Lessons you didn’t learn when you were young

Do you wish someone had told you how to manage your money before you made costly mistakes? Could the right advice have saved you from a lifetime of trial and error?

I want to hear the financial wisdom you’ve picked up along the way that you think would help young people. This is in preparation for a course I’ll be teaching at George Brown College later this month and again in May. The target audience is in the 20-to-35-year age range, struggling to get an education, graduate with as little debt as possible, get a foothold in the job market, settle down with a life partner and pay for big purchases like cars and homes.

This nine-hour course, offered in partnership with the Financial Consumer Agency of Canada and the Investor Education Fund, will be free of charge. Now that’s a great deal.

So, tell me the things your parents or teachers never taught you as you grew into adulthood and started taking control of your money — or letting your money control you.

Author: Ellen Roseman

Consumer advocate and personal finance author and instructor.

15 thoughts on “Lessons you didn’t learn when you were young”

  1. Oh man, do I understand that one. I remember someone telling me when I was 18 how they’d do things differently if they were my age. Naturally, it went right over my head.

    I sometimes wonder how different life would have been when we were first married if I had the knowledge (common sense) I have now. One thing I’d recommend to anyone young is to read the book Your Money or Your Life while you’re younger. Much better not to make all the mistakes we made.

    good luck with your course

  2. Ellen. George Clason wrote The Richest Man in Babylon. No one has improved on this book and never will..

    Remember The Wealthy Barber? (The name was changed, but isn’t it the same book??) Wealth is simple. It simply means “PAY YOURSELF FIRST, at least 10% of net income, and only finance things that appreciate.

    And lastly: Know the difference between Wants and Needs.

  3. My dad, who is now in his 80s, and whose combined pension and investment income enables a comfortable life, said to me recently that his only secret of financial success was never to have debt. The only debt he ever had apart from a car loan was his mortgage. His idea was that if you don’t have the money and want something, don’t borrow to buy it, save up the money first. He waited a long time to tell me this, though I guess somehow he must have taught by example, since I have never had any debt apart from my mortgage either.

    Just having a quick look at the Investor Ed website, which appears to have much of value (though I found one error already regarding reinvestment of ETF distributions), I came across the “should we share finances when we marry?” topic. Though we decided in my first marriage to keep things separate, that became more and more difficult/inconvenient and broke down, especially after the kids came along. Still, I think it is worthwhile to keep some amount of money that each person can spend without any consultation with the spouse. That must be surplus money, over and above any required for upkeep of the children and/or household. On the basic stuff, you must compromise and agree.

  4. Four things come to mind:

    1. Track your money: for years I paid very little attention to where my money was going, and I never balanced my checkbook. Once I started tracking my finances (using Quicken, but a simple spreadsheet would be just as effective), I realized how much money I was wasting.

    2. Use a credit card as if it were a debit card: It’s very easy for young (and not so young) people to get into credit card debt. But I don’t think the answer is to say “don’t get a credit card.” Instead I think people should learn to use credit cards wisely, to view them as a tool that they control, instead of a tool that takes control of their lives. Just think of your credit card as a debit card and set yourself a monthly limit on expenditures.

    3. Start saving for retirement when you’re young. It’s hard to think about retirement when you’re in your 20s and struggling to survive paycheck to paycheck. I didn’t start saving for my retirement until my mid 30s. But even if I had set aside just $500 or $1,000 a year starting in my early 20s, I’d have a much better chance of fully retiring than I do now.

    4. Delay buying a house until you can put down at least 20 percent: It can take many years to build up equity in a house when you have a highly leveraged mortgage (zero or five percent down). Most young people don’t stay in a house long enough to build equity. There’s no guarantee that a house you buy today will sell for much more than you paid for it. With a highly leveraged loan you’re throwing money away, just as if you were renting: the only difference is that you’re throwing it away (in the form of interest) to the bank instead of throwing it away in rent to your landlord. I didn’t buy my first home until I was 48. I saved for years until I had enough for a 20 percent downpayment, which gave me instant equity, and I took out a 15 year mortgage. Those decisions have saved me hundreds of thousands of dollars in interest over what I would have paid with a highly leveraged 30-year mortgage.

  5. Hello Ellen,

    I like your columns. All the best for your course.

    Some random thoughts…..

    I would emphasize the difference between ‘investing’ and ‘spending’ and similarly between asset and liability. Many people have these terms confused. They think they are investing in an asset when they are spending on a liability, e.g. negative cash flow on rental properties.

    The opportunity cost of education grows with age. I did not go to university when I was young, but now I would like to. But then I’d have to forego my above average salary to do that.

    Insurance. Many people are overinsured on life and underinsured on assets. I believe that life insurance must be directly proportional to liability and inversely proportional to assets. Similarly, any asset that has a significant value must be insured.

    I believe the ultimate human value is freedom. Freedom is what the entire western civilization is built on. Having financial liability is not much better than being a slave. People buy expensive stuff, not because they like it (“admiration is a very short lived passion that immediately decays upon growing familiar with its object” – Joseph Addison) but because they want to convince themselves that they are capable of buying it. This is a false sense of power (just like during slavery when people were made to be physically strong but mentally weak). The true power and freedom comes when you have the capability to buy, but you still don’t do it.

