Wealth-building plays a critical role in securing your financial future. More than just having enough money to cover day-to-day expenses, it’s about creating a financial cushion that allows you to navigate life’s uncertainties and enjoy peace of mind in the long term.
Whether your goals are to own a home, provide for your family, or retire comfortably, it’s essential to take steps to build your wealth as soon as you can. Follow the smart financial strategies listed below to help you set a solid foundation for achieving your long-term wealth-building goals.
Start the Process by Creating a Realistic Budget and Sticking to it
Your budget is the cornerstone of your financial plans. As such, it’s important to set a solid foundation for achieving your long-term goals by putting together a realistic budget that reflects your financial needs and capabilities. This means keeping a record of your expenses, categorizing your spending into essential and non-essential items, and using these details to plan your future spending. Having a clear picture of where your money goes can help you identify areas where you might be overspending and adjust your budget if needed. Once you’ve established control over your finances, you’ll have more room to save and invest for the future.
Build an Emergency Fund that can Sustain your Household for several months
There are circumstances, such as illnesses and accidents, that may require you to immediately shell out money or disrupt your source of income for some time. These can quickly derail your finances if you’re not adequately prepared. That’s why building an emergency fund is crucial. Start as early as possible to grow your funds; open a bank account with high-yield savings, such as Maya’s Personal Goals or Time Deposit Plus that let you earn at least 4% p.a. and up to 5.75% p.a., respectively. Aim to set aside 3 to 6 months’ worth of living expenses in such accounts. This fund will serve as a financial buffer so that you won’t need to rely on credit cards or loans when an emergency arises. Having an emergency fund gives you a sense of security and keeps your wealth-building efforts on track.
If you have Debt, make a Priority of Paying off High-Interest Debt First
Debts, particularly high-interest debt like credit card balances, can severely hamper your ability to build wealth. Focus on paying these debts first to prevent your balance from ballooning even further. If you have multiple high-interest debts, consider using either the avalanche method (pay the debt with the highest interest rate first) or the snowball method (start with the smallest debt for quick wins). You may also want to consolidate debts so you only have to worry about one amount and one deadline. Once you’re free from high-interest debt, you’ll have more flexibility to redirect your money toward savings and investments that grow your wealth.
Look into Investing in Retirement Accounts as early as possible
Even though retirement may seem too far into the future, it’s never too early to plan for it. In fact, the sooner you start investing for retirement, the better. Aside from government-backed retirement plans like the Social Security System (SSS) and Personal Equity and Retirement Account (PERA), you can also put some of your money in investment products like time deposits or stocks. Consistently contributing to these accounts over time allows you to benefit from compound interest, which grows your investments faster. Prioritize retirement contributions as part of your wealth-building strategy to ensure that you’ll have a secure financial future when you’re ready to stop working.
Diversify your Investments to Control Risk and earn Long-Term Returns
Instead of putting all your money in one place, spread it across different types of investments, such as stocks, bonds, mutual funds, or real estate. Each type of investment behaves differently under various market conditions, so diversification helps protect your wealth from sudden market downturns. If you’re new to investing, consider working with a financial advisor or using investment apps that provide access to diversified portfolios with lower entry points. Continue Reading…
* Republished from the Just Word Blog from Robin Powell, the U.K.-based editor of The Evidence-Based Investor and consultant to investors, planners & advisors
Upton Sinclair, American writer & social reformer, 1935; Goodreads
If you want to know how to invest and which stocks or funds to invest in, who do you look to for help? The obvious answer, you might assume, is to ask an expert professional. After all, you would probably consult a doctor if you were worried about your health, or a lawyer if you faced a pressing legal issue.
But it’s not that simple with investing. The problem is that, although there’s no shortage of professionals only too happy to advise you, identifying someone who’s a genuine expert and, crucially, has your interests at heart is far more tricky than you might imagine.
The bottom line is that, no matter how professional we like to think we are, almost all of us have conflicts of interest, and it’s a particularly serious issue in the financial sector.
Can you trust an advisor?
