the broken typewriter

By Brad Brain

I see people looking for shortcuts to wealth. But, in doing so, they can end up making money mistakes and end up really botching things.

The good news is that you don’t need a get-rich-quick scheme. What you need is some simple guidelines on how to not screw up your life. Get these things right and chances are good that everything is going to turn out okay.

1. Live Within Your Means

You can make good money in the north. That can be dangerous. I run into lots of people who make $8000 per month, but they spend $10,000.

Having a healthy income can give a person a false sense of security. Sure, making a lot of money means that you get to spend more money. But it doesn’t matter how much you make, you still can’t continually spend beyond your income and expect things to work themselves out. Live within your means.

2. Know your priorities.

New trucks are shiny, but they don’t stay new for long. Put first things first. A $1900 per month truck payment means that $1900 can’t be spent on something else – perhaps something more important in the long run.

3. Pay yourself first.

Each month take part of your income – 10 percent is a suggested starting spot – and put it towards your great goals in life. Maybe that’s retirement planning, or debt reduction. Maybe it’s a dream honeymoon, or a house downpayment. Wherever your priorities lay.

If you put 10 percent of your income towards your great goals and live off of the remaining 90 percent, it is unlikely that there will be a noticeable reduction in your standard of living today. Fail to do so, however, you most certainly will notice a difference in your ability to do what is really important to you.

4. Be thoughtful with what you buy.

Being impulsive with big ticket purchases can lead to poor decisions. We’ve all done it. I’m the first to admit it. I’ve got a $700 woodchipper in my shed that I have only used a couple of times in my life.

Sometimes a person needs to step back and ask themselves if what they think that they really, really want is something that they actually need.

5. Debt can be an ally, or an enemy

Know the difference between good debt and bad debt. Good debt is something that you take on in order to help get something important done. The best debt would be for an asset that appreciates over time, carries a low interest rate, and if its tax deductible that’s even better.

Bad debt is debt for lifestyle expenditures, or on a depreciating asset, carries a high rate of interest, and isn’t tax deductible. Credit card balances and most consumer loans are examples of bad debt. If you have bad debt, work hard to pay it off, or see if you can convert it to good debt.

6. Pay less tax.

There are many legitimate ways to pay less tax. Take advantage of them. Appeal your property tax assessment. Accumulate assets in tax-assisted vehicles. Save your medical and charitable donation receipts. Have your taxes prepared by a qualified person so that you don’t miss any opportunities.

7. Prepare for the future

Each day your present-day self wrestles with your future self over who gets to spend your money. Spend a dollar today, and its gone. Invest that dollar today and you have your dollar plus interest to spend in the future.

There will come a day when you no longer have a paycheque. When that day comes, where will your money come from?

This isn’t just about retirement. Your kid’s future education costs are going to be expensive too. In the future people won’t just walk into careers. There will always be jobs, but careers are what provide more satisfaction and better compensation. Careers require training, and training costs money.

The future is coming, whether you prepare for it or not.

8. Protect your income.

Fundamental to almost everything you want to do in life is that you have cash coming in. If your cash flow stops, everything else might too. Make sure that you have good income protection plans in place that mitigate the financial consequences of disability, critical illness, and premature death, and do what you can to protect yourself from unemployment or under-employment.

You don’t need to speculate on hot stock tips to live the life you dream of. Just follow these basic rules and your chances of financial success are pretty good.

Brad Brain. CFP, R.F.P., CIM, TEP is a Certified Financial Planner in Fort St John, BC. This material is prepared for general circulation and may not reflect your individual financial circumstances. Brad can be reached at www.bradbrainfinancial.com.