interest savings account.
Well said – good points.
Carrying a balance on credit cards or on a line of credit – Makes sense. For the average Credit card, you’d need the equivalent of a 20% gain per year in the market. Good luck- pay that sh!t down! I recently had some unexpected expenses, and people not paying me on time, so my card got out of hand. Sold off my CoucheTard position to pay it off, and used the extra to increase my position in another stock of mine.
Letting expenses get out of control – Easier said then done…but VERY important. Keeping up with the Joneses is a real thing..and hard not to get sucked in.
Having no emergency fund – I have to admit I am guilty of this one…though I consider my TFSA stocks as an absolute emergency fund.
Buying too much house – Guilty of this one too..but sometimes you need to just bite the bullet and make the wife happy..haha
Not (always) saving for retirement – This is the one thing, I make sure I always do. Pay yourself first/Automate it.
Interesting Jordon…. “Having no emergency fund – I have to admit I am guilty of this one…though I consider my TFSA stocks as an absolute emergency fund.”
I prefer to have cash as an emergency fund – this way – the account balance doesn’t change whatever the stock market does or does not do!
Smart man – pay yourself first and automate. 🙂
Another mistake I can add is not being diversified enough as a new investor.
When I started investing I had “too many eggs in one basket” and suffered the consequences. It was a painful lesson but it greatly increased my awareness and desire to learn about investing. That knowledge has certainly benefited me over the last 10 years, so it wasn’t a complete loss, but still pretty painful.
Great addition to the list Owen. Keep up the great work with your site.
1) I was so fortunate to have married an accountant/book keeper. I listened and learned so much about budgeting…kept our family above water.
2) The best/worst financial day for me was the day I concentrated on reading and dissecting the monthly stack of paperwork from our advisor. (About 18 years ago) I trusted his advice and connected that with being fair. I couldn’t believe what they were charging…even before the mutual fund fees. Anyways, didn’t take me long to begin finding alternatives…now completely self-directed.
Sounds like you’ve been rewarded with two great lessons there Paul. Thanks for sharing. Comments like these help pay it forward. Let’s hope they are reading!
Biggest mistake Imade was not taking control of our investments sooner. When we first started investing in RRSPs we were told by our financial adviser /salesman to buy these mutual investments and “put them in the closet” to let them grow till our retirement. What was I ever thinking?? When I finally came to my senses I realized that the only growth that was happening in my RRSP was my annual contribution. Well at least the salesman/advisor was making money. Anyway we said goodbye to that arrangement and have been independent dividend investors for several years and have done signicantly better and not lost another chunk of money to fees (I really should work harder at getting over my bitterness at the time and money I lost being sold that line of crap). Lessons learned.
The salesman/salesperson masquerading as an advisor is very bad for the Canadian investor. Sadly, there is little regulation and/or enforcement on this issue.
One should try to figure out if they are a trader or an investor, they ain’t necessarily the same thing.
Definitely not the same thing.
Good post and info once again Mark.
Biggest mistake- too much house 3x over. Still guilty.
Nearly as bad- too many expensive cars/toys. Kinda still guilty.
Biggest win – started investing age 22 – although MANY mistakes along the way. Still probably guilty to slightly lesser degree!
Huge win for you – started investing at age 22. Well done. I recall I was 23 for my RRSP.
You can afford the toys now 🙂
Thanks, but sounds like you deserve that win too. Why you’re making the progress you are. Great.
I could afford them before. Now with way less income “maybe” not so much. It’s all good. LOL
Keeping an eye on my inbox!
I know…I owe you an email!
I might be guilty of buying too much house. Well, the entire family enjoyed it, so no regret here. Regretted not bought the house earlier and we might have bought exactly at the top of the house market. I also spent lots of money this year on the new home. I considered all of them are necessary to make use more comfortable and we had control over the expense, we still managed to max out all our registered accounts this year, so I guess not really a problem. Right now we did not have any plan for next year yet. Hopefully next year our expense will be reduced a lot and we could save more for retirement.
I would add to the list:
Not invest the money you saved.
That’s the biggest mistake I made anyway.
“…we still managed to max out all our registered accounts this year, so I guess not really a problem.”
Very well done May. That’s not a problem, that’s a solution! 🙂
Biggest ‘regret’ – not having the confidence take control of my own investments earlier than I did. Better late than never, but earlier would have been MUCH better.
I hear ya Karen but you’re doing very well from what I recall. Kudos.
I’m retired now and living off my interest bearing investments so I am giving advice that has already been proven and disproven. Invest in things you know personally and can see them perform or not perform before the rest of the market sees it. The stocks I bought from local firms have been my best performers. The ones from further away not so well. I live in Manitoba. I made a lot of money buying and selling MTS when it went public. I lost a lot of money on Yellow Pages.
But also remember if you are dealing with events at the world level, then your “local knowledge” is your knowledge of Canadian economics. Case in point, the US financial crisis 10 years ago. Canadian bank stocks were being sold off by foreign investors who didn’t understand the differences in the banking systems in the US and Canada. When Canadian bank stocks were at half of their pre-crisis price I bought as much as I could. A win!
I’m a Boomer, born in 1955. So I thought investing in medical research companies that would be selling to Boomers such as myself would be a win… WRONG! I knew nothing about that business. I currently have 20,000 share of a stock now worth $0.003/share that my average cost was $1.00. I keep that $20,000 loser stock in my portfolio so I get reminded everyday of how not to invest.
Another piece of good advice (that I didn’t always follow) is to sell when a stock doubles or when it drops by 50%. When I didn’t do this I ended up chasing a loser or hanging on to a stock that went nowhere after a sudden rise.
Finally, remember that the stock market is more a gambling site than it is an investment in a bricks and mortar business. As in gaming you play the odds but there is always a chance that the wrong card will come up. For example, in blackjack if you never take a card when you have a 12 or higher you will never beat yourself. Only the house can beat you with a better hand. You will win but not as fast (potentially) as a person who studies all the cards that have been played and calculates the odds of the needed cards to come up. But those people can and will loose more often when the wrong cards come up. As in the stock market you will hear more about these people when they win than the people who play it safe. But I prefer to be the one who doesn’t beat himself.
Thanks for the detailed comment. I think many investors “chased” high-yielders and got burned over the years. Yellow Pages is just one of them.
“When Canadian bank stocks were at half of their pre-crisis price I bought as much as I could. A win!”
My parents are Boomers. It’s very interesting to talk investing with them.
As for selling winners…I don’t do that. Because of that, my portfolio is growing thanks to reinvested dividends over many years. I suspect that will only continue if I stick on the path I’m on. Time will tell.
I don’t really see the stock market as gambling, rather, it’s an investment in that I expect to make money in it over time. And I have. I’m not investing for a quick win/I don’t trade. Rather, my holding period is measured in years.
Good stuff Mark. I’d add:
– Being Taught
– Willing to Learn
We are not taught about finance or saving and its importance to our future and we can only learn if we are willing or open to learn. Many are not.
Willing to learn. That’s excellent. That’s align to desire/motivation in the ADKAR model. Many adults don’t keep an open mind. Investing is no different.
It’s funny how easy it sounds but in practice we aren’t that good at it. More in than out, simple plan. I’d like to think that as I get older that obey more of these rules, but I’m sure others looking in the window would say not always. Here’s to hoping that I do more often than not.
Easy to write but very hard to do over time. I’m guilty and not perfect but I’d like to think I’ve learned many good lessons to date. Thanks for the comment Murray and good luck with the MacBook!