Americans spend an average of less than two minutes a day managing their personal finances, I read recently. I have no reason to believe that Quebeckers are spending more time on it.
If so, we would spend 0.12% of our time taking care of our finances, compared to 11.6% watching TV (and a third sleeping). It’s now that you’re expecting my little sermon … I thank you! It seems normal to dedicate 100 times more of your time to your leisure than to manage your finances, if only for the hundredth of which you talking here be used effectively.
An average of two minutes a day is equivalent to half a day a year. For a couple, it’s been 24 hours. If one excludes planning for the grocery store, a household that is on its own needs no more.
The secret ? Tidy up, systematize and automate! There are certainly elements that must be put in place, which requires time. Once the machine is launched, our attention is almost no longer required.
The basis, the foundation, is a realistic budget. The longest part of this exercise consists in making an inventory of your expenses, thinking about your priorities, establishing a timetable for your projects and distinguishing unnecessary elements. What is it to make a budget if not to balance two columns of figures? Then just respect it (that’s the hard part) and adjust it every year.
The budget must allow for a cushion. There must be a savings line at the top, hence the adage “pay yourself first”.
This money must grow. Putting in place an investment “strategy” cannot be improvised. I say “strategy”, but let’s not tell ourselves stories: we are not Warren Buffett either. We have other things to do than try to interpret the geopolitical events, the twittering of Donald Trump and the fluctuations in interest rates (even Buffett is not involved in it). For the vast majority of people, investing is all about picking out turnkey investment products that deliver decent returns at a reasonable cost and then sleeping on them.
We’ve never been spoiled for choice. With a single exchange traded fund (ETF), anyone now has access to a diversified self-rebalancing portfolio at minimal cost. This is suitable for all amounts called upon to sleep for more than five years, by favoring well-known tax shelters: RESP, TFSA, RRSP. Short-term savings will be deposited in a high interest account.
All transfers between accounts, such as paying bills, should be automated and synchronized with the filing of payroll.
A counselor is helpful. The hardest part will undoubtedly remain to get hold of someone competent who watches over our financial interests before his own. There is always the risk of selling useless life insurance, paying high fees for investment funds and poor after-sales service.
There are many, good advisers. The others are too, that’s the problem. So stay tuned and ask for references. We have to look for someone who is relatively available, able to help us set realistic goals and suggest ways to reach them.
While waiting to find the pearl, it is important to be wary of financial jargon, to decline complicated product offerings and to flee from miracle solutions.
-Negotiate your auto and home insurance. Do the same with its communications services.
– Question the relevance of the two cars, unlimited internet and other compressible expenses, like all these pay-per-view subscriptions, eating out, etc.
-Compare the returns of its investments to those of the market.