If you want to lose weight you know you shouldn’t be eating donuts. If you want to save money and stay out of debt there are also things you should avoid. Here are 9 life types from Gail Vaz-Oxlade that you might want to keep in mind if you want to have a healthy financial profile.
- Don’t marry a money moron. You can’t change people. They can change themselves if they really want to. And if they really want to marry you, they should be willing to be a grown-up about how they deal with their money. Can’t get them to pay attention? Have the money talk. Share your dreams and expectations. Discuss how you’ll manage your money as a team. If he can’t, or she won’t, ask yourself: Do you want to spend the rest of your life fighting this battle?
- Don’t procrastinate on making a will. More than half of Canadians don’t have a will. Grow up. Without a will you have no say on who gets your money. Without a will, you can’t plan to minimize your taxes. Without a will you’re leaving your family in the lurch. Make a will.
- Don’t buy too much house. The rule of thumb is to spend no more than 35% of your net income on shelter: mortgage, property taxes, insurance, utilities, maintenance. (If you have no debt, you can go as high as 50%.) If you’re over your head on housing, it means having very little life. It can also mean you’re having to use credit to supplement your cash flow, digging yourself a hole that’ll just add to your misery.
- Don’t wait to invest. What are you waiting for? Do you think some magical can-opener is going to come out of the sky, open up your brain, and pour in everything you need to know to get comfortable with investing? If you aren’t putting your money to work, you need to find a course, read a book, follow a blog or three, and learn. Learn. LEARN. Remaining ignorant isn’t the answer.
- Don’t delay saving. This may be the reason you’re not investing: you have no money to invest. If you don’t set something aside for tomorrow, what are you planning to live on when the paycheques stop coming? It doesn’t matter how much you start with: $100, $50, $25 a month. Open up a high-interest savings account and set up an automatic plan to have your “savings” deducted from your regular account. And remember, you can’t spend that money on credit or you haven’t saved a thing.
- Don’t use credit to scratch your consumer itch. When you use credit to buy stuff, you’re spending money you haven’t earned yet. It’s only a matter of time before all those minimum payments end up squeezing your cash flow tighter than a nun’s knees.
- Don’t skimp on insurance. The cheapest you’ll ever get your insurance is when you’re young, healthy and don’t need it. Buying life insurance when you’re 35 or 40 is expensive and narrows your options. Buying disability insurance after you’re 30 is almost impossible: you’ll have picked up some physical disqualifiers and your premiums will be astronomical. Just imagine how you’ll live if you get sick, can’t work a full week anymore and still have a family to feed.
- Don’t ignore an emergency fund. Without an emergency fund, you’ll have to turn to credit to fill the holes. And, no, a line of credit is not an acceptable emergency fund. It’s debt waiting to happen. You need to have cash in the bank. How much cash? Work towards accumulating six months’ worth of essential expenses. (Cable is not an essential expense!)
- Don’t avoid a budget. If you don’t have a budget and you aren’t tracking your expenses, you have no idea how you’re using your money. That can’t end well. Nothing else about your financial life will work if you don’t create a game plan for the money coming in and going out each month. You’ll whine that you don’t have money to save for an emergency, to save for the future, to invest. You won’t know where to find the money for your insurance premiums. You’ll end up not even knowing how much house you can afford. And you won’t ever make a will because you can’t come up with the money for the lawyer. As for marrying the wrong mate, if you can’t make a budget together and live on it as a team, you’re almost certainly not on the same page when it comes to the money. Let this be your test!