When I was first starting to invest back in the late 90s, one of the first things I learned about was the difference between short term investments and long term investments. It has a lot to do with not just the expectation that you will make money, but whether or not this will happen in near or far future. And moreover, it has to do with how far ahead you can think, even considering the events that are taking place around you in the present and near future. Since I wasn’t strapped for immediate cash (no debts, and had I ever incurred any, my parents would have killed me) I always put away my money for the long term. Even when I started Racketsports Montreal (RsM) I managed to float the business on my personal networth, without ever paying more than 20$ on interest over the course of 3 years because I accidentally forgot to pay a credit card bill.
It’s the reason why I don’t bother with ING savings accounts despite everyone I know being so amazed that it offers 3.00% (WOW THREE PERCENT OMGZ). Why? Because 3% is nothing, it barely counteracts annual inflation. Keeping your money in something that offers peanuts like that is something that gets you in the habit of settling for low returns. Keeping your money in a savings account like that also keeps your money visible and accessible, which is the first problem when it comes to saving anything.
While I’m not a day trader, there are mutual funds that one can invest in for the long term that will weather out most recessions. There’s one philosophy of investing which is that you just invest the same amount, every month, all the time, sun or shine. You can try and time the market to some extent, but if you do it too much you risk losing your nerve and your discipline. As long as you’re not investing in something really, REALLY volatile, you’ll be fine if only you’re patient, because most markets bounce back even if it takes many many years.
Isn’t time on your side? How old are you really?
I was telling my family about my impressions of Hong Kong. The feeling I got was the duality– either you’d have the elite, composed of the nouveau riche and the established powerbugs who dress from pedicure to manicure in the latest trends; or you’ve got the people from Pig Sty Ally (re: Kung Fu Hustle).
Looking at my grandparents, who still don’t dress well even though they’ve jumped an entire social class, it’s obvious from the anachronistic dress code that my family came from Pig Sty Alley. Sure there are differences– we don’t wear wife beaters or shorts– but that’s mostly because of regional differences in climate between Montreal and PSA. What I’m saying is that when we were kids, we were poor. Not dirt poor and living on the streets– and I did have a lot of toys because my relatives bent backwards to provide, but we had to scrape our way up to where we are now.
People are always talking about the recent economic crisis– but I think that as many smarter people are pointing out, the economic crisis doesn’t really affect people who know what they’re doing with their money. And by that, I don’t mean people who are investing in the right places– I’m talking first about people who have healthy spending habits as a basis.
While, okay, the crisis does affect everyone, it’s mostly having influence because of the borrowing that’s going on the first place. How is it that so many people I know are putting away so little money? Because people don’t spend within their means. Many people finish the year with their net worth only marginally higher than what it began with.
I hear people all the time saying “right now is not a good time for me to invest”.
And for the most part, that’s bullshit. First of all, for the average Joe (and believe me, there are far more of us that are averager Joes when it comes to investment than we’d like to believe) NOW is always the time to invest– simply because,the first step, like anything in life, is just to get in the habit of doing it. And forget about long or short term investing for a moment– completely ignore all the details. ANY investment (a savings account does NOT count because you can still withdraw from it quite easily), in the sense that anything you can put your money in a locked away position where you cannot spend it, is an excellent decision. As you get smarter about your money you’ll put things in investments that yield more– but to begin with, it’s not a question of Where you but your money but Whether you begin in the first place or not.
Talk about time being a greater factor than quantity of money invested– that’s true. But even before considering the time issue, what one has to start off is the discipline of saving money and spending within one’s own means. Discipline is more important than location, and even quantity.
“I should put more in my RRSPs…” is another one of those things I hear a lot of bullshit about. This brings me to my second point (the first one was that people need discipline). My second point is ignorance, which may or may not be mutually exclusive to the discipline problem. The two might even work in combination. Most people I know are just doing it because it’s what they hear all their coworkers are doing. RRSPs only need to be used when you’re making so much income that it would work as a tax credit– if you’re not in those high brackets, you don’t need RRSPS. The average part time worker will never need RRSPs, and even people fresh out of university with a new job might not need to max them out. Now, this has nothing to do with my earlier point of saving money– but my point is, that investing isn’t really TOO complicated– you should get the basic knowhow about a lot of things first though before putting money in them. Go to your bank– ask them what to do. They’ll try and sell you all sorts of shit that you don’t need of course, but at the very least they can explain most investment jargon to you in an easy way. It doesn’t usually take all that long. You can even go to most online bank sites and get the info there. Use wikipedia for all I care! SOmetimes ignorance is how people invest wrong, sometimes ignorance is why people don’t even begin (because of fear of the unknown). Either way, people need to take the initiative not just to start saving, but the easy stage two, which is to start paying attention to how their money will grow. A little effort makes a lot of difference.
But when it comes to money, I’d say that most people are fucking up just because of lack of discipline and ignorance.
The current financial crisis is perhaps the biggest of fuckups, but it’s not the fault of the American government per se– I like to believe that the power of a democracy lies int he people, and so it follows that the crisis is actually at the hands of the average joe who votes for crisis every time they swipe a credit card while biting their lip. What’s going on today has a lot to do with people who just relied too much on imaginary money that wasn’t really there, because they wanted to get too many things.
I’m not anti-consumer, strictly speaking– I buy a fair amount of things. But what I am is an advocate of common sense. Debt is, simply, stupid. It is the opposite of planning for your future, because it brings the problems of yesterday and preserves them, ferments them, so that they’ll stink that much more later.
Get a grip, save some money!
I hear people all the time say that “you only live once” and that’s also bullshit. I’ve managed to save about 75% of my earnings this year, and that’s even considering my expenses– a scooter, trips to Taiwan, Hong Kong, Japan, drinking, partying, noraebangs, a new laptop, a new wardrobe (including like five new pairs of shoes, six jackets), guitar and taekwondo lessons… and I really, REALLY don’t even earn that much. In fact, I earned more as a government official before I became a teacher in Korea. So how?
Well, of course, one might argue the cost of living in Korea is lower than that of Canada. Regardless, my point is that you have to adjust your lifestyle, consider your perspective, and really, honestly, see what has value. You can find ways to shave some dollars off, and this is where I am anti-consumer– there is no reason to pay big bucks for something that you will not appreciate. Impressing others with your possessions isn’t enough of a reason.
The reason why I say 75% instead of giving you an exact number is because savings are relative to what you earn– you don’t earn the same as I do, it’s a statistical improbability. You earn more or less than I do. Your lifestyles will be significantly different, your spending habits in turn. What needs to follow though are your saving habits.
I don’t really care about the crisis. It’s out of my hands, so I chose not to bitch about it. The only thing I can do is manage my own finances, which is what other people should be doing– they should be taking responsibility for their own money instead of pointing fingers whenever a system crashes. While some people did get majorly screwed, the majority of people shouldn’t be feeling the burn of the crisis if only they were managing their own personal lives better to begin with.
This isn’t just finances I suppose– it has to do with everything about the contemporary North American lifestyle.