Barry Choi: The best financial advice I ever received

There are simple rules you can follow to set yourself up for financial success

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Many people ask me about where I learned about money. While most of my knowledge came from reading books and doing countless hours of research, I learned the most important lessons from real people. Their advice has been instrumental to my financial journey, and I’m happy to pass it on.

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Pay yourself first

When I received my first paycheque, my dad encouraged me to open a Registered Retirement Savings Plan (RRSP). He explained that if I saved a bit of money each month and invested it, my retirement would be taken care of. Looking back, this may have been the best advice I ever received.

My dad was essentially telling me to pay myself first, and it’s incredible how much that tip has helped me over the last few decades. By investing early, my RRSP has grown considerably. I was also able to save a significant down payment and max out my Tax-Free Savings Account (TFSA).

Admittedly, it may not be easy for everyone to save money each month. But if you can even set aside a small amount regularly for emergencies, it can go a long way as you’re building a financial buffer for yourself.

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Only invest in what you know

When I wanted to learn more about investing, I asked my cousin about his strategy, as he was investing on his own.

As it turned out, he was into penny stocks. It was something he enjoyed. He would research small companies, read their financial reports, and sometimes get in touch directly with the owners before making any purchasing decisions.

My cousin admitted that this strategy wasn’t for everyone and advised me to invest only in things I understood.

After doing my research, I realized that index funds suited my style the most. I wasn’t interested in individual stocks or actively managed funds. With index funds, I was accepting a passive approach, but there would be little work required on my end.

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These days, many people are attracted to cryptocurrency, non-fungible tokens (NFT), and meme stocks due to their meteoric rise. However, if you don’t understand how those investments work and how they fit into your portfolio, you could potentially invest in the wrong things and see some huge losses.

Watch your investment fees

For a little while, I had my RRSP with an investment firm. My advisor had told me that the fees he earned from my portfolio were relatively small. Happy with his service, I praised his low fees on a message board that I frequented.

A random stranger reached out to me and explained that there was a 100 per cent chance that I was paying much higher fees than what my advisor claimed. He encouraged me to investigate further.

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As it turns out, this random stranger was right. Not only was I paying a high management expense ratio (MER) on my mutual funds, but my advisor had put me in funds with a deferred sales charge (DSC). This ensured he earned a commission upfront.

I pulled my money out shortly after and started investing in index funds since they had a lower MER. By the time I retire, I could end up having hundreds of thousands more in savings thanks to the power of compound interest.

Take free money

The first full-time company I worked for had a defined benefit pension plan, but I didn’t join it right away. In addition, my financial advisor said it was unnecessary to join the pension plan since I was already investing in my RRSP. Yes, it was the same financial advisor that had put me in funds with a DSC.

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A few years later, while working, I talked to an older coworker of mine about the company benefits. I mentioned how I had not joined the pension plan yet. He immediately said, “Are you crazy? That’s free money you’re giving up!” He then explained how the pension worked — that my employer matches my contributions — and I was shocked. I had literally given up years of income by not joining.

If your employer offers a pension plan, RRSP matching, or stock options, it’s in your best interest to sign up as soon as you can.

Also, look out for government incentives that may be available to you. If you have kids, you could qualify for the Canada Education Savings Grant (CESG) where the government matches Registered Education Savings Plan (RESP) contributions by 20 per cent, up to $500 a year.

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Avoid the fear of missing out

When I started researching personal finance, one of the first books I read was Andrew Hallam’s Millionaire Teacher: The Nine Rules of Wealth You Should Have Learned in School. On the first page, he talked about a $150 cheque he received from the mother of one of his students, which bounced.

This was significant because she drove a car worth more than $250,000, wore an expensive Rolex, and lived in a huge house. Hallam thought they were rich, but it turns out they were living paycheque to paycheque.

This story really struck me, as it became clear that the appearance of wealth is meaningless.

Admittedly, there have been times where I’ve browsed social media and have been jealous of people taking fancy trips or buying new homes. However, I have no idea what their financial situation is. Sure, they might have the income to support their lifestyle, but for all I know, they could be drowning in debt.

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Every so often, I need to remind myself that what others are doing has no relevance to me. Nor should I make financial decisions based on how others may perceive me.

Filter out the noise

If you’re looking to learn more about personal finance, the news and social media can be overwhelming, pushing headlines that leave you more confused than ever. Reading a book on personal finance is a good start, but sometimes, solid advice from someone you trust is all you need to point you in the right direction.

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.



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