Let’s start with financial advisors. As with every profession, there are good advisors and not-so-good ones. In my experience, even advisors who don’t dispense the best advice generally mean well. But advisors are only human, and if they’re incentivized to recommend a certain course of action, that’s what most will recommend — even if it’s not the best advice for the client.
Take actively managed funds, for example. The evidence is overwhelming that only a very small proportion of active funds beat the market in the long run. Therefore most investors are better off avoiding them, using low-cost passive funds instead, and resisting the temptation to buy and sell. And yet it is still extremely common for advisors in Canada to recommend active investing.
So why is that? Well, the simple answer is that advisors are often paid more money if their clients use active funds. Many advisors, for example, are paid through commissions from mutual fund companies, typically in the form of a trailing commission, or recurring payment, for as long as the client holds the fund. Actively managed mutual funds tend to have significantly higher expense ratios than passive funds, and these include a portion dedicated to advisor compensation.
Other advisors are employed by banks or other large financial institutions which offer their own actively managed funds. These advisors are usually incentivized through sales targets, bonuses or company performance metrics to sell in-house products.
Research links conflicts to poorer outcomes
There have been several studies over the last ten years into the effects of financial incentives on the types of investment Canadian advisors recommend.
One study, entitled The Misguided Beliefs of Financial Advisors, showed how Canadian advisors often steer clients into high-fee active funds, and encourage them to trade too often — both of which usually lead to lower long-term returns. (Surprisingly, the study showed that advisors often made the same mistake with their own money, but that’s another story!)
A 2016 study by the Ontario Securities Commission called Missing the Mark: Behavioural Insights and Investor Decision-Making, found that clients tend to trust their advisors’ recommendations without questioning the potential conflicts of interest arising from commission-based compensation.
The Canadian Securities Administrators (CSA), which regulates securities markets in Canada, has produced and commissioned a number of studies on this subject. The findings have been broadly consistent, namely that advisors are more likely to recommend funds that paid higher commissions, and that such commissions often lead to inferior investment outcomes, compared to cheaper products with similar risk-return profiles.
In response to such findings, the CSA and other regulators have introduced measures to improve fee transparency and address conflicts of interest in financial advice. However, concerns remain about whether these changes are sufficient to protect investors from biased recommendations.
What about DIY investment options?
Of course, you don’t need to go through a financial advisor. Some investors choose to use self-directed investing platforms, such as RBC Direct Investing, TD Direct Investing, BMO InvestorLine or CIBC Investor’s Edge. But these platforms may also have incentives to promote active funds over low-cost index funds or ETFs. Continue Reading…
Yes, interesting times may call for interesting portfolio changes! Or not. 🙂
Inspired by a few recent reader questions and a new blogger article I found that I will link to below, here is my quick take on whether I should be making any changes to our portfolio: with a new U.S. President.
Should I change our Portfolio – With a new President?
Reader questions, adapted slightly for the site:
Reader #1:
With a new U.S. administration about to take office on January 20, 2025, it’s easy to imagine things like tariffs on U.S. imports, an overheated U.S. economy, etc. fuelling the rise of inflation.
Thoughts? Should we be using this reality in our investing style going forward? What changes should we consider? Also, with net interest income improving in that type of scenario. Banks seem like a good idea? Just a thought for a future article.
And…
Reader #2:
Mark, I know you’re investing more in U.S. stocks and global stocks using a low-cost indexed fund now vs. before – at least you have written about that for the last few years since the pandemic. So, with the pandemic now over and with the U.S. stock market up so much since 2023, what’s your investing plan when a new U.S. President comes into office? Do you still support that administration and that economy moving forward beyond 2025?
I’ll unpack a few themes to provide some answers…what I am doing and what I will continue to do.
1. Politics is messy, at best
Like the Revolution article above, although I don’t always get it right (!) on this site, I try to avoid writing too much about politics and/or the broader economic climate including the influence that each subject has with the other since these subjects are far too polarizing. It’s very difficult to have any meaningful discussion online these days…
2. Equity diversification still works
Until my overall investing approach stops working towards meeting my goals, I’ll keep at it.
