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Financial planning tips

April 16, 2013

My financial decisions: From the very bad to the very best

I’ve made some spectacular errors with my money over the years, but I’ve also done enough smart things that we’ve ended up ahead of the game.

Sadly, I’m very well-qualified to write about dumb financial mistakes. I once lost $100,000 in my wife’s RRSP with an oversized bet on the wrong investments, made for the wrong reasons. Dumb indeed.

Remarkably, I’ve actually achieved most of our financial goals over time (in partnership with my long-suffering wife) in spite of my errors, so I’ve also done some smart things with our money.

I’m sharing my experience in the hope that you might learn from my mistakes and, if you like the sound of them, try a few of my more successful tactics. Note, however, that what I’ve listed as my smartest money moves are ones that have actually worked for us; they may not work for you. Full disclosure: I’m not a professional advisor, so feel free to disagree with me. But don’t sue me, okay?

My dumbest money moves

  1. Over-confidence about investing. Risk didn’t scare me like it should have. You’ve already heard how that worked out.
  2. Under-confidence about choosing life insurance. So, for a long time, I put it off.
  3. Going for years without a will. (My wife and I still haven’t gotten around to creating living wills.)
  4. Investing based on “hot tips,” and never hitting the jackpot.
  5. Ignoring my group savings opportunities at work (e.g., group RRSP and a defined-contribution pension plan) for years. That cost me.
  6. Converting my defined benefit pension to a defined contribution pension when a former employer encouraged me to make the switch, without understanding the added risk I was taking on.

My smartest money moves

  1. Living within our means. My wife and I budget and prioritize because we know we can’t have everything.
  • We buy one inexpensive, fuel-efficient car at a time, and keep it until it dies.
  • When we realized our house was too big and our retirement savings too small, we fixed both problems by replacing the house.
  • Our cable/phone/Internet bill is about half what it could be.
  • We don’t lease cars or anything else.
  • We do most home maintenance and big jobs around the house ourselves.
  • We pay our bills on time.
  1. Taking an active role in our finances. Both my wife and I became financially literate before it was fashionable.
  • We read all our financial, insurance and investment statements.
  • I learned how to use spreadsheet software.
  • I do a net worth statement regularly, so we know how we’re doing.
  • I’m actively -- but not overly -- involved with our investments.
  1. Getting good advice. We trust our money only to big, reputable, financial institutions. No Bernie Madoffs for us.
  • We found a really good financial advisor. He advises us but doesn’t make our decisions for us.
  • I worked with our advisor to do the math, to see if I could fulfill my dream and retire early.
  1. Raising our kids to be independent. They don’t live in our basement or have habitual access to our wallets.
  • We gave our kids a modest allowance when they were young. Whatever amount they saved (instead of spending), we matched with a “savings bonus.”
  • We said “no” to the kids, a lot.
  • We said “yes” to their education, with limits.
  1. Protecting ourselves. I was proactive about managing my career. In our single-income family, it was the foundation of our financial security.
  1. Planning ahead. We focussed on paying off the mortgage first, then made retirement saving our priority.
  1. Working together. I married someone with similar values about money.
  • My wife and I keep no financial secrets from each other. We talk about money.
  • We have named each other as beneficiary on our investment accounts, to eventually save on probate fees.
  • We play specialized roles in managing our money: I handle insurance and investing. My wife handles day-to-day banking.
  1. Retiring without debt.

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