If you’re a regular reader of my blogs, you’ll likely see a common trend. I never recommend one particular outcome for everyone. I instead devote this space to weighing pros and cons and identifying pitfalls or opportunities.
The reason for seeming indecisive? Financial advice needs to be unique! Finance itself is all about optimizing money decisions. But that optimal outcome is wildly different for every person reading these sentences.
I’ve come across countless authors and media personalities who claim there is only one path to financial success. You know it when you see it. If anybody suggests, “all you need to do is follow my formula to riches,” that should be your cue to turn and run!
A common piece of retirement advice is to “invest 10% of your income in a fund mirroring the S&P 500 index.” If you follow that advice it can’t possibly mislead, right? Well, what if a person can’t afford 10% of their income towards retirement today? What if you want to retire sooner than 65 or never truly retire at all? What if you have a pension program through work that’s already saving 12% of your income per year? What if you can’t stomach the volatility of the S&P 500? Is that savings to be directed into RRSPs or TFSAs or Non-Registered accounts? The list of questions to refine that blanket statement into an actual, implementable decision is too high to count.
Some more dangerous pieces of advice, that seem to surface regularly, involves real estate or complicated tax shelters. Here is where I can give some decisive advice, regardless of situation:
- If you need to pay hundreds of dollars to attend a seminar to learn how to build wealth, the only person getting wealthy is the seminar host! After all, if they can make millions off their own ideas, why rent a hotel conference room to make thousands?
- If someone is selling you something on the basis that the tax decrease will be equal to (or greater) than the cost of the investment, you’re in trouble. There is no real, legal way to do that in Manitoba without placing all your principal at risk of loss. Most tax savings are based on credits or deductions, which cap out at around $0.50 for every $1 spent in our province.
Every person is different when it comes to their financial lives. We all are. There are so many variables at play it is impossible to find two people who are actually identical. You would be truly hard-pressed to find a financial “doppelganger” who shares the same: age, life expectancy, earning power, tax situation, family situation, goals, values, etc… So why listen to someone who is giving blanket, cookie-cutter advice?
Learning to ask the right questions, and critically evaluate financial alternatives, is a skill that takes time. I’m a firm believer that an informed person can make the right decision and find the optimal outcome for their personal situation.
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