For new and established readers on this site, you might be aware I’ve mentioned that our investing approach could be considered a “hybrid approach” – a structure that was established about 15 years ago as follows:
We invest in a mix of Canadian stocks in our taxable account – to deliver income and some growth, and
Beyond the taxable account, while we own a mix of Canadian and U.S. stocks, we own (increasingly) more low-cost ETFs like XAW and QQQ in particular in our registered accounts: inside our RRSPs, TFSAs and my LIRA for extra diversification.
I like the approach, the process and the results.
As a hybrid investor, I just don’t see how I should be making any significant changes to our portfolio for income, growing income, and total growth for the coming years.
If the market turns bearish, while most stocks will go down in price many blue-chip stocks will still pay dividends regardless of the market correction. The Boards know that shareholders invest in their companies for stable cashflow. Even dividends can be increased in a bear market by some companies. One good example is owning Fortis (FTS) – which has been paying higher dividends for 51 consecutive years through all kinds of market cycles…
I’m trying not to fix what isn’t broken per se.
That said, I also don’t see the U.S. stock market flying higher, up another 20% for 2025 coming.
Sure, that could happen I guess but 2023 and 2024 have been great investing years coming out of the pandemic for the U.S. so I would expect, at some point, some reversion to the mean will occur. If and when and how much that reversion will be, well, I have no idea… Continue Reading…
Unlock the path to Financial Independence with insights from 14 industry leaders who have mastered expense tracking to achieve their goals.
From uncovering spending patterns to ensuring every dollar is accounted for, business leaders share how these simple habits can transform financial awareness.
Packed with actionable advice and real-world experiences, this article offers a comprehensive guide to making expense tracking a cornerstone of your financial success.
Tracking Expenses Reveals Spending Patterns
Use Budget Trackers for Financial Goals
Monitor Spending to Identify Unnecessary Costs
Set Up Budgeting Apps for Expense Tracking
Regularly Review Spending for Financial Goals
Categorize Expenses to Optimize Spending
Track Every Dollar for Financial Awareness
Automate Expense Tracking for Financial Discipline
Avoid Lifestyle Inflation with Expense Tracking
Stay Educated on Personal Finance Strategies
Separate Commission Checks for Financial Stability
Use Zoho App for Expense Tracking
Make Expense Tracking a Habit
Treat Financial Education as Ongoing Process
Tracking Expenses Reveals Spending Patterns
Tracking expenses has been a game-changer for my Financial Independence journey. I started by meticulously logging every purchase, from my morning coffee to weekend activities. This habit revealed surprising patterns. For instance, I discovered I was spending an astronomical amount on dining out. By cooking more at home and finding free or low-cost activities, I’ve cut my food expenses by 40% without sacrificing enjoyment.
I’ve found that the key to successful expense tracking is making it a daily ritual, as consistent as brushing your teeth. I use a simple spreadsheet, categorizing expenses and color-coding them based on necessity. This visual approach helps me quickly identify areas where I’m overspending.
My advice? Start small and make it fun. Create a “Money Challenge” for yourself. Set a budget for exploring local attractions and see how creative you can get. You might find that free activities are more rewarding than expensive outings. Remember, some of the best things in life—like enjoying nature or spending time with loved ones—are absolutely free. — Joe Hawtin, Owner, Marin County Visitor
Use Budget Trackers for Financial Goals
Tracking expenses has been like having a financial compass, guiding me steadily toward my independence goals. It’s interesting how, when you start paying attention, those small, seemingly inconspicuous expenses add up much like stray grains of sand forming a desert. I remember when I first began meticulously noting every transaction: everything from coffee runs to larger business expenses. It was a revelation to see where my money actually went, allowing for informed adjustments.
One time, I noticed just how much I was spending on subscription services. It became evident that some provided value while others were just nice-to-haves that could be trimmed. This insight gave me the clarity and discipline needed to funnel resources into areas that genuinely supported my goals. At spectup, we often stress the importance of financial literacy and discipline to startups, emphasizing how a penny saved is indeed a penny earned, if not more.
