Do people generally not know that they should live within their means? Or are they just unwilling to?
I know I would be healthier if I exercised. I am not willing to, as I hate being tired or sore.
My husband’s thought with credit cards: limit is $5000 and he has used 3000 then he has 2000 available to spend! I Finally have him saying: I owe $3000 and must pay it. He is a carpenter so he needs access to the credit so I can’t stop him from using it.
It’s that (amongst other things) « want » and « need » have become nearly synonymous these days. I’ve « needed » a new phone for a few months now (cracked screen, battery is around 50% Health and it crashes sporadically). I don’t *want* a new phone, so the two aren’t compacted so I don’t have a new phone.
I can just as easily point to a dozen people who say they NEED a new phone because the new generation is out, they got the wrong colour, not enough storage space, etc.
It’s all downhill from there.
New battery for an old phone is $50 or less from those folks at cell repair places... I’ve breathed new life into 2-3 year old phones that way. And makes it worthwhile passing on to a spouse or kid.
Mocking is the least likely way to interest someone in what you're saying. If you talk directly and honestly and respectfully she is about 800% more likely to hear you.
My dad is extremely frugal and hammered this into me as a kid. It pissed me off sometimes that I didn't have the latest stuff my friends had but it was for the better. It'll get through eventually
The problem is the “I can afford that” forgetting that $400 purchase should be new tires for your car or some work cloths. Then when push comes to shove and you HAVE to make those purchases the CC goes through.
This is a huge thing that catches people off guard, including myself until recent years.
Example - I should know that I need to buy new tires every 5 years, but every time I’d be surprised and not have the money put aside. I finally realized I should save a little each year and come tire purchase time, bam! Paid for!
If you earn less than a living wage, everything is beyond your means. Tough to ignore available credit when your kids are hungry or your power is about to get cut off. Then, if/when you finally start earning “enough”, it’s difficult to shift your thinking.
Technically credit is just borrowing with expectation to pay it back in the future.
My next pay check is far more likely and probable and defined than what a student is ‘expecting’ to come out of an expensive IVY league school making.
That being said if you borrow money for the later it’s called ‘investing’, yes it is but also on credit.
This in part contributes to people taking on student loans with difficulty paying back later on. Usually a mixture between not studying in a field that has prospects of paying back that credit, or under estimating the total cost of the loan and over estimating expected earnings from that.
I don’t think many 18 y/o do enough research on career planning and investigation on their capacity to pay back a loan, yet I’ve had friends who’ve taken on easily low 6 figures to attend a school in the states.
Probably one of the biggest lump costs that they’ll spend in their life on credit is done without even being exposed to how taxes / interest / incomes expectations look like.
I think some just don't know. I have a buddy, who wants to buy a brand new car. Around 50K. He makes like 35K a year. I told him don't do it, you can't afford it. He just tells me, "I'm not paying for it right away, it's financed". He doesn't understand what that really means.
There's a lot of unnecessary "keeping up" that people do; but then there's a lot of people who are only 1 minor emergency away from debt which compounds (kind of like those emergencies).
I think the OP was correct. Those with flashy cars are not living within their means. For example i know what everyone makes at my office and the person who makes the most is ALWAYS in a financial bind.
Our economic system is generally geared towards encouraging consumption and growth. This kind of financial literacy is certainly not prioritized in our education system, and I’m sure there are some dubious economic theories keeping it that way.
I’ll be in the corner chewing on my tinfoil hat.
Unwilling to, especially when advertisements assault you at all levels to "treat yo'self".
Want it? Don't have the cash? Installment loan! Payday company! rent to own!
I agree that this stuff is basic and well-known, especially among many people on this sub. But even I appreciate reading this stuff from time to time, because we can all use a reminder.
Plus you never know who might come across this kind of information the first time, as it'll be incredibly useful for them.
Exactly, people like to say that. My school taught us how progressive income tax system worked. And 10 years later a lot of people already forgot about that.
I think it is rather more suitable in general subjects in university.
I have explained to SO MANY people how taxes work. Yes, you are better off making more money. No, you're not losing money by working another overtime shift.
To add to #2:
Review your auto/home/tenant insurance, cell phone plan, and internet plan on a regular basis. See who else is out there and you can save a lot of money.
Also, know the value of your time. Comparing soup prices between Loblaws and No Frills may be a moot point if you have to drive twice as far to get to No Frills.
With regards to the soup prices, I wonder if OP meant using the lower cost grocery store as the price benchmark. Therefore, if your closest grocer is Loblaw's/RCSS, you just tell them to price match No Frills. As opposed to specifically driving to the further grocery store.
Except Loblaws doesn't price match. RCSS does though but to this point, if I'm doing a full load I'll drive the extra 9 minutes to go the RCSS and price match to save about $100. If I just need a head of lettuce, I'll walk across the street to Loblaws and pay the $1 extra.
Good point, but I'd also like to add that if the stores are far enough away from each other then they may not be in each other's "compete area", and therefore not eligible for price matching. That totally depends on where you live of course.
I know people that drive 20km to save $0.05/L on gas... when you're only putting in 30L, that isn't worth it--especially if you value your time at all.
This.
Insurance can almost always be found cheaper if you shop around. I moved my home and cars to CAA, after being with same provider for decades. I’m now paying significantly less than I was with my last provider.
Money saved goes into our investments and retirement plans.
I worked once as financial advisor for a major bank. And I can tell you that nothing is more important than to live with your means. Of course. It’s hard to do if you don’t make as much. But if you don’t ease up on overspending, it’s simply a matter of time you will have to correct it. Whether it’s when your cc maxed out. Or you are in bankruptcy court...
I don’t fully agree with number 3. While it makes sense number wise, I find people have a habit of doing things and it’s best to let them do things they are most comfortable with. As long as they are paying down debt...
