There aren’t many financial gurus willing to call out financial companies by name for their bad behaviour, but Ramit Sethi is one of them. In his book I Will Teach You to be Rich, he promises “a 6-week program that works,” and he includes advice on which banks to use and which to avoid.
The book is aimed at American Millennials; Canadians will learn useful lessons as well, but much of the specific advice would have to be translated to Canadian laws, banking system, and account types. The book’s style is irreverent, which helps to keep the pages turning.
It may seem impossible to fix a person’s finances in only 6 weeks, but this is how long Sethi says it will take to lay the groundwork for a solid plan and automate it with the right bank accounts and periodic transfers. The execution of the plan (e.g., eliminating debt or building savings) will take much longer.
Sethi is rare in the financial world because he will say what he really thinks about banks. “I hate Wells Fargo and Bank of America.” “These banks are pieces of shit. They rip you off, charge near-extortionate fees, and use deceptive practices to beat down the average consumer. Nobody will speak up against them because everyone in the financial world wants to strike a deal with them. I have zero interest in deals with these banks.” For the banks he does recommend, “I make no money from these recommendations. I just want you to avoid getting ripped off.”
People have many reasons why they can’t save and are in debt, but Sethi sees them as just excuses in most cases. “I don’t have a lot of sympathy for people who complain about their situation in life but do nothing about it.” “Cynics don’t want results; they want an excuse to not take action.” He urges readers to “put the excuses aside” and get on with the business of making positive changes.
The Program
The first step in the program is to “Optimize Your Credit Cards.” I found it interesting that Sethi focused on credit card perks before he covered eliminating credit card debt. He wants readers to “play offense by using credit cards responsibly and getting as many benefits out of them as possible” instead of “playing defense and avoiding credit cards altogether.” This approach sets him apart from many other experts on getting out of debt. While he does teach methods of eliminating debt, his focus is more on building wealth steadily.
The second step is to open “high-interest, low-hassle accounts.” Interestingly, he wants readers to open a chequing account at one bank and a savings account at another bank. Among his reasons are that the psychology of a separation between accounts makes us less likely to raid savings. Some might think opening a savings account is pointless if they have no money to deposit, but Sethi insists that you need to lay the groundwork now for a better future, even if you’ve only got $50 to deposit.
The third step is opening investment accounts. The author favours very simple investments, such as a Vanguard mutual fund account invested in a target date fund. “Don’t get fooled by smooth-talking salespeople: You can easily manage your investment account by yourself.” Unfortunately, Vanguard mutual funds are only available to Americans. Canadians can find one-fund solutions with certain Exchange-Traded Funds (ETFs).
To create the cash flow to reduce debt and invest, the fourth step is about “conscious spending,” which is “cutting costs mercilessly on the things you don’t love, but spending extravagantly on the things you do.” Achieving this involves tracking spending in different categories, but not traditional budgeting. Continue Reading…
Navigating the financial challenges of saving for a home while starting a family can be daunting.
To help you find a balance, we’ve gathered ten insightful tips from CEOs, business owners, and financial experts.
From creating a realistic family budget to exercising patience and smart spending, let’s explore these strategies to help you achieve your financial goals.
Create a Realistic Family Budget
Leverage First-Time Homebuyer Programs
Reevaluate Spending Habits
Establish Separate Accounts for Goals
Prioritize Consistent Savings and Budgeting
Consider the “House Hacking” Strategy
Avoid Lifestyle Creep, Automate Savings
Trim Expenses, Seek Additional Income
Explore Alternative Homeownership Strategies
Exercise Patience and Smart Spending
Create a Realistic Family Budget
My top tip for balancing the financial goal of saving for a home while starting a family is to create a realistic budget. Take the time to review your current budget and account for earnings, current expenses, and estimates for future expenses. Kids are expensive: they can cost $20k or more in the first year alone.
Your priority is to keep your kid safe, fed, and loved. Kids don’t care if you’re a homeowner. Once you have a good sense of what you’re doing with your money each month, put aside a reasonable amount each month to save for your home.
If you’re a few months out from buying, consider investing the funds in something with a fixed interest rate, such as a CD. It’s safer than investing in the stock market and has a higher return than most savings accounts. — Jeremy Grant, Founder and CEO, Knocked-up Money
Leverage First-Time Homebuyer Programs
First-time homebuyer programs are designed to make homeownership more affordable and accessible. These programs provide benefits like down payment assistance, lower interest rates, or reduced closing costs.