For anyone aiming for Financial Independence, I’d suggest starting with a simple yet powerful tool: a budget tracker or even a basic spreadsheet. Regularly reviewing it can help spot trends, unnecessary outflows, and potential savings. Another tip is to categorize expenses into ‘needs’ and “wants” — a method that not only flags areas ripe for cutbacks but also enhances conscious spending decisions. Financial Independence is less about deprivation and more about strategic allocation and investments that align with one’s dreams and ambitions. This practice, over time, builds a healthy foundation for independence, much like a sturdy scaffold supporting the tallest of towers. — Niclas Schlopsna, Managing Consultant and CEO, spectup
Monitor Spending to Identify Unnecessary Costs
Keeping track of my spending has been crucial for achieving my Financial Independence goals. By monitoring where my money goes, I’ve been able to spot unnecessary expenses, like eating out too much or keeping subscriptions I don’t use anymore. This awareness helps me direct my money toward more important goals, such as saving for retirement or investing. Using a budgeting app has made it easier to track and categorize my spending, which highlights areas where I can improve.
One piece of advice I’d give to others is to set clear savings goals and treat them like must-pay bills, making them a priority over non-essential spending. It’s also important to have an emergency fund and ensure your budget can handle unexpected expenses without affecting your long-term goals. Regularly reviewing and adjusting your spending helps you stay focused and disciplined, speeding up your journey to Financial Independence. — Matthew Ramirez, Founder, Rephrasely
Set up Budgeting Apps for Expense Tracking
Tracking my expenses has been instrumental in keeping me focused on my Financial Independence goals. When I first started my company, managing finances was crucial not only to the business but also to my personal goals.
I began by setting up a dedicated budgeting app to track where every dollar was going, breaking down my expenses into categories like essentials, business investments, and personal spending.
This habit of tracking helped me identify patterns I hadn’t noticed: like small recurring costs that added up over time, which I could cut or reinvest.
One experience that really solidified the importance of tracking was when I noticed my dining-out expenses were eating into my savings goals more than I realized.
Cutting back on that allowed me to reallocate funds towards business tools that directly supported my company’s growth. For anyone aiming for Financial Independence, my advice is to start small but stay consistent.
Use a tool you’ll stick with, review your spending weekly, and set achievable targets. Monitoring expenses not only keeps you aware of spending but also provides a sense of control over your path toward financial freedom. — Aseem Jha, Founder, Legal Consulting Pro
Regularly Review Spending for Financial Goals
Tracking my expenses has been essential to staying on track with my Financial Independence goals. By regularly reviewing my spending, I’ve clearly understood where my money goes and where I can make adjustments. This transparency helps me avoid unnecessary expenses and prioritize saving and investing for long-term goals.
One key benefit of tracking my expenses is identifying patterns. For example, I noticed that small, recurring subscriptions were adding up over time, and cutting back on those had a noticeable impact on my budget.
Tracking my expenses also helped me evaluate the return on investment for both personal and business expenses, ensuring that every dollar spent aligns with my broader financial objectives.
For others aiming for Financial Independence, I advise starting small and being consistent. Use apps or spreadsheets to track every expense, no matter how minor it seems. Set realistic goals, like reducing discretionary spending by a certain percentage or automating savings. Most importantly, review your expenses regularly and adjust your strategy as needed.
By staying disciplined and aware of your financial habits, you can gradually build a solid foundation for economic independence and peace of mind. — Fawad Langah, Director General, Best Diplomats
Categorize Expenses to Optimize Spending
Tracking my expenses has been essential to staying on course with my Financial Independence goals. As CFO, I’m used to analyzing budgets and understanding the power of detailed financial oversight. By tracking my personal spending, I’m able to identify where my money is actually going and, more importantly, make adjustments that align with my goals. Seeing exactly how much is allocated to necessities versus discretionary spending gives me a clear picture of my financial habits and where I can optimize.
One tip I’d share is to categorize expenses into “needs” and “wants.” This simple division has been invaluable, helping me prioritize what’s truly essential and allowing me to cut back on less critical spending without feeling deprived. I recommend using a reliable app or software for tracking; it keeps everything organized and accessible, making it easier to spot trends over time.