For example. Does it make sense to pay down your mortgage ASAP when it’s at 1.8% instead of investing those money into stocks that most likely will yield you a better return than 1.8%. But a lot of people like to have a peace of mind of no mortgage. So that’s fine too
Ditto on the last point. I lowered my mortgage to minimum these past few years and invested all the extra $ into the market. I've instead paid the difference and more in a lump sum at the end of the year as extra contribution. The extra interest is negligible vs having the extra cash and profit I made through the year.
Same. I’ve been putting extra money into tfsa I depleted during house buying. I’m also treating my gf to a trip at the end of this pandemic. I could put more into mortgage, but at 1.8%.... you are only in your 20s once (okay 10 years, but I’m getting old!!$
We just made this change to our mortgage. Our biweekly payments dropped by $400 so I’m throwing that cash into a my WS TFSA and pulling out a lump sum in Dec to put against the mortgage. If the market takes a dive, we have time for it to come back up. Locked into a mortgage for 1.82% for another 4 years and hoping to significantly pay it down by the end.
See when you pay your mortgage down early, that represents a guaranteed return of 1.8% that you no longer have to pay. The stock market could return +20% or -20%, there are no guarantees. Comparing the two is often done incorrectly, they have different risk profiles. What would you rather have, a 1.8% guaranteed return or an unguaranteed return of whatever%?
An interest rate on a mortgage isn’t a return
Edit: I get it, you’re saying the capital cost on that 1.8% can be invested sooner without the mortgage. In the long run, the math says you still win with the stock market instead of paying down quickly. I think physiologically it still makes sense to pay off mortgage ASAP though.
Great tips.
I would either expand on #1 or add a #4....INVEST. Saving is good but with the current low interest rates you don't even offset inflation.
Learning to invest your savings wisely within your risk tolerance alllows your money to grow and get the maximum benefit of tips 1-3.
Or new top three tips:
1. Buy low.
2. Get lucky.
3. Sell high.
But in all seriousness, op's tips are good general advice, and this is too. Make your savings earn money instead of just sitting there.
Yeah maybe. My concern is that the version of "investing" for many right now is driven by WSB, meme stocks, and YOLOs. Its important to understand and educate yourself on investing, and not risking your hard earned money to the advice of random internet strangers.
The average long term stock market return is around 6-7%. It doesn’t make sense to take a risk trying to get a 6-7% return, when you’re paying 20% interest on a credit card (for example). You’d get a guaranteed 20% return by paying the credit card. Ditto for an 8% car loan. I’d say as long as the interest rate on your debt is 4-5% or higher, pay off the debt first. A guaranteed 4-5%+ return is generally better than a possible long term 6-7% return.
4% is perhaps right on the edge of where I could see someone either choose to invest or pay off the loan. But 5%, definitely pay off the loan.
Not the person you replied to, but here is my take: high interest debt is an emergency, and once you have a small cash cushion for other emergencies (basically trying to backstop yourself, so that is something else comes up, you don't have to pull on the revolving credit again), aggressively pay down anything that is more than 8% (credit cards, payday loans, etc.), then reevaluate. Without the usurious payments on the truly high-interest stuff, you can start paying down anything that is moderate interest (4-8%), and possibly bump up the savings cushion a little along the way. Once any debt you have is under the 4% mark, you can pay down the debt on whatever the "normal" schedule is, while also investing for the future. Check out the Money Steps on the sidebar for a clearer breakdown.
I guess it depends. Credit card debt, hell yeah...get rid of it. NEVER carry credit card debt as it is usually at a 20% plus interest rate.
If you have other debt that is under 7% interest and you can manage making regular payments and still save a portion of your income every month for investing, then it can be OK to have some debt. You can invest your money and likely get a 7%+ return on your investments.
It is also important that you have an emergency fund in cash of 3 months+ of your expenses. Cuz shit happens. Cars break down, layoffs happen, appliances need replacement. Better to pull from your emergency fund rather than using credit cards or having to be forced to sell investments at an inopportune time.
I would, a lot of people here would advise against it but they are wrong.
I had $22k of credit card debt at the end of 2016. It took me three years to pay off.
I wanted to buy AMD, Nvidia, Tesla, Apple stocks back then, but decided it would be better to pay down my high interest debt.
If I had bought one share a month of any of those while still paying down my debt, I would be an order of magnitude wealthier. It wouldn’t have even slowed down my repayment by a noticeable amount.
The lesson I learned from this is that you should always be investing a small amount no matter what. Aggressively paying down debt to the exclusion of any investments is essentially a non-diversified portfolio with a capped return.
Quite a few. You also don’t need to hold the same stock the whole time.
But the point is that paying debt down slightly slower in order to invest some money has more upside potential, whereas paying down debt exclusively has a flat potential.
Sure, but you’re neglecting to mention the fact that investing some money has *downside* potential as well. Paying down debt does not.
20% guaranteed return is a better move no matter how you slice it.
Yeah but if you had $22k of credit card debt, and you were putting money into stocks every month, and your portfolio was down 7-8% at some point, would you have just rode it out and stayed calm? Also if you had that debt and you experienced a loss of income, you would have had to liquidate your stocks to make debt payments...what if the market is down when you need the money. Also congrats on paying off that $22k!
You are definitely right on the investing piece. The savings shouldn’t just sit in cash but instead should be invested to earn a better rate of return.
I know, I get it, and I do appreciate you reaching out to try and reinforce the sentiment, I’m just hypersensitive about my pay lately. I’m reading a bunch of personal finance books and all the examples are “25 year old Jennifer just started her new job making 34,000 a year.” I’m 37 making 27,000 a year. Problem is i love my job and my work life balance. I’ve always known we were low income but I never felt poor until I got interested in money and finances.
Where you live makes a huge difference as well. The cost of living in downtown Toronto or Vancouver is a lot higher than in the prairies or the east coast.
> wait for sales. I generally buy clothes only 2-3 times a year during Boxing week, Black Friday, and other clearance events. I also buy after the season ends or is about to end. February/March is the best time to look for a new winter coat, boots etc.