Research and identify the programs available in your area, offered by government entities or local financial institutions. Eligibility criteria may include income limits or credit score requirements, but many programs have flexible guidelines. If it all seems overwhelming, work with a knowledgeable mortgage lender or loan officer to navigate these programs effectively. — Mike Roberts, Co-founder, City Creek Mortgage
Reevaluate Spending Habits
Sit down and have a priorities conversation. Are you spending a lot of money in areas that don’t actually make you happy, just because you’ve always had the income to afford it? Just because you can, doesn’t mean you should.
Of the three to four things you spend lavishly on, what if you kept only one of those things — whichever makes you very happy to spend lavishly on it — and you downgraded the rest?
Every family can find at least one area of money being spent every month that doesn’t nearly matter that much to them but has become a habit. Which ones bring you true joy, and which ones have just become “the way we do it”? — Alex Boyd, Owner, Mindfully Investing
Establish Separate Accounts for Goals
The one tip I recommend for balancing the financial goals of saving for a home while starting a family is to have different accounts for each goal. I started doing this after reading The Richest Man in Babylon.
I started by saving 10% of my income, then divided everything else to pay for household bills and debts. After a few months, I increased this amount to 12%, then 15%, until I hit 35%. Continue Reading…
Today’s economic and job-growth landscape might have you turning to investing as a prominent option.
It takes patience and effort, but anyone can save up enough through intelligent investments.
How do you begin the Investment Process?
As of 2023, the average American makes around US$57,000 annually, which is lower for minority groups. Even if you’re careful with your spending, becoming financially independent with that salary can take a long time.
The average person from the United States only has about $5,000 in savings. Before beginning the process, you must consider how much money you can invest. The ultimate goal is financial independence [aka “Findependence” on this site], but getting there can take a while. Only put in what you’re willing to lose because things might not pan out as expected.
The formula for Findependence takes your yearly spending and divides it by your safe withdrawal rate to calculate your goal savings figure. Then, it subtracts the amount you’ve already saved and divides that amount by how much you can save each year. It’s only an estimation, but it can help you know how much your investments need to make.
What Investments should you Consider?
There are plenty of investment types. The stable ones often have lower returns and you usually need to take some risk to see a high reward quickly.
1.) Real Estate Investment Trust
A real estate investment trust (REIT) receives money from investors to purchase and manage property. Most generate revenue through rental income and pay dividends in return for the initial payment you made. It’s similar to owning by yourself, but you pool funds for the purchase and let someone else take care of the tenants. There are also other REIT types, so you have more options than rental properties.
2.) Stocks
The stock market usually requires more attention to detail because you must keep up with it. Anything from an upcoming brand deal to an overseas political event can affect this investment type. You should frequently check the stocks you hold and the businesses they belong to so you can quickly respond to changes.
The Canadian stock market differs from the United States version. Firstly, you need a brokerage account. Most brokerages charge about $5 to $10 per trade, with average commission fees of $6.95. It might seem minor, but paying to invest or shift your stocks around puts you at a loss before you begin. The flat rate cut you must pay can also make investing smaller amounts challenging because it takes a higher percentage the less you put in. Continue Reading…
BDO Affordability Index Spring 2023 (CNW Group/BDO Canada LLC)
By Jennifer McCracken, BDO
Special to Financial Independence Hub
The cost of living has spiked significantly in the past year and Canadians across the country are feeling the pinch. Younger Canadians between the ages of 18 and 34 are particularly affected, having not had the chance to build up as much savings as older generations.
BDO’s newest Affordability Index shows that 45% of young Canadians say their debt load is overwhelming and they’re unsure how to tackle the problem. That’s higher than those between the ages of 35 to 54, where 39% say they’re in that situation and significantly larger than the 13% of Canadians between the ages of 55+ who feel the same.
Credit-card debt appears to be the main reason younger Millennials and Gen Z are falling behind, with 37% of 18-34 year olds saying this form of debt causes them the most stress. Mortgage debt and student debt were the next closest reasons, with 22% for the former and 21% the latter.
What are Canadians doing to cope with inflation and rising debt?
It’s not surprising then that 49% of younger Canadians say they’re reducing their living expenses to cope with inflation and the high cost of living, while 32% say they’re lowering how much they contribute to savings as well.
While younger Canadians may be struggling more than their older counterparts, they’re also more open minded when it comes to finding solutions.
