Pattie Lovett-Reid: Six money lessons for your younger self
ANALYSIS: Millennials,listen up.
You may be looking at the world through rose coloured glasses. A recent report out of RE/MAX suggests 80 per cent of 18 to 34-year-olds agree owning a home is attainable despite the appreciation in some markets while 81 per cent also believe finding a good job in the field of choice is also attainable. And when it comes to owning that home, 60 per cent are expecting help from their parents.
So if you are serious about achieving these financial milestones, here are a few of the lessons I’ve learned along the way.
1) Buy real estate and stay put -- If and when you decide to buy real estate, consider it a long-term investment. In one decade we bought and sold 10 pieces of real estate in terms of both recreational property and our primary residences. While overall we made money we could have made a lot more if we stayed put and didn’t incur all those real estate costs and transaction fees. They add up very quickly and can erode your net worth.
2) Create a real budget and then stick to it -- I do that now, but if I had done it years ago the discipline to save would have kicked in much sooner. Understand how much money you have coming in and what it is you are spending your money on. If you are lucky enough to not have incurred debt to complete a post-secondary education have the wisdom to recognize what a great gift you have been given to kick start your financial life.
3) Stop spending on clothes -- Fashion comes and goes. Buy fewer yet quality pieces and learn to mix and match. If you are going spend on a quality piece make it a classic and amortize the cost over years. I’m still wearing a pair of Prada shoes from 2008 and while they have been repaired more than a few times they have more than paid for themselves over the years. Have a friend or relative come and mix up your closet – shake things up or consider buying one piece that makes an older look more current. Buying cheap often means buying twice. Start working on that minimal wardrobe; buy fewer items that are high quality, functional, and versatile.
4) You don’t need a car that is worth more than you make -- In fact, if you don’t need a car daily – ditch it. Those who tend to do well financially aren’t likely the ones driving the swanky car. And in many cases don’t drive at all.
5) Start to invest now -- Small amounts make huge differences over time. Don’t let your money sit in cash because after taxes and inflation you will actually lose money. Start by paying yourself first, set up a pre-authorized purchase plan to have money taken from your account and invested in a good quality mutual fund. Let the power of time and compounding work for you as you start to earn income on income. And as boring as it might seem, you must read the terms and conditions of any financial paperwork.
6) Finally, spend money on experiences rather than stuff. That is ultimately the definition of financial success.
As the Chief Financial Commentator for CTV News, Pattie Lovett-Reid gives viewers an informed opinion of the Canadian financial climate. Follow her on Twitter @PattieCTV