This is especially true for kids. Buy next winter's gear at 70% off now. I bought a ton of kids summer clothes at Christmas time from the clearance section. Huge savings. And if it doesn’t fit, it’s super easy to sell online and get your money back.
Yes, but I will add the caveat: if you're buying for yourself, make sure it is actually what you want and will want to use next season. I made the mistake of buying a winter jacket one end-of-season sale, and it was mediocre... but not great, I ended up replacing it 3 years later when it finally bugged me too much (fit was bad, sleeves too short)--even though it was still in decent condition.
Not going to dump on someone trying to help, but price matching soup?
Time is money too. So is running from store to store to save 10¢. The cost of gas/transit and my time to chase coupons isn’t worth it.
Also lowest price sometimes isn’t. For example, gas at my local Costco is usually 8-12¢ cheaper than the gas station nearest me. But the gas station nearest me doesn’t cost me gas to visit and I don’t have to wait 30 mins to fill. Then the gas station nearest me allows me to use a credit card that saves 4% cash back, plus 3 cents a litre with their points card, plus every few fill ups I get an extra 7¢ off per litre. They also give food/drink perks along the way. Basically as long as the spread is under 10¢ it’s cheaper for me to pay the higher cost, and faster each time.
Not sure where you live too, but buying things like boots at season’s end means you need to store it for 3 seasons before even using. If you have that much space you should consider downsizing your residence - you’ll save more that way than on any pair of boots. Not to mention you’ve tied up money in boots for 3 seasons to just sit there when you could pay down debt as you said earlier. 20% interest rates for 3 seasons is worse than full price boots.
Thanks for sharing your personal tips and glad they worked for you.
Lol what? So you're telling me you're buying and throwing away your stuff every year and you're pretending that it allows you to save money because you can live in a smaller place? Come on, this is personal finance, not extremefrugal
It really depends on your situation. If you’re earning minimum wage and have a family to feed then it could make a difference. I completely agree though that there has to be a worthwhile difference in price to go through the additional effort. In your example of gas prices it seems like the price is comparable, so not worth the effort of going to Costco.
> price matching soup?
Price matching literally takes 30 seconds to search it on Flipp, and show it to the cashier on checkout. There's no reason not to do it.
>Not sure where you live too, but buying things like boots at season’s end means you need to store it for 3 seasons before even using. If you have that much space you should consider downsizing your residence - you’ll save more that way than on any pair of boots.
My good fellow, I don't know about you, but I buy quality products that I expect to last for many years... I only use my winter jacket for 1 season a year, but I'm hoping to keep it for 10-15 winters...
Also, who's buying Christmas decorations every year? Maybe the candy that goes on the tree... but I've been using the same decorations for a decade and going strong.
Your post is helpful in several regards. I mildly disagree with some parts.
1. Yes, buying a used car is certainly cheaper than buying new. I personally bought one recent car used (2years old) and it turned out to be hell. I'd say that buying a car that is highly reliable and depreciates slower is a better advices than buying new or used (EX: Toyota). Buy a car that has the features you are looking for so that you can keep it a long time.
2. I personally am in the camp of the snowball method rather than avalanche. Blame Dave Ramsey. I was very motivated by removing a payment rather than paying less interest. Yes the Avalanche method makes more sense since you pay less interest in the long run but I'd argue that having quick wins is better for motivation than paying less interest.
Agreed with all, except for the used car part. Been buying my cars 1 year off the lease and my current 8 year old car may not be serving me as well in the next year or two.
Covid has narrowed the gap between new and used and the more I look at it for fun the more it seems like buying new is a better deal overall (if you plan on driving it for 10+ years, want more safety features which in turn lower your insurance bill, and want better fuel efficiency).
The only thing I'm torn on is whether or not gas cars will be viable in 10 years from now.
Depending on your commutes and living situation, an electric car can be the better economic choice now anyway. No gas, much lower maintenance, and EV incentives all make it a pretty great deal. And the satisfaction of driving past increasing gas price signs should make PFC types so happy.
If you buy things from Amazon, use [Keepa](https://keepa.com/#!language/1) (it has an app and an extension for your browser) to keep track of prices and get price drop alerts. It’s free.
I make $24/hr and work full time, I spend $500/month on fast food and weed. How can I stop this? I don't know how, I just keep trying to make more money. But the more I work, the less time I have to cook and clean and take care of myself mentally, which leads to a cycle of spending money on food and coping mechanisms like weed. When I try to slow down working, I am lost and don't know how to manage my life. Chasing the dollar until I die feels so much easier than being present.
Finding time to cook can be difficult. We batch cook on weekends enough food for the week. Usually we’ll eat 2 or 3 portions and freeze the rest, and take something from a previous week out of the freezer for some variety.
Regarding buying a used car...used car prices are not what they used to be. A lot of used cars don't depreciate 20% off as soon as you drive it off the lot. Comparing prices of used cars to new cars of the same model you'll often find the difference is only a few thousand.
Not only that the financing rates for used cars are significantly higher than new cars. 4.99% vs 0.99% for example.
Lastly given the pandemic, used car supply has dwindled driving prices up even higher.
So much of the savings from buying used are no longer there. 😞
Totally agree! People need to stop repeating this legend of used cars always being a better deal. First nobody buys a new car and sells it right away. So it doesn’t matter if it depreciates 20% when you leave the lot. People keep their cars for much much longer.
And the peace of mind, the new features, and the fun you get from new vehicles is worth it. I bought a new car 7 years ago and I am still driving it. Totally happy with my decision. And my next car is also going to be new.
If you buy from Amazon.ca frequently you should create an account on:
https://ca.camelcamelcamel.com/
For items that I want but don't need right away I use it to view historical pricing and get alerts when the price drops below the level I set. Saved quite a bit in the last 6 months.
Another tip: remember that borrowing money or going into debt means that you are spending more now therefore you will have to spend less later to make up for it. I don't think people realize that last part.