The Affordability Index indicates that younger generations are much more willing to look for new streams of revenue compared to older ones. Some 24% say they are adding part-time work to keep up with inflation, compared to just 13% of 35-54-year-olds and only 5% of those 55 or older.
Young Millennials and Gen Z would also find side hustles and gig work to increase their income. Of those doing this, 35% said it was to help them pay for essentials and 27% say it’s to help them pay down debt.
It’s not just part-time and gig work that younger Canadians are using to fight inflation, they’re also looking for higher paying jobs. A total of 13% say they’ve recently found a new full-time job in response to the affordability crisis. That’s compared to just 7% of those aged between 35-54 and only 1% of those 55 and older.
However, while younger generations are keen to seek out new ways to increase their income, they’re very unfamiliar with many of the most common debt relief options available.
A lot of people just don’t know what their debt relief options are …
Only 19% of them said they were familiar with the idea of bankruptcy, 11% said they know what a debt management plan is and 9% with a debt consolidation loan. Continue Reading…
To help you create a budget and stick to it for achieving your financial goals, we’ve gathered advice from 18 professionals, including CEOs, founders, and VPs. From leveraging public accountability to reviewing and adjusting your budget regularly, these experts share their top steps to take for effective budgeting and saving.
Leverage Public Accountability
Negotiate Lower Fees
Celebrate Budgeting Successes
Automate Your Savings
Identify Cost-Cutting Opportunities
Track Expenses and Income
Eliminate Unnecessary Expenses
Create a Realistic Budget
Prioritize Necessary Expenses
Monitor Financial Metrics
Automate Savings Consistently
Use the 50/30/20 Rule
Utilize a Monthly Bill Calendar
Limit Online Shopping Access
Establish a Purpose and Set Goals
Use Cash Stuffing With Discipline
Create Organized Sub-Budgets
Review and Adjust the Budget Regularly
Leverage Public Accountability
In my personal journey toward financial wellness, one of the most effective strategies I’ve employed is leveraging public accountability to create a budget and stick to it. I started by sharing my financial goals with my circle of trusted friends and family, which made the goals feel more real and tangible.
Whenever I felt tempted to stray from my budget, the thought of explaining my overspending to them motivated me to resist. In fact, one time I was really close to buying an expensive gadget on a whim, but the idea of having to admit this unnecessary expense to my accountability partners made me rethink, and I decided against it.
Using public accountability in this way can be a powerful tool to reinforce your commitment to your financial goals, and I encourage you to try it. — Antreas Koutis, Administrative Manager, Financer
Negotiate Lower Fees
One example of a strategy not commonly undertaken when creating a budget is to negotiate lower fees on existing bills such as cable, internet, or cell phone plans.
As the market becomes increasingly competitive, companies are more likely than ever before to reduce customer bills if they know they may otherwise lose that customer’s business.
This can lead to significant savings without having to decrease spending on existing items. With the resulting saved money, you can then allocate it towards your financial goals, more easily allowing for what was once considered unattainable! — Carly Hill, Operations Manager, Virtual Holiday Party
Celebrate Budgeting Successes
Creating a budget and sticking to it, in my opinion, is difficult work. Celebrate your accomplishments along the way. In the long run, I believe that this will make it easier for you to stay on your budget and will help keep you motivated.
Treat yourself to a small reward if you reach a savings goal or pay off a debt, for example. Just make sure the prize is within your financial constraints! — Bruce Mohr, Vice-President, Fair Credit
Automate your Savings
A lot of people tell you to pay yourself first. I think a better approach is to save for yourself first. Set up automatic transfers to your various retirement and savings accounts. That way, the money isn’t just sitting in your checking account and tempting you.
This works even better when you have high-yield savings accounts and retirement funds that aren’t linked to your main bank account. Spending habits are hard to break, but it can be easier to form new ones if you automate your savings. — Temmo Kinoshita, Co-founder, Lindenwood Marketing
Identify Cost-Cutting Opportunities
Of course, the goal of budgeting is to save money, but one step you need to take in order to be successful and reach your financial goals is to look for ways to save. You can do this by reviewing your budget and pinpointing areas where you can cut costs to save money.
For example, if you find that you spend a lot of money on going out to eat, you can cut down spending here and instead cook your meals, which ultimately will be the cheaper alternative.