  6. I read this a few years back but can’t remember the source. I’ve probably got it twisted a bit but it goes something like:

    The best investment you can make is to save the money in the first place.

  7. My parents taught me how to save, pay myself first and invest. My parents also taught me to trust financial advisors. Big mistake. No one cares as much about my money as I do.

    I wish I had known about Management Expense Ratios (MERs) and loads before delving into mutual funds and blindly trusting a financial advisor (really a salesperson). I am thankful I learned this lesson in my late 20s and got some education — albeit, to have known about index funds and ETFs earlier would have saved me some grief in dealing with back-end load funds. I am happy to be a DIY investor now…and hopefully will see my investments prosper due to indexing.

  8. The fact that people attend the course would be the first lesson: no one teaches you about money in school, you have to go out and educate yourself.

    Things I wish I was told:

    1. Good financial planning isn’t about a monetary target but a life you want to live in financial security

    2. You will never know everything about money. Make sure you surround yourself with mentors who can teach you.

    3. It’s not what you make, it’s what you keep.

    4. True wealth is not measured by the number of assets you have, but the amount of cash your assets generate.

    5. Understand the difference between good debt and bad debt

  9. Hi Ellen,

    I really enjoy your blog. Here’s 5 simple ideas that I’d suggest for those trying to take control of their finances.

    1. Eliminate all debt (except mortgage).
    2. Save at least 10% of your income.
    3. Invest your saved income. Don’t let it fester in a savings account.
    4. Treat all your invested money as spent money. It stays in your investing account until retirement.
    5. Pay your mortgage every 2 weeks instead of once a year.


  10. Great comments from ‘brad’ – I would echo those, especially the idea of tracking your money. My wife and I share a lot of money habits and that is one, which has been very useful, both when I was single and for the last 10+ years of married life.

    We have also done 2,3, and 4, though with credit cards it has always been the approach of paying them off in full – not necessarily setting any limit.

    Our approach with cars has been to save and then buy with cash – no debt. We had rental income from a tenant and put all that money into a savings account and then used that money, along with other savings, for the purchase of a new car, and then a couple of years later, a good used vehicle as a second car. The new car was a bit of a “nice to have”, but at least it is owned with no debt and we plan to drive it to the end of its life – it is a Toyota, after all – and so is the second vehicle.

  11. 1. Track ALL assets – you can’t manage what you can’t or don’t measure. Know your net worth at all times.

    2. Understand Management Expense Ratio on mutual funds.

    3. If you buy mutual funds (and beginners often must), buy those in the top two quartiles for their classes’ performance, and in the lower portion of fees. (I find http://www.Fundlibrary.com best for this research. There are lots of others, http://www.Globefund.com and http://www.Morningstar.ca come to mind.)

    4. Understand compound interest and use that knowledge to understand what an extra $100 payment does to the length and to the total interest payment for your mortgage.

    5. Be cheap. Why pay extra fees or accept lower interest income when you can move your business? Quarter percentage points count. A dollar here, a dollar there and a dollar somewhere else soon add up.

    6. Read more and ask more questions than your neighbours and friends — you are in competition with them to get the better rate or price or value.

    8. Find a mentor – lots of us like to help. We just need someone who wants to learn.

  12. Several points come to mind, and have already been mentioned:
    a. get a credit card as soon as you can
    b. ONLY buy things on credit that you can otherwise afford to pay for with cash, and pay your balances off right away
    c. pay yourself first (10% or more into a separate account)
    d. buy a house as soon as you’ve got enough for a downpayment. Even if it means leasing it to tenants for years, it’s probably the best investment you’ll ever make.
    e. Remember that no one cares about your money as much as you do.
    f. Investing is great, but if you can’t take the highs and lows (and there will be plenty of those) stay out of the market.

  13. Many good comments here. I’ll add a few more that we’ve found made a difference in our finances:

    – pay your mortgage weekly – saves thousands in the longrun

    – “Your Money or Your Life” is a very good book, coupled with “Why Swim with the Sharks” as it has a Canadian slant.

    – Also get the book, “Portfolio Doctors” as it helps the average person learn to read and understand ‘how their money works’ (statements, money websites, investments, stocks, and of course the confusing code language, e.g. MER)

    – Remember you are the CEO of yourself. Don’t depend on others to ‘care’ about growing your funds. Take charge now, learn the language, and understand ‘how the money works’ through self education – and take charge of your own finances

    – Learn to negotiate – we did this with our banker to renew our mortgage by first contacting brokers. Then we took the data our brokers offered us, and gave our banker an opportunity to ‘blend and extend’ our present mortgage, giving us an excellent rate, picking up the legal fees and other bank fees. Adding, that if they can’t beat the broker’s offerings, we’ll part company at the end of our mortgage. We got an excellent deal with many fees covered.

  14. Pick up the book, Rich By Thirty by Lesley Scorgie. It’s the book I recommend for teenagers and young adults. She explains everything in the simplest terms.

    I enjoyed the lecture today, Ellen. See you next week!

  15. To Alice:

    Before recommending a book, consider the source and the information. Consider that so many things these days are simply about making the one that is being marketed rich and famous, not truly coming from experience or a place of wisdom!

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