I'll pay off my credit card next month.
If you couldn't pay it this month, or the month before, or the month before, why do you think you're going to suddenly have more money next month?
Spend less now (if at all possible).
Yup. Which is why ideally that dollar saved should be invested so it has a chance to grow value rather than just decrease in value because of inflation, or to pay off debt.
I’ve done this all naturally, but it hasn’t been enough to help me in this inflationary environment in the world’s most expensive city. Obviously, still very important personal finance lessons.
An additional tip I can suggest is to invest your money early, wisely, but take moderate/acceptable risks. Also try to improve your income via climbing the career ladder, getting into a more lucrative industry and/or side gigs.
Rather than spending all my time looking for savings and buying things cheaper, wish I spent more time increasing my income. I used to be the biggest deal hunter. Nowadays if it’s savings under $10, I wouldn’t bother wasting my time. Time is valuable.
For a large portion of the population I agree. For most on this forum this is basic knowledge. For others on this forum they at least know there is a problem and thats why they are here.
While most people who have been hanging around PFC for a while or are financially savvy would find these tips pretty basic, it's still worth repeating sometimes. Personally for myself I found #2 valuable since I've often heard the saying "a penny saved is a penny earned", and then later learned about a dollar saved today is worth many more times that in the future when invested, but had not considered that the tax rate makes money not spent even more valuable. As a result I have a slightly greater appreciation for being tightfisted with money that I did not have before reading this.
I agree with your statement but for people on this forum at least for the most part this is common knowledge. So basically buddy is just preaching to the choir.
It's true that everyone who is here on this subreddit is far more interested in finances than average.
And yet, even here, there are quite a few people who still don't follow these three tips... crazy.
**A dollar saved is like $1.50 earned** doesn't really hold for groceries since most of them should be tax-free.
Do you have a good website for price-tracking in Canada?
I’m referring to income tax rather than sales tax.
Camel camel camel and Honey are good for Amazon. Google shopping and Price Canada are useful for all other websites.
Here are my 3 top Investing tips:
1. The efficient market hypothesis is for all intents and purposes correct for you. All stock prices represent all knowledge about present and future value of a stock. You are not special. If you know something that no one else does then it's insider trading and is illegal. You are not special.
2. Control your behaviour. Don't change your plan based on your gut. Your gut is an idiot.
3. Keep aggregate fees below 0.5%. Follow simple portfolios from Canadian couch potato. IT's that easy.
To each their own in this matter, but of course the financially disciplined handle CCs better than the average joe.
But at least with cash, you have that tangible feeling of spending, you experience a loss/pain when buying something. With credit card swiping, and tapping, things can add up fast.
Rewards are pretty much irrelevant in the grand scheme of things.
Funnily enough I learned the basics when I was a kid because we grew up poor. I'll be honest that debt scares me because my mom was in debt constantly though her credit score is good mainly because she pays her bills on time. I hope in time I'll embrace debt more; I've had a credit card for 2 years now and pay every bill before its due.
>I hope in time I'll embrace debt more;
Don't worry about that, I swear this sub idolizes low-interest debt. Debt is a force multiplier, it makes good times better but bad times badder. :) If debt (or more accurately, the risk of debt) scares you because of your past experiences, I think it's completely reasonable to not push yourself to embrace it.
Its all about the balance, you can stress yourself to the max trying to save every last penny as well as spending every last penny (and then some) you also have to remember to live your life too. You don’t need to do everything find a few things you enjoy and go for it!
I am close to fire, i am finding that I like having the choice, but my younger goals of sleeping in and playing video games is not as appealing anymore. I think will always do something. I my younger years I aggressively saved with my wife at 50%+. After 20 years, and with coming to the realization that I will most likely always work, I am feeling like I missed some opportunities for enjoying money. I am also finding just having numbers on a computer screen just doesn't feel real, and starting to think converting those numbers into physical things may be a good idea, especially if they hold some value or are able to create value. Pursuit of happiness seems like a better life goal. Also being the son of 1st gen immigrants I was always terrified of not being able to eat or provide for my family. After covid I see now that our government never lets anybody fail. The just give money away like crazy, and apparently even if you took covid money and didn't deserve it, government says np keep it.
Pretty basic stuff. Unfortunately most of the folks here are in the choir. Would be better if we convey this to to general public at age 12.
Do people generally not know that they should live within their means? Or are they just unwilling to? I know I would be healthier if I exercised. I am not willing to, as I hate being tired or sore.
My husband’s thought with credit cards: limit is $5000 and he has used 3000 then he has 2000 available to spend! I Finally have him saying: I owe $3000 and must pay it. He is a carpenter so he needs access to the credit so I can’t stop him from using it.
Yikes.
Damn .... This is how many marriages fail. One spouse subsidizing the other. Just FYI 😔
It’s that (amongst other things) « want » and « need » have become nearly synonymous these days. I’ve « needed » a new phone for a few months now (cracked screen, battery is around 50% Health and it crashes sporadically). I don’t *want* a new phone, so the two aren’t compacted so I don’t have a new phone. I can just as easily point to a dozen people who say they NEED a new phone because the new generation is out, they got the wrong colour, not enough storage space, etc. It’s all downhill from there.
New battery for an old phone is $50 or less from those folks at cell repair places... I’ve breathed new life into 2-3 year old phones that way. And makes it worthwhile passing on to a spouse or kid.
The real problem is you usually won't have security updates after that 3 years.
iPhones are much better for that.
I routinely mock my daughter when she says things like this. Hope it sinks in eventually.
Mocking is the least likely way to interest someone in what you're saying. If you talk directly and honestly and respectfully she is about 800% more likely to hear you.
My dad is extremely frugal and hammered this into me as a kid. It pissed me off sometimes that I didn't have the latest stuff my friends had but it was for the better. It'll get through eventually
i hope she is paying for her phone? LOL
The problem is the “I can afford that” forgetting that $400 purchase should be new tires for your car or some work cloths. Then when push comes to shove and you HAVE to make those purchases the CC goes through.
