Financial Advice to Build Your WealthChristopher Briggs, RRC®
One of the most important lessons we’ve learned throughout our time working in the investment industry is that the basic principles of successful investing remain timeless—wealth comes from choices, not chances. Here is some financial advice for everyone, young or old, to help you build your wealth:
Building Wealth has Little to Do with Your Income, and a Lot to Do with Your Savings Rate
Wealth is the accumulated difference between what you spend and what you bring in. You can build wealth without a high income but you have no chance without a high savings rate. Takeaway: If you need help saving, consider making a budget to track your sources of income and your expenses. A budget can reveal whether you are on the road to spending more than you make, and can help you to be a better saver.
The Value of Wealth is Relative to What you Need
People require vastly different amounts of funds to get by each month. A dollar of savings to one person is worth something completely different to another. Takeaway: Quit comparing yourself to others — especially on social media — it can not only steal your joy, but your paycheque!
Time is on Your Side
As a young person, you have one of the greatest assets available to you: time. Add in the power of compounding, and you have the ability to grow significant wealth into the future. Consider that if you invested each month for 20 years, you would need to invest almost 2.7 times more at age 45 than at age 25 to end up with the same amount at 65 years old. Retirement may seem far off, but it will creep up faster than you think! Takeaway: Invest in your retirement today. Even small contributions can build up a TFSA or RRSP.
Debt Can be Paralyzing
We are living at a time in which spending money has become increasingly easy — for many things, buying is just “one click” away. But if you can’t pay for it, don’t buy it. When you are not burdened by debt payments, you are more likely to be agile. Of course, some debt may be necessary. The phrase: “it takes money to make money” has some merit. Good debt can help generate income and increase your net worth, such as debt associated with funding an education or a real estate property. Takeaway: If you have student loans, focus on paying down this debt responsibly. If you use a credit card, pay your bills on time. But most importantly, live within your means.
Build your wealth over time by choosing to save wisely and pay yourself first, live within your means, and eventually put in place an investment plan that encourages value, quality, and diversification. Then, add in some patience to understand that your plan is working for you over the long term.