This boring money advice never goes out of style

This boring money advice never goes out of style

I’ve read countless personal finance and investing books and articles.  I’m sure I’ll read many more.  Most books and articles all say similar things just differently – maybe you don’t need any more money advice at all!

Here is a collection of some ultra-boring yet time-tested money advice that never seems to go out of style.  For kicks, I’ll include our efforts that take this advice to heart.

What you focus on

Debt

  • Holding long-term mortgage debt, in general, is not considered “good debt”. Unless…you are assured your investment (primary residence, rental property, other) will increase substantially in value over time.  Lucky you Toronto and Vancouver.  Not everyone owns a million dollar home that appreciates 15-20% more every single year. #unsustainable.
    • We don’t have this confidence in our home. So, we’re trying to kill our mortgage debt.  The other benefit of not having any mortgage debt is I don’t have to think (or write) about mortgage debt anymore.
  • All credit card debt is “bad debt”.
    • We try and avoid credit card debt as much as possible.
  • Lines of credit debt should be discouraged.
    • We feel borrowing money makes other people wealthy.
  • Borrowing lots of money to buy a depreciating asset (e.g., a car) is unwise.

We strive (and have done so in the past) to reduce all forms of high-interest debt before focusing on any savings for investment purposes.  I would encourage you to do the same.

Emergency Fund

  • Access to some money, on demand, in an emergency, is usually a good thing.
  • Avoid borrowing money, long-term, for emergencies. See “Debt”.
  • Try to keep many weeks of cash savings available.
    • We believe some cash savings helps us sleep at night. Otherwise, I do stress over it.

Savings

  • Consider cash savings as something different than money invested.
    • We believe money invested should not be touched.
  • Consider keeping cash savings for all upcoming, short-term expenses.
    • We try and save for expenses in advance as much as possible.
  • To save money, you must earn more than you spend.

Investing

  • Consider cash savings for investment purposes as a long-term endeavour.
    • We try to avoid withdrawing money from our investments for short-term expenses.
  • Diversify your investments.
  • Keep your investing costs low.
    • We buy new investments around 10 to 15 times per year. We don’t trade stocks – so we keep our transaction costs low.

We try and apply this above advice but we’re not always successful.  We’re far from perfect and we overspend now and again.  Maybe the same goes for you.  This blog however helps keep me honest so whenever things go awry I’ll try and remember what I wrote here to get back on track.  I hope this post helps you too.

What boring money advice do you try and follow for success?   Who did you learn that from?

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18 Responses to "This boring money advice never goes out of style"

  1. Thanks for sharing. Good advice is always worth reading again, boring or not!

    There is one piece of advice I would add in the debt section: less debt is better than more debt. People seem to see big numbers their eyes go blurry. Once you hit 6 digits, it’s like it doesn’t matter whether it’s a 5 or a 9 in front….its just a lot of money! But the long term impact of a few extra thousand dollars is massive. In purchasing a house for instance, I did some calculations yesterday on how much we are saving each month by not maxing out the mortgage we were approved for. It is astonishing. You can read the details here if you wish (http://www.apfblog.com/why-we-bought-one-third-the-house-we-could-afford/), but the short version is that we still have a home to live in, and we have $3000 extra each month because the home we bought was MUCH less than what the real estate agent and banker told us we could afford. It is one of the best decisions we have ever made (less stress, more piece of mind, more flexibility etc…). And my guess is that our lives will be the better for it.

    Reply
    1. Thanks for reading APF. Well, our mortgage remains in the 6-figures but hopefully for another 3 years. We hope to have the mortgage fully killed off in 5 years.

      You were smart to free up $3000 per month in cash flow. The reality is nobody wants you to save your money for the most part (except brokerages). That because realtors and everyone else gets paid when you spend 🙂

      Reply
  2. “Borrowing lots of money to buy a depreciating asset (e.g., a house) is unwise.”
    — Fixed that for you. 😉 There is no financial, economic, or accounting difference between a house and a car, yet for some reason society believes otherwise.

    “We feel borrowing money makes other people wealthy.”
    — The banks already do this with ALL of your money and stocks, but anyone can play that game. I refer you to your last guest interview, the retired Aussie who made his million via borrowing against his house. Or Freedom35 whose been leveraging up his net worth for the last 8 years.

    “We pay ourselves first, every month, more than 10% net income if we can and then spend the rest.”
    — Yup. It’s much more important to save, and decide where to allocate that savings, than it is deciding what to buy with the rest; priorities will usually sort that out for you.

    “This blog however helps keep me honest so whenever things go awry I’ll try and remember what I wrote here to get back on track.”
    — Probably a good activity to do, even if you don’t blog. There has to be some level of accountability to keep you flying straight (e.g. spouse, auto-alert spread sheet, future self, etc.).

    Reply
    1. “Borrowing lots of money to buy a depreciating asset (e.g., a house) is unwise.”

      A house, nice one. Largely agree unless you live in Toronto or Vancouver! See latest post!

      “We feel borrowing money makes other people wealthy.” – the banks are VERY good at this game. I’m just too risk averse for home equity leverage. Too bad eh? I could be retired by now like the Aussie!

      “This blog however helps keep me honest so whenever things go awry I’ll try and remember what I wrote here to get back on track.”
      I’ll run it as long as I enjoy it. So far, so good. Passionate readers help. Cheers.

      Reply
  3. Classic principles and words to live by.

    Parts of your post reminds me of reading “The Richest Man in Babylon” 35 years ago for the first time.