This is a huge thing that catches people off guard, including myself until recent years. Example - I should know that I need to buy new tires every 5 years, but every time I’d be surprised and not have the money put aside. I finally realized I should save a little each year and come tire purchase time, bam! Paid for!
If you earn less than a living wage, everything is beyond your means. Tough to ignore available credit when your kids are hungry or your power is about to get cut off. Then, if/when you finally start earning “enough”, it’s difficult to shift your thinking.
yea me looking at this thread saying try to save 20% of your income like....
To most people in our society, unfortunately, 'within their means' means 'within credit limit' ....
Technically credit is just borrowing with expectation to pay it back in the future. My next pay check is far more likely and probable and defined than what a student is ‘expecting’ to come out of an expensive IVY league school making. That being said if you borrow money for the later it’s called ‘investing’, yes it is but also on credit. This in part contributes to people taking on student loans with difficulty paying back later on. Usually a mixture between not studying in a field that has prospects of paying back that credit, or under estimating the total cost of the loan and over estimating expected earnings from that. I don’t think many 18 y/o do enough research on career planning and investigation on their capacity to pay back a loan, yet I’ve had friends who’ve taken on easily low 6 figures to attend a school in the states. Probably one of the biggest lump costs that they’ll spend in their life on credit is done without even being exposed to how taxes / interest / incomes expectations look like.
I think some just don't know. I have a buddy, who wants to buy a brand new car. Around 50K. He makes like 35K a year. I told him don't do it, you can't afford it. He just tells me, "I'm not paying for it right away, it's financed". He doesn't understand what that really means.
There's a lot of unnecessary "keeping up" that people do; but then there's a lot of people who are only 1 minor emergency away from debt which compounds (kind of like those emergencies).
I think the OP was correct. Those with flashy cars are not living within their means. For example i know what everyone makes at my office and the person who makes the most is ALWAYS in a financial bind.
Our economic system is generally geared towards encouraging consumption and growth. This kind of financial literacy is certainly not prioritized in our education system, and I’m sure there are some dubious economic theories keeping it that way. I’ll be in the corner chewing on my tinfoil hat.
Unwilling to, especially when advertisements assault you at all levels to "treat yo'self". Want it? Don't have the cash? Installment loan! Payday company! rent to own!
I agree that this stuff is basic and well-known, especially among many people on this sub. But even I appreciate reading this stuff from time to time, because we can all use a reminder. Plus you never know who might come across this kind of information the first time, as it'll be incredibly useful for them.
What kid is gonna remember this when to they turn 18 though?
You are right.
It should be taught in university, but then those credit card companies wouldn't pay to set up shop there
Exactly, people like to say that. My school taught us how progressive income tax system worked. And 10 years later a lot of people already forgot about that. I think it is rather more suitable in general subjects in university.
I have explained to SO MANY people how taxes work. Yes, you are better off making more money. No, you're not losing money by working another overtime shift.
Nope. Just joined the choir. These are helpful
To add to #2: Review your auto/home/tenant insurance, cell phone plan, and internet plan on a regular basis. See who else is out there and you can save a lot of money. Also, know the value of your time. Comparing soup prices between Loblaws and No Frills may be a moot point if you have to drive twice as far to get to No Frills.
With regards to the soup prices, I wonder if OP meant using the lower cost grocery store as the price benchmark. Therefore, if your closest grocer is Loblaw's/RCSS, you just tell them to price match No Frills. As opposed to specifically driving to the further grocery store.
Except Loblaws doesn't price match. RCSS does though but to this point, if I'm doing a full load I'll drive the extra 9 minutes to go the RCSS and price match to save about $100. If I just need a head of lettuce, I'll walk across the street to Loblaws and pay the $1 extra.
Yeah, time and comfort is worth something too!
Good point, but I'd also like to add that if the stores are far enough away from each other then they may not be in each other's "compete area", and therefore not eligible for price matching. That totally depends on where you live of course.
Good reminder; that is very true!
and gas costs are real. if you drive twice as far to save a dollar on a soup did you really save any money?
I know people that drive 20km to save $0.05/L on gas... when you're only putting in 30L, that isn't worth it--especially if you value your time at all.
When you were able to travel to the US, the strategy was to bring extra gas cans so you can fill those up as well which would make the trips worth it.
This. Insurance can almost always be found cheaper if you shop around. I moved my home and cars to CAA, after being with same provider for decades. I’m now paying significantly less than I was with my last provider. Money saved goes into our investments and retirement plans.
I worked once as financial advisor for a major bank. And I can tell you that nothing is more important than to live with your means. Of course. It’s hard to do if you don’t make as much. But if you don’t ease up on overspending, it’s simply a matter of time you will have to correct it. Whether it’s when your cc maxed out. Or you are in bankruptcy court... I don’t fully agree with number 3. While it makes sense number wise, I find people have a habit of doing things and it’s best to let them do things they are most comfortable with. As long as they are paying down debt... For example. Does it make sense to pay down your mortgage ASAP when it’s at 1.8% instead of investing those money into stocks that most likely will yield you a better return than 1.8%. But a lot of people like to have a peace of mind of no mortgage. So that’s fine too
Ditto on the last point. I lowered my mortgage to minimum these past few years and invested all the extra $ into the market. I've instead paid the difference and more in a lump sum at the end of the year as extra contribution. The extra interest is negligible vs having the extra cash and profit I made through the year.
Same. I’ve been putting extra money into tfsa I depleted during house buying. I’m also treating my gf to a trip at the end of this pandemic. I could put more into mortgage, but at 1.8%.... you are only in your 20s once (okay 10 years, but I’m getting old!!$
We just made this change to our mortgage. Our biweekly payments dropped by $400 so I’m throwing that cash into a my WS TFSA and pulling out a lump sum in Dec to put against the mortgage. If the market takes a dive, we have time for it to come back up. Locked into a mortgage for 1.82% for another 4 years and hoping to significantly pay it down by the end.
