Canadians save money because no one can predict the future and having a safety net is important when it comes to avoiding unnecessary debt. It is also a great way to plan for retirement, and make sure there’s extra money to enjoy life as it happens. Saving money is just the start, though. Investing money is where you can make a difference when it comes to achieving and attaining your goals.
So how can we do that?
Wealthy people know they can’t make money and just put it all in a GIC. It will never grow enough. You need to get your money working for you, too. It has to be invested in something that, like you, is working, and will eventually provide you with the funds you need when you stop working.
This process is called monetization — the movement of money — and there are many traditional and non-traditional ways to do this. The first option is to invest in the stock market, perhaps a guided stock portfolio, SMAs, Mutual Funds, Strip Bonds, or Exchange Traded Funds (ETFs).
You can do this on your own with an online trading account or you can get a financial planner to help you. Another option is to invest in real estate, decidedly one of the oldest ways to make money. The rates are super low and you need a place to live — right?
Why not buy a home, move up to a larger home, buy a second residence or buy a rental or investment property? There are many people who have made their fortunes and become extremely wealthy just buying and selling real estate, many of whom have never invested a dime in the stock market. Here are some other options that you could consider:
• Invest in your company pension plan, company savings plans, or your own RRSP or TFSAs.
• Consider lending for private mortgages. You must be on title to the property and always work with a broker.
• Help out a child or family member buy their first home. Make sure you are on title and your contribution is clearly defined in the percentage of ownership, then when the property is sold in the future — you split the proceeds.
• Consider leverage lending to purchase blue-chip, dividend stock in the market. If you open up a non-registered account, the interest that you pay on the loan will be a tax write off.
• Consider SMAs (Separately Managed Accounts), when investing in the stock market. They usually come with a floor guaranteed value of two to four per cent and are a great way to ensure capital preservation and downside market protection.
• Consider AAA Strip Bonds to invest in a laddered portfolio. There are no ongoing fees, but rather a transaction fee when you purchase and sell the bond. You purchase at a discount and will know exactly what your guaranteed return is when it comes up for renewal.
• Consider purchasing insurance such as Whole Life. This is a great way to create your own pension plan.
• Invest in YOU. They say the fastest way to make more income is to believe in your potential to earn it. So, invest in a new business, go back to school, ask for that promotion and get out of your comfortable, ordinary ways. Start selling things online, look for opportunities. Talk to people that share your passions. What are they doing — what worked for them and what might work for you? Open yourself up to something different.
Remember, if you want to grow your options for the future, you need to “own your future.”
Find ways to improve your situation. Don’t be afraid to try new things. I’m not saying this will be easy. Anything worth having is always difficult. You must make sacrifices and be committed to taking charge of your financial future. You cannot sit on the side lines and watch your life go by and never make any changes. And if you are leaving your financial future in the hands of a financial planner — STOP THAT!
It’s your money, your decisions — you’re the one who’s going to make yourself happy in the future, not some banker. So today — do it, secure your future.
— Christine Ibbotson has written four finance books, including the bestseller How to Retire Debt Free & Wealthy. She also writes the Moneylady column. askthemoneylady.ca