I have always been good with my money.

I’m not trying to brag, it’s just the truth.

While some people get a high off of shopping, I get my kicks watching my investment accounts grow.

I’ve always had an interest in personal finance however, it’s only been over the last year and a half that I have completely buried myself in financial books, podcasts and blog posts trying to absorb as much financial advice as possible.

Last year I had my first child, my little boy!

While parenting is a 24/7 job the first 6 months mainly involve holding a baby, changing a baby and feeding a baby. There is a lot of mental downtime.

This gives you hours to listen to podcasts of your choice. I will say, reading a book or anything that involves physical holding something, in addition to your baby, is a bit more challenging. Audio learning all the way.

Anyways, I want to thank my maternity leave for giving me the opportunity, and the time, to really dig into the topic of personal finance and educate myself.

Like I said, I thought I was good with money. I thought I was doing all of the right things. I started saving early, I started investing in mutual funds early with my parents financial advisor.

When there was the odd conversation about money with my friends I felt like I had it more together then they did because I had a fancy financial advisor. I thought I was super on tops of things because I met with him, in person, annually.

Oh, so naive!

Financial literacy is so important.

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Financial literacy is empowering.

If you instantly want to feel better about your financial situation then I suggest you educate yourself on the topic.

No, a financial education will not change your bank account balance or reduce your debt burden overnight but, it can act as a starting point.

You need to understand what you are doing before you can do it. You need to know what a budget is and the steps for creating one before you can start budgeting.

The topic of personal finance, at it’s core, is not complicated.

People have made it complicated.

There is an extraordinary amount of unnecessary jargon thrown around. Basis point (1 basis point = 0.01%), ETFs (exchange traded funds), PE ratio (price to earning ratio).

Whaaaaaaaatttt?

Like those in the medical or legal professions, the financial industry has it’s own language.

I spent the first month of my personal finance deep dive just writing down acronyms and looking them up.

It doesn’t need to be this complicated.

So why?

Why does the world of finance seem so difficult and so exclusive.

Why does it feel like you have to wear a three piece suite and work on Bay Street just to be invited to the financial party?

Well, there’s incentive for some people to keep things complicated.

Some people in the financial industry are motivated to keep things complicated because it puts more money in their pockets. The more complex it is, the more likely you will have to reach out to a financial advisor to manage your money.

The more complicated it sounds, the less attention people will pay to what is going on with their money.

The more complicated it sounds, the easier it is to hide ridiculous fees that you really don’t want or need to be paying.

The more complicated it sounds, the more important people can feel when they speak in jargon and make you feel like an idiot.

This is not everyone in the financial industry.

There are also a ton of amazing people in personal finance that provide amazing financial advice geared at helping the average person.

These are the personal finance pod-casters and bloggers that have done the research and demystified the world of finance.

These are the fee for service financial advisors and advisors with a fiduciary standard (this means that the advisor puts the clients interests ahead of their own…you’d think this would be common practice for all advisors but….surprise, it’s totally not.)

Top 3 Piece of Financial Advice for Beginners

After my year and a half deep dive into all things personal finance I have distilled all of my learnings down to three pieces of financial advice that I think are most helpful to beginners looking to gain a basic understanding of personal finance.

These three pieces of financial advice came up most frequently and were the most influential to me on my financial journey.

Educate yourself.

I kind if already covered this one but I can’t stress it enough. No one cares about your money and your financial situation more than you do. NO ONE.

Ladies, if your husband, boyfriend, dad or partner is the one taking care of your money, if they are the ones with the financial education….that’s not good enough.

Dudes, if you have your head in the sand about your personal finance situation then the same goes for you.

If you want to learn more about what financial literacy is and how you can become more financially literate today then check out this article.

Stop paying insane fees associated with mutual funds.

Canadians pay some of the highest fees in the world. These fees range between 1-3%.

To put this into perspective….

If you have $100,000 invested and you are paying 2.5% in fees you can expect to pay $2,500 in fees each year.

Ouch.

That really adds up over time.

This article does a good job of explaining the impact of high fees on your portfolio overtime. One to 3% might not sound like a lot but it can have a HUGE impact on your investments overtime.

For more information on mutual fund fees you can check out the Ontario Securities Commission site here

So, I’ve presented a problem — high fees associate with mutual funds.

Now, what is the solution?

Index funds.

An index fund is an investment fund that tracks the performance of an established set of stocks.

In other words…it’s a bucket of stocks that replicates a pre-established part of the market.

A very popular index fund that you may have heard of is the Standard and Poor 500 (S&P 500). This index is made up of 500 of the most widely followed US companies. The S&P500 acts as a measure of how the stock market is doing in general.

From a Canadian perspective we have the S&P/TSX Composite Index which includes ~250 companies.

If you want to learn more about index funds check out the Canadian Couch Potato site. They have tons of articles that will explain what index funds are and how to start investing in index funds.

Diversification.

Diversify your investment portfolio. This means, don’t put all of your eggs in one basket.

Investing in index funds is one way to diversify your portfolio.

When you buy an index fund like the S&P 500 or the S&P/TSX Composite you are diversifying across 500 companies. Meaning, you have your eggs spread out into many baskets.

When you buy one stock you are buying ONE stock. So, if that stock goes way down then you are screwed.

Diversify your income streams. This means, don’t rely on one source of income.

How do you do this?

Well, most of us have our 9 to 5 gig. Then it’s a good idea to have your investments…those are working to make you some passive income over the long term.

Then you should try to generate some additional income streams. You can do this by getting a side hustle. For more ideas on side hustles check out this article.

See, this information isn’t complicated BUT, it does take effort to become financially savvy….and, eventually, financially secure.

My last few pieces of advice for you to take or leave, don’t waste any time. Start educating yourself today. Once you have a basic understanding start to implement. Don’t suffer paralysis due to perfectionism.

Investing is scary. But you eventually have to take the leap and just go for it.

There is a little bit of “learn as you go” that can’t be avoided. If you wait until you know everything about personal finance and investing (which I would argue is impossible) then you will suffer major opportunity loss from years of wasted investment opportunity.

I want to hear from you.

What are you favourite pieces of financial advice that you would offer to beginners?

References

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