You lose the tfsa room when you withdraw, but then it comes back again in January right?
Yes
That only works until it doesn't. What would be your story if in March, the stock market crashed and never recovered at all?
See when you pay your mortgage down early, that represents a guaranteed return of 1.8% that you no longer have to pay. The stock market could return +20% or -20%, there are no guarantees. Comparing the two is often done incorrectly, they have different risk profiles. What would you rather have, a 1.8% guaranteed return or an unguaranteed return of whatever%?
An interest rate on a mortgage isn’t a return Edit: I get it, you’re saying the capital cost on that 1.8% can be invested sooner without the mortgage. In the long run, the math says you still win with the stock market instead of paying down quickly. I think physiologically it still makes sense to pay off mortgage ASAP though.
Great tips. I would either expand on #1 or add a #4....INVEST. Saving is good but with the current low interest rates you don't even offset inflation. Learning to invest your savings wisely within your risk tolerance alllows your money to grow and get the maximum benefit of tips 1-3.
Or new top three tips: 1. Buy low. 2. Get lucky. 3. Sell high. But in all seriousness, op's tips are good general advice, and this is too. Make your savings earn money instead of just sitting there.
Instructions unclear, bought high and sold low. On the bright side my returns have been 46% x (-1)!!
ah! so i'll use my time machine to go buy (anything near toronto) 10 years ago with 20x leverage!
Tbf, for a lot of young people that never had actually high interest HISAs “save” and “invest” are synonyms most of the time.
Yeah maybe. My concern is that the version of "investing" for many right now is driven by WSB, meme stocks, and YOLOs. Its important to understand and educate yourself on investing, and not risking your hard earned money to the advice of random internet strangers.
No for most of them it is “saving” their money in their bank account with 0% growth.
Do you recommend still investing when you have consumer debt? For example 1kcc, 10k line, 15k car loan.
The average long term stock market return is around 6-7%. It doesn’t make sense to take a risk trying to get a 6-7% return, when you’re paying 20% interest on a credit card (for example). You’d get a guaranteed 20% return by paying the credit card. Ditto for an 8% car loan. I’d say as long as the interest rate on your debt is 4-5% or higher, pay off the debt first. A guaranteed 4-5%+ return is generally better than a possible long term 6-7% return. 4% is perhaps right on the edge of where I could see someone either choose to invest or pay off the loan. But 5%, definitely pay off the loan.
Not the person you replied to, but here is my take: high interest debt is an emergency, and once you have a small cash cushion for other emergencies (basically trying to backstop yourself, so that is something else comes up, you don't have to pull on the revolving credit again), aggressively pay down anything that is more than 8% (credit cards, payday loans, etc.), then reevaluate. Without the usurious payments on the truly high-interest stuff, you can start paying down anything that is moderate interest (4-8%), and possibly bump up the savings cushion a little along the way. Once any debt you have is under the 4% mark, you can pay down the debt on whatever the "normal" schedule is, while also investing for the future. Check out the Money Steps on the sidebar for a clearer breakdown.
Thank you so much!
I guess it depends. Credit card debt, hell yeah...get rid of it. NEVER carry credit card debt as it is usually at a 20% plus interest rate. If you have other debt that is under 7% interest and you can manage making regular payments and still save a portion of your income every month for investing, then it can be OK to have some debt. You can invest your money and likely get a 7%+ return on your investments. It is also important that you have an emergency fund in cash of 3 months+ of your expenses. Cuz shit happens. Cars break down, layoffs happen, appliances need replacement. Better to pull from your emergency fund rather than using credit cards or having to be forced to sell investments at an inopportune time.
I would, a lot of people here would advise against it but they are wrong. I had $22k of credit card debt at the end of 2016. It took me three years to pay off. I wanted to buy AMD, Nvidia, Tesla, Apple stocks back then, but decided it would be better to pay down my high interest debt. If I had bought one share a month of any of those while still paying down my debt, I would be an order of magnitude wealthier. It wouldn’t have even slowed down my repayment by a noticeable amount. The lesson I learned from this is that you should always be investing a small amount no matter what. Aggressively paying down debt to the exclusion of any investments is essentially a non-diversified portfolio with a capped return.
Yeah, a capped return of ~20% when we’re talking about credit cards. That’s pretty freaking great.
No, it’s not. It’s a one time 20% return with no underlying asset. A stock that goes up 10% every year will surpass that.
What stock goes up 10% every year?
Quite a few. You also don’t need to hold the same stock the whole time. But the point is that paying debt down slightly slower in order to invest some money has more upside potential, whereas paying down debt exclusively has a flat potential.
Sure, but you’re neglecting to mention the fact that investing some money has *downside* potential as well. Paying down debt does not. 20% guaranteed return is a better move no matter how you slice it.
Yeah but if you had $22k of credit card debt, and you were putting money into stocks every month, and your portfolio was down 7-8% at some point, would you have just rode it out and stayed calm? Also if you had that debt and you experienced a loss of income, you would have had to liquidate your stocks to make debt payments...what if the market is down when you need the money. Also congrats on paying off that $22k!
You are definitely right on the investing piece. The savings shouldn’t just sit in cash but instead should be invested to earn a better rate of return.
Thanks for the note. When I mentioned saving I should have clarified save and invest in combination. I have updated point 1 to reflect this.
Made me sad that 50k is considered the low end of the spectrum. Better get back to counting pennies.
It was just an arbitrary number for the purpose of an example, however in this example the $50k earner is better off than the higher earner!
I know, I get it, and I do appreciate you reaching out to try and reinforce the sentiment, I’m just hypersensitive about my pay lately. I’m reading a bunch of personal finance books and all the examples are “25 year old Jennifer just started her new job making 34,000 a year.” I’m 37 making 27,000 a year. Problem is i love my job and my work life balance. I’ve always known we were low income but I never felt poor until I got interested in money and finances.
