Budget Sense

We all have our life mistakes and regrets. That crush you had on that girl in high school which you now look at as a waste of time. How about that decision to not finish high school? But what about your biggest financial mistakes, the ones that you have regretted till this day? We all have them and it is not about making them but how much we have learnt from them. In talking to people I know, reading people’s admissions online and from my own person experience, here are some of the most notable ones.   Some people regret these so much so that they would hire an exorcist to erase their ghosts from their memory if they could.

Taking on too many credit cards and debt at once

I couldn’t resist putting this on the top of the list and I am sure many of you agree. In fact, I am guilty of this myself.  While in school and a few years after graduating, I was carrying up to 4 different credit cards at once! I look at that stage in my life with total financial disgust. How was I able to manage? well I wasn’t really and it took me years to eliminate all but one of these cards.  People have gone credit-crazy in the last few years, ignoring the very bad economic situation we have been in for the last few years. People are refinancing their mortgages so they can do expensive home renovations and buying new cars they don’t even need.

Not starting to save early

In his book “Debt Free For Life…”, famous financial author David Bach confirms that it is never too late to start saving and I agree. While that may be true, it is not telling us the full picture though: the later you start, the less money you can save. In fact, when you are young, you generally have less expenses than when you are with a family, a mortgage to pay and other life expenses.  As youngsters, the tendency or motivation to save is usually not that strong as it is later on in life.  Make use of TFSA, RRSP and other saving programs out there, from as early an age as you can.  For example, if you are wise enough to start saving at the age of 18, and assuming you are able to put $250 a month on average, by the time you reach 35, you will have close to $56,000! (assuming an accumulated 2.5% interest)

Cars, cars and more cars

There is no question about it, cars can be big suckers of your income money. Sometimes up to half of your income if not more. There it insurance, maintenance, finance payments and of course, gas! Most of these costs have been on the rise as of late. I am not saying people shouldn’t buy a car if they need one but the mistakes lies in what people bought and how frequently they replaced their cars. Some people would buy a new car, make the payments for a few months, and then sell it for half the price to buy a newer or better model. Total madness! Buying a new car in and of itself usually means you will end up losing money as the price depreciates over time. But to buy a new one before you have had time to pay off the first one is setting yourself up to lose lots of money for years to come. And let us not forget to mention money spent on expensive car re-modelling and upgrades. 

Selling and Buying stocks at the wrong time

This is a tough one to judge since no one chooses to buy or sell stocks at the wrong time. It is simply a matter of wrong guessing or bad timing. I was reading an interview with one of Canada’s millionaires and renowned entrepreneurs and he talked about his regret for selling a certain stock too early. Had he waited a few more years he would have made close to a quarter billion in profit! To minimize your losses, be sure to diversify your portfolio and invest based on your risk tolerance.

School and Career mistakes

Few people know what they like to specialize in before entering higher education and even then, many don’t stay in the same program and end up changing it. Sometimes more than once. Others regret dropping out and not graduating at all which I agree to be one of the biggest mistakes, particularly in situations where you are more than half way to graduation.  For those, they paid thousands in school and tuition costs only to see it gone down the drain.

The fact that we are humans is enough of a guarantee that we will always make mistakes. No one is without one. The real question is not whether you have made financial mistakes in your life but more importantly, how much have you learnt from them? If you read the biographies of people who have accomplished a lot in their life-including top billionaires- you will often notice something common between all of them: they either built on the mistakes of others or learnt from their own mistakes and did things differently in their new attempts. Learn from your mistakes and don’t dwell on them. While you can’t undo what is in the past, you can certainly change how your future will shape up to be.

We all love the smell of a new car or the feeling of moving into a new house. But as  a parent, there is no better feeling than that of having a new baby, especially if it is the first one in the family!

Amid all the excitement and joy of having a new baby, parents often forget one very important aspect which often comes back to hurt them late on in life: that this small and tiny baby will one day grow up and hopefully attend a good post-secondary institution.  We all know how much school costs these days and how much more it will cost in a decade or two from now.

Start saving for him now!

Knowing that school costs a lot these days and will cost a lot more in the future, it is wise to start saving for your new born child before even leaving the hospital! Yes, while still in hospital to deliver the baby, ask your husband to open a new account in the baby’s name (assuming you have picked a name for the newborn) Be sure that this is a high interest saving account, preferably a GIC one, so you can get the maximum interest possible by the time you withdraw the money for him when he reaches adulthood.

RESP and other Registered Education Saving Accounts

In Canada, the government offers the RESP (Registered Education Savings Program) which helps you save for your child’s post-secondary education.  The government, in turn, offers/matches your contributions through the Canada Education Savings Grant and the Canada Learning Bond exclusively to RESP subscribers.  Similar programs are offered in other countries and it is wise to make use of them early on. The earlier you start the better it is for your child’s savings.

Secondary savings options

In addition to the saving methods outlined above, you have other options at your disposal, including something as basic as a piggy bank where you and the family agree to put as much or as little as you can spare in it. Over the years, you can end up with thousands of dollars in there. You can also consider buying stocks in your portfolio for your new-born and vowing not to cash it out until they reach their adulthood which could potentially have multiplied, tripped, quadrupled or more in value by then

Whatever or however you decide to save, the important thing is to start saving as soon as they are born. In fact you can go one step further and do it as soon as the wife is admitted to the hospital or is in labor! The idea is to commit to it from day one and we know day one starts at the hospital.  And don’t make the mistake of assuming they are still too young and that there is enough time to start saving later in life. As long as you start saving early, it doesn’t matter how much you actually set aside for them for now. You can start small and grow your contributions as they get older. Just like you wished you had more money to pay for your school, your kids will thank you for having saved this money for them so they can actually focus on studying and not working two jobs to pay for their school!