You may also cancel subscriptions you don’t use or negotiate your bills with your service providers to see if you can get a discount. Overall, there are multiple ways to cut down your spending and save money—you just need to figure out which areas you can negotiate or compromise! — Bill Lyons, CEO, Griffin Funding
Track Expenses and Income
You can find areas where you might be overspending or where you can reduce expenditures by keeping track of your expenses and income. Additionally, you may utilize this data to make wise decisions on future purchases and investments, ensuring that you are deploying your resources as effectively and efficiently as you can.
You may keep yourself motivated and on track to accomplish your goals by routinely evaluating your financial accounts and your progress toward them. Additionally, it can assist you in seeing future difficulties or obstacles, enabling you to modify your plan and change the route as necessary. — Michael Lees, Chief Marketing Officer, EZLease
Eliminate Unnecessary Expenses
A major problem people have when sticking to a budget is the little purchases they make along the way. Many of us are guilty of ordering takeout after a long day of work, picking up a daily Starbucks order, or wasting groceries.
While these small purchases may seem innocent enough, they quickly add up and get you off track toward reaching your financial goals. Before making a purchase, ask yourself, do I need this? Or if you need extra motivation, consider how many hours of work it takes you to purchase these daily items.
By cutting out or at least reducing some of these mundane purchases, you’ll notice your bank account feeling a little healthier and lower stress knowing you have enough money to put towards your financial goals and still pay your bills. — Brandon Brown, CEO, GRIN
Create a Realistic Budget
Often, I see people attempting to budget just for the sake of budgeting without considering its implications on their overall lifestyle. If you want to religiously follow your budget, make it realistic. Realistic financial goals will provide you with a head start in creating an achievable and sustainable budget.
Create a budget that takes into account not only your financial goals but also your lifestyle behavior and the situation you are in right now. If you regularly eat out, set aside money for that based on how much you anticipate spending and how much you are willing to spend.
Moreover, don’t make your spending plan too strict. What’s the purpose of working if you can’t occasionally treat yourself to a sumptuous meal or a new pair of boots? After all, you deserve to feel human.
If you don’t make room for the things you want, you’ll eventually give in and ruin your spending plan. Just make sure to plan ahead and remember that the ultimate goal is financial security and independence. — Jonathan Merry, Founder, Moneyzine
Prioritize Necessary Expenses
Pay all your bills before buying anything discretionary. When you’re trying to save money, it’s essential to cover all necessary expenses before you try setting money aside. This way, you have a better idea of how much money you have left for casual spending and savings.
Paying any obligations first allows you to avoid surprise expenses after you’ve already started spending, which in turn helps you avoid having to pull money out of your savings. The best way to stick to your budget is to pay what you need to first. — Max Ade, CEO, Pickleheads
Monitor Financial Metrics
Entrepreneurs should track financial metrics to monitor their success. A metric for entrepreneurs to measure is customer lifetime value, which is the total amount of revenue that one customer generates during their entire interactions with the business.
Monitoring this metric helps entrepreneurs understand how much revenue can be expected from a single customer and what marketing strategies are most effective at keeping them engaged.
Additionally, tracking customer lifetime value allows entrepreneurs to maximize their returns on investment as they can target customers who spend more money and reward existing customers who have already demonstrated loyalty and commitment. — Julia Kelly, Managing Partner, Rigits
Automate Savings Consistently
Automating savings is a surefire way to help you stick to saving money and reaching your financial goals. Too many situations can thwart your best intentions to regularly add to your savings yourself: mainly forgetfulness since an additional task is the last thing anyone needs.
If you don’t automate, you may rationalize not regularly adding to your savings account because of an extra purchase you think you need or deserve. That could snowball into a pattern of doing it less than you initially wanted or not at all.
“Out of sight, out of mind” is an advantage of automating your savings: If you don’t see that money sitting in your checking account, you won’t spend it.
Disabuse yourself of the notion that you need a large amount of money for an automatic savings plan. Start with $5, $10, or $20 at a time. You can increase that by looking for ways to decrease your expenses, such as comparison shopping for your car and home insurance or requesting lower interest rates on credit cards. — Michelle Robbins, Licensed Insurance Agent, Clearsurance.com
Use the 50/30/20 Rule
To create a budget and stick to it, prioritize your expenses and allocate your income with the 50/30/20 rule. This rule suggests that 50% of your income should go towards necessities like rent, utilities, and groceries, 30% should go towards discretionary spending such as dining out and entertainment, and 20% should go towards saving and paying off debt. Continue Reading…
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