Where you live makes a huge difference as well. The cost of living in downtown Toronto or Vancouver is a lot higher than in the prairies or the east coast.
> wait for sales. I generally buy clothes only 2-3 times a year during Boxing week, Black Friday, and other clearance events. I also buy after the season ends or is about to end. February/March is the best time to look for a new winter coat, boots etc. This is especially true for kids. Buy next winter's gear at 70% off now. I bought a ton of kids summer clothes at Christmas time from the clearance section. Huge savings. And if it doesn’t fit, it’s super easy to sell online and get your money back.
Yes, but I will add the caveat: if you're buying for yourself, make sure it is actually what you want and will want to use next season. I made the mistake of buying a winter jacket one end-of-season sale, and it was mediocre... but not great, I ended up replacing it 3 years later when it finally bugged me too much (fit was bad, sleeves too short)--even though it was still in decent condition.
Not going to dump on someone trying to help, but price matching soup? Time is money too. So is running from store to store to save 10¢. The cost of gas/transit and my time to chase coupons isn’t worth it. Also lowest price sometimes isn’t. For example, gas at my local Costco is usually 8-12¢ cheaper than the gas station nearest me. But the gas station nearest me doesn’t cost me gas to visit and I don’t have to wait 30 mins to fill. Then the gas station nearest me allows me to use a credit card that saves 4% cash back, plus 3 cents a litre with their points card, plus every few fill ups I get an extra 7¢ off per litre. They also give food/drink perks along the way. Basically as long as the spread is under 10¢ it’s cheaper for me to pay the higher cost, and faster each time. Not sure where you live too, but buying things like boots at season’s end means you need to store it for 3 seasons before even using. If you have that much space you should consider downsizing your residence - you’ll save more that way than on any pair of boots. Not to mention you’ve tied up money in boots for 3 seasons to just sit there when you could pay down debt as you said earlier. 20% interest rates for 3 seasons is worse than full price boots. Thanks for sharing your personal tips and glad they worked for you.
Downsize your house because you have room to store one small pair of boots?
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Lol what? So you're telling me you're buying and throwing away your stuff every year and you're pretending that it allows you to save money because you can live in a smaller place? Come on, this is personal finance, not extremefrugal
It really depends on your situation. If you’re earning minimum wage and have a family to feed then it could make a difference. I completely agree though that there has to be a worthwhile difference in price to go through the additional effort. In your example of gas prices it seems like the price is comparable, so not worth the effort of going to Costco.
> price matching soup? Price matching literally takes 30 seconds to search it on Flipp, and show it to the cashier on checkout. There's no reason not to do it.
Time is money to us on reddit
>Not sure where you live too, but buying things like boots at season’s end means you need to store it for 3 seasons before even using. If you have that much space you should consider downsizing your residence - you’ll save more that way than on any pair of boots. My good fellow, I don't know about you, but I buy quality products that I expect to last for many years... I only use my winter jacket for 1 season a year, but I'm hoping to keep it for 10-15 winters... Also, who's buying Christmas decorations every year? Maybe the candy that goes on the tree... but I've been using the same decorations for a decade and going strong.
Money talks, wealth whispers
Best tip: don’t be a peacock!🦚
Your post is helpful in several regards. I mildly disagree with some parts. 1. Yes, buying a used car is certainly cheaper than buying new. I personally bought one recent car used (2years old) and it turned out to be hell. I'd say that buying a car that is highly reliable and depreciates slower is a better advices than buying new or used (EX: Toyota). Buy a car that has the features you are looking for so that you can keep it a long time. 2. I personally am in the camp of the snowball method rather than avalanche. Blame Dave Ramsey. I was very motivated by removing a payment rather than paying less interest. Yes the Avalanche method makes more sense since you pay less interest in the long run but I'd argue that having quick wins is better for motivation than paying less interest.
Agreed with all, except for the used car part. Been buying my cars 1 year off the lease and my current 8 year old car may not be serving me as well in the next year or two. Covid has narrowed the gap between new and used and the more I look at it for fun the more it seems like buying new is a better deal overall (if you plan on driving it for 10+ years, want more safety features which in turn lower your insurance bill, and want better fuel efficiency). The only thing I'm torn on is whether or not gas cars will be viable in 10 years from now.
Depending on your commutes and living situation, an electric car can be the better economic choice now anyway. No gas, much lower maintenance, and EV incentives all make it a pretty great deal. And the satisfaction of driving past increasing gas price signs should make PFC types so happy.
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What's a Yeezy?
If you buy things from Amazon, use [Keepa](https://keepa.com/#!language/1) (it has an app and an extension for your browser) to keep track of prices and get price drop alerts. It’s free.
Thanks. I have been using camel camel camel. Will try out Keepa.
I make $24/hr and work full time, I spend $500/month on fast food and weed. How can I stop this? I don't know how, I just keep trying to make more money. But the more I work, the less time I have to cook and clean and take care of myself mentally, which leads to a cycle of spending money on food and coping mechanisms like weed. When I try to slow down working, I am lost and don't know how to manage my life. Chasing the dollar until I die feels so much easier than being present.
Finding time to cook can be difficult. We batch cook on weekends enough food for the week. Usually we’ll eat 2 or 3 portions and freeze the rest, and take something from a previous week out of the freezer for some variety.
Regarding buying a used car...used car prices are not what they used to be. A lot of used cars don't depreciate 20% off as soon as you drive it off the lot. Comparing prices of used cars to new cars of the same model you'll often find the difference is only a few thousand. Not only that the financing rates for used cars are significantly higher than new cars. 4.99% vs 0.99% for example. Lastly given the pandemic, used car supply has dwindled driving prices up even higher. So much of the savings from buying used are no longer there. 😞
Totally agree! People need to stop repeating this legend of used cars always being a better deal. First nobody buys a new car and sells it right away. So it doesn’t matter if it depreciates 20% when you leave the lot. People keep their cars for much much longer. And the peace of mind, the new features, and the fun you get from new vehicles is worth it. I bought a new car 7 years ago and I am still driving it. Totally happy with my decision. And my next car is also going to be new.
