Aug 9, 2016
Pattie Lovett-Reid: 5 biggest financial mistakes you can make
When it comes to making money we tend to focus on the markets. We try to determine where the next uptick will be, and seek out a winning investment strategy that could make us the next Warren Buffett. But I'm not convinced financial success comes from solely investing in the market at all.
If you get the following things wrong, it has the potential to destroy your financial life:
1. Marry the right person for the long term: A marriage failure could result in losing half your assets in a single day. Unlike investing in the markets, you can't make this money back by staying longer. Statistics indicate that if you marry someone who is terrible with money and your credit scores are not compatible, the odds are more likely the relationship will end. Having a similar money mind set can be a big predictor of relationship success. Also, think about how big do you want your family to be? The decision to have children is first an emotional one, but don’t underestimate the financial consequences of a large family.
2. Be careful with student loans: How much you decide to borrow to attend school has to align with the compensation you get when you enter the workforce. For example, taking on in excess of $100,000 in education debt to be a journalist isn't likely to be a profitable return on investment. Be realistic if the numbers don't add up and change a losing game.
3. Watch your costs: If your monthly fixed costs are high, look for ways to shave dollars off those expenses and align the money to savings. For example, if you stretch your mortgage amortization for as long as possible, it will be impossible to save while at the same time your financial institution benefits at your expense. Look at every fixed cost you have from gym memberships, to cell phones bills, to eating out – and find ways to lower these costs to boost your savings. Consider, for example, how often are you replacing your car? Buy a used vehicle and keep it for as long as possible. Better yet, if you don't need a car don't buy one.
4. Tune out noise: Given the volatility in the market there is a reason every day to bail. But that could prove very costly. Try to turn out the noise and take a long term perspective. Also think about low-cost index funds as the investment of choice. The sooner you start investing, the better the odds are that you will benefit from time and compounding.
5. Don't rush for government benefits: The longer you can put off collecting government benefits the better. The risk isn't in dying too soon. The real risk is living too darn long.
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