    Reply
  4. Love this one: “We believe money invested should not be touched.”
    Not so this one: “Diversify your investments.”. Prefer “concentrate on the best, not the most”

    Reply
    1. Well, we’ll have to agree to disagree on the diversification front. I think owning more stocks than just some concentrated ones, for most investors, is a very good idea.

      Reply
  5. Kind of reminds me of this article:

    http://www.moneysense.ca/etfs/why-a-simple-portfolio-is-still-a-hard-sell-for-investors/

    Having the ‘perfect’ investment strategy is really only possible in hindsight. Should you be over weighted in equities right now? Should you pay off your mortgage or invest the money? These questions are good but they’re not really all that knowable except i hindsight. The thing is, effective money management that helps you meet your financial goals is amazingly simple. The central theme, as you say, is spend less than you make. Without that, nothing else matters. You could still meet all your financial goals with that approach using high MER mutual funds (although it would be much harder).

    The frustrating thing when I try to educate people is that they don’t believe these relatively small changes can make a HUGE difference. I’m preaching to the choir but here they are:
    1) Spend less than you make;
    2) Diversify investments; (including exposure to RE)
    3) Keep investment fees low;
    4) Be tax efficient;

    What else is there really?

    Reply
    1. This is where I get annoyed at CMF and other forums, about preachy people talking about indexing and this fund and that fund and how you should do this and that. They have no idea what the future holds and they can only preach about it because history told them what happened.

      There is no perfect portfolio, perfect strategy or perfect anything in advance. 100% agree.

      I told a friend of my this weekend in Toronto that plans are far from doing any of us any good but the process of planning and re-planning is essential. We both agree to that. Hard not too really 🙂

      If you can’t spend less than you make, save your token 10% net income, etc. then you have little hope other than to lower your expenses or earn more or work longer in life. It’s really that simple. Thanks for your comment.

      Reply
      1. I’m not sure if I agree. The best we can do is learn from history. Sure, investing into the future is somewhat like driving a car by looking in the rear view mirror but what other choice do we have?

        The issue I have is what I call hyper-optimizing. Chasing fractions of MERs, fighting with complication beyond what you need to to just achieve the more less same returns anyways. What’s the point really.

        One saying that has served me well is ‘don’t think with your gut, your gut is an idiot.” Your gut far too often confused good intuition with wishful thinking. Set an objective plan and stick to it. Easier said than done but it does get easier with time. I felt a bit silly buying heaving into Europe in my kids RESP a month ago. That seems to have turned out to be a good choice. Just follow the plan man!

        Reply
        1. I should clarify. I don’t dislike or get annoyed by indexing. I think it’s a great method and practice some of it myself. My point is, I dislike the preachy tone of some investor who believe because they index, and have an allocation that works for them, they believe they are 100% right.

          Everyone has different goals, objectives, tolerance and such. People need to find theirs. To say what MUST be done by all is heard-mentality and it drives me nuts. That’s all. Indexing is great but people arguing over 5 basis points is useless.

          “I felt a bit silly buying heaving into Europe in my kids RESP a month ago. That seems to have turned out to be a good choice.”

          It could be a great call in a few years or a dud – my point is – you don’t know! But, buying the market puts the odds in your favour. You know this too well…what am I writing this to you?? 🙂

          Reply
  6. While all these points are valid and should represent the core of any financial plan, most people want the instant gratification. A long(er) term plan is not gratifying enough in this day and age. They want their house to jump in value the week after they take possession, they want the stock they just bought to announce a dividend increase every quarter. They want granite counter tops, SS appliances, and not only a bathroom for each person in the household but a “guest” one as well in their FIRST home! People think they want to retire at (name any age under 50) and will read any sucker book they find that claims to have the answer. And face it, there are a lot of these sucker books out there and more showing up every year. Financial advisers(ors) can be found everywhere extolling the virtues of any number of schemes and people fall for them. Having said all that, it’s the same in the dieting world as well.

    Knowledge is not the problem, human behaviour is.

    Reply
    1. Totally agree Lloyd. The latest generation seems to enjoy and thrive on instant gratification. Too bad.

      I got a quartz countertop in our home but I could afford it. I couldn’t imagine not having decent jobs (like we do, thankfully) and trying to buy a house like we did. No friggin way. Even with two good jobs, I was very stressed up until a couple of years ago about our mortgage. Worse case, very worse case, I could pay it off with my non-reg. account and keep my RRSP and TFSA fully intact.

      You sound like another passionate reader: “Knowledge is not the problem, human behaviour is.” I believe you’re both bang on.

      Reply
  7. Another great post Mark!

    There are two paths to financial freedom, but most people only talk about the first one:

    1. Reduce your expenses, in other words save money
    2. Earn more money, grow your income

    I believe #2 is also important but it seems to get less coverage. Most people would do well to focus on both methods. There are a number of ways to earn more:

    1. Invest
    2. Start a business
    3. Move up in your career or change career and earn more
    4. Work harder, ask for a raise
    5. Start a side hustle

    Reply
    1. Well done with #2 and #5, essentially the same. I suspect as the modern economy unfolds there will be more #5 which offers choice and flexibility. This is a great thing. Thanks for stopping by. How are you? We should meet up again this spring for a pint or two. I need a business expense 🙂

      Reply
  8. I like #5. I like exercise and I like soccer. Refereeing soccer adds $400 a month in an honorarium payments for a few nights work and keeps me fit.

    If people viewed themselves as a service they contract out, they may realize how to earn more. Increase the service, solve someone’s need and increase your value and you will always be paid more.

    Reply

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