Another strategy I use is setting quarterly spending goals instead of focusing just on monthly budgets. This allows for flexibility while still maintaining oversight, so I can adjust for any unexpected expenses without losing sight of my broader financial objectives. Tracking expenses isn’t just about cutting costs, it’s about having a clear plan and adjusting as you go, helping you achieve financial freedom with greater control and less stress. — Brian Chasin, Chief Financial Officer, SOBA New Jersey
Track every Dollar for Financial Awareness
Tracking my expenses has helped me stay on track toward my Financial Independence goals. It’s one thing to have a general idea of where your money goes, but actually seeing every dollar laid out is a real wake-up call. When I started tracking everything, from big expenses like rent to small daily coffee purchases, I noticed patterns I hadn’t expected. Those small, everyday expenses add up fast, and seeing them written down made it easy for me to see where I could cut back without feeling like I was depriving myself. Instead, it helped me make decisions that were more in line with my long-term aims.
If you’re serious about Financial Independence, start with something simple, like a basic spreadsheet, and just stick with it. You don’t need any fancy software to see where your money’s going. I started by tracking every little thing: coffee, takeout, random purchases-and honestly, just seeing it all laid out showed me where my money was going. I started noticing spots where I could cut back without really missing out. Little tweaks like that can add up over time, and it’s an easy way to start working toward your bigger financial goals. — Mushfiq Sarker, Chief Executive Officer, LaGrande Marketing
Automate Expense Tracking for Financial Discipline
In my journey towards Financial Independence, meticulous tracking of my expenses has been a lynchpin. It has provided me with an accurate picture of where my money is going, empowering me to make informed decisions. For instance, by identifying non-essential expenditures, I was able to divert funds towards worthwhile investments, precipitating a 20% increase in my profitability over five years.
For those pursuing the same goal, my advice is to embrace automated financial management tools. These tools streamline expense tracking, allowing more focus on strategic decision-making. Also, I advocate for the adoption of a mindset that regards every expense as an investment:a strategy that has guided my own financial growth and stability. — David Chen, Director of Finance, Srlon
Avoid Lifestyle Inflation with Expense Tracking
Tracking expenses has been invaluable in maintaining focus on my Financial Independence goals. By monitoring where every dollar goes, I gain a clear picture of my spending habits and identify areas where I can cut back or adjust. It’s crucial to allocate spending in alignment with my values and long-term objectives, meaning I consciously choose to invest more on experiences that enrich my life rather than mindless consumption. Continue Reading…
A recent survey from Canadian fintech company Spring Financial, found that nearly three quarters (74%) of respondents plan on reducing holiday spending this year and shoppers, particularly Gen Z (66%) and millennials (64%), are finding the financial strain of buying gifts to be the most stressful part of the holidays.
The economy has been challenging this year so it’s no surprise that shoppers are feeling added stress this holiday season. Whether you’ve already started your shopping or you haven’t even started your list, below are some practical holiday shopping tips to help make your spending less stressful and more manageable.
1.) Spread the joy of pre-loved items
This one might be easier said than done but with half of shoppers opting for gift alternatives, there’s a good chance your friends and family may be relieved about the idea of traditional gifts with more financially feasible alternatives. For example, places like Facebook marketplace often have gently-used children’s toys that offer a more budget-friendly price tag for the little ones on your list, while a traditional baking or book exchange can be a great alternative to Secret Santa games for the adults in your life.
2.) Set a budget and stick to it
It can be so easy to overspend during the holidays. There is always someone to shop for and shops — whether online or in-store — are set up in a way that encourages impulse buying and overspending. To set yourself up for success, set a budget and shopping plan before starting shopping to ensure you’re sticking to a spending limit that works for you. Don’t forget to account for all the extra expenses that come with this time of year like food, host gifts, and transportation to and from any holiday parties you have coming up.
3.) Compare your debt options
Sometimes, taking on a bit of debt is necessary to keep the holiday magic alive. The good news is, there are lots of financial options available to shoppers. Comparing the interest rates on any buy-now-pay-later programs as well as credit cards, lines of credit and loan is a great way to determine which debt option will be the easiest to pay off post-holidays. Continue Reading…
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