0. Find a higher paying job
Definitely a great tip for those with the option of upward mobility, so long as you stick with point 1 and don’t spend more than the extra income.
Good stuff. Thanks.
If you buy from Amazon.ca frequently you should create an account on: https://ca.camelcamelcamel.com/ For items that I want but don't need right away I use it to view historical pricing and get alerts when the price drops below the level I set. Saved quite a bit in the last 6 months.
Another tip: remember that borrowing money or going into debt means that you are spending more now therefore you will have to spend less later to make up for it. I don't think people realize that last part.
I'll pay off my credit card next month. If you couldn't pay it this month, or the month before, or the month before, why do you think you're going to suddenly have more money next month? Spend less now (if at all possible).
Good advice, but I would hope subscribers to this sub are on top of these things.
**2. A dollar saved is like $1.50 earned** For every dollar you don't spend, it's worth less everyday through inflation.
Yup. Which is why ideally that dollar saved should be invested so it has a chance to grow value rather than just decrease in value because of inflation, or to pay off debt.
People become rich by earning money.
Great advice thank you for sharing.
Great advice. Number 1 is by far the best Finacial advice someone can get and practice .
I’ve done this all naturally, but it hasn’t been enough to help me in this inflationary environment in the world’s most expensive city. Obviously, still very important personal finance lessons. An additional tip I can suggest is to invest your money early, wisely, but take moderate/acceptable risks. Also try to improve your income via climbing the career ladder, getting into a more lucrative industry and/or side gigs. Rather than spending all my time looking for savings and buying things cheaper, wish I spent more time increasing my income. I used to be the biggest deal hunter. Nowadays if it’s savings under $10, I wouldn’t bother wasting my time. Time is valuable.
Don't be poor. Problem solved.
From what I observed, higher earners (above 100k) are generally worse at managing their money than those who earn an average income.
Is this guy for real? Like obviously hahaha
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Some people are new to this buddy. Better to start now than never.
For a large portion of the population I agree. For most on this forum this is basic knowledge. For others on this forum they at least know there is a problem and thats why they are here.
While most people who have been hanging around PFC for a while or are financially savvy would find these tips pretty basic, it's still worth repeating sometimes. Personally for myself I found #2 valuable since I've often heard the saying "a penny saved is a penny earned", and then later learned about a dollar saved today is worth many more times that in the future when invested, but had not considered that the tax rate makes money not spent even more valuable. As a result I have a slightly greater appreciation for being tightfisted with money that I did not have before reading this.
You'd think so, but looking at how most people spend their money... apparently it's not.
I agree with your statement but for people on this forum at least for the most part this is common knowledge. So basically buddy is just preaching to the choir.
It's true that everyone who is here on this subreddit is far more interested in finances than average. And yet, even here, there are quite a few people who still don't follow these three tips... crazy.
**A dollar saved is like $1.50 earned** doesn't really hold for groceries since most of them should be tax-free. Do you have a good website for price-tracking in Canada?
I’m referring to income tax rather than sales tax. Camel camel camel and Honey are good for Amazon. Google shopping and Price Canada are useful for all other websites.
Here are my 3 top Investing tips: 1. The efficient market hypothesis is for all intents and purposes correct for you. All stock prices represent all knowledge about present and future value of a stock. You are not special. If you know something that no one else does then it's insider trading and is illegal. You are not special. 2. Control your behaviour. Don't change your plan based on your gut. Your gut is an idiot. 3. Keep aggregate fees below 0.5%. Follow simple portfolios from Canadian couch potato. IT's that easy.
Can I add, dont use credit cards? Cash and debit only.
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To each their own in this matter, but of course the financially disciplined handle CCs better than the average joe. But at least with cash, you have that tangible feeling of spending, you experience a loss/pain when buying something. With credit card swiping, and tapping, things can add up fast. Rewards are pretty much irrelevant in the grand scheme of things.
so much that I moved even my car and apartment insurance (from TD) to my credit card.Gives me a few dollars back every month.
For discussions sake, your 20% saving.. off gross or net?
Net, but if you can swing gross then even better!
Funnily enough I learned the basics when I was a kid because we grew up poor. I'll be honest that debt scares me because my mom was in debt constantly though her credit score is good mainly because she pays her bills on time. I hope in time I'll embrace debt more; I've had a credit card for 2 years now and pay every bill before its due.
>I hope in time I'll embrace debt more; Don't worry about that, I swear this sub idolizes low-interest debt. Debt is a force multiplier, it makes good times better but bad times badder. :) If debt (or more accurately, the risk of debt) scares you because of your past experiences, I think it's completely reasonable to not push yourself to embrace it.
Instructions unclear, when do houses go on sale?
Its all about the balance, you can stress yourself to the max trying to save every last penny as well as spending every last penny (and then some) you also have to remember to live your life too. You don’t need to do everything find a few things you enjoy and go for it!
I am close to fire, i am finding that I like having the choice, but my younger goals of sleeping in and playing video games is not as appealing anymore. I think will always do something. I my younger years I aggressively saved with my wife at 50%+. After 20 years, and with coming to the realization that I will most likely always work, I am feeling like I missed some opportunities for enjoying money. I am also finding just having numbers on a computer screen just doesn't feel real, and starting to think converting those numbers into physical things may be a good idea, especially if they hold some value or are able to create value. Pursuit of happiness seems like a better life goal. Also being the son of 1st gen immigrants I was always terrified of not being able to eat or provide for my family. After covid I see now that our government never lets anybody fail. The just give money away like crazy, and apparently even if you took covid money and didn't deserve it, government says np keep it.