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Healthy Futures – 5 Tips for Navigating Your Finances in Uncertain Times

By August 26, 2015May 26th, 2017Moments

As oil prices continue to slump, it should come as no surprise that nearly half of all Albertans fear financial loss.

As oil prices continue to slump, it should come as no surprise that nearly half of all Albertans fear financial loss, according to an study on the psychology of investing recently published by BMO Wealth Management.

 

The anxiety can only have spiked following the market correction that started at the end of August.

 

On top of that, the BMO study found 45 per cent of Albertans and nearly 40 per cent of Canadians are confused about finding an investment that will yield a best return with minimal risk.

 

Confusion about how to invest is a serious issue for many Albertans and Canadians in the “sandwich generation” who are often in the process of putting kids through university while looking after aging parents.

Tips for Investing in Tough Economic Times

Since there’s never a wrong time to learn more about investing, we have prepared 5 tips for Alberta investors to survive and prosper in tough economic times… even if you’re new to the concept of investing itself.

Tip 1. Decide to Take the First Step

Blogger FrugalTrader is married with two young children and runs popular investing website Million Dollar Journey.

 

He started the blog in 2006 with a personal net worth of $200,000. By 2014 that he had reached his goal of achieving a net worth of $1 million.

 

The blog is jammed-packed with investment tips he has learned along the way.

 

If you’re a beginning investor, his blog post Financial Freedom 101 provides a great introduction to his website.

 

The blog post explains how to take the first steps to learn how to invest, including:

 

  1. Set “SMART” goals
  2. Track your progress
  3. Make saving a priority every month
  4. Pay off debt
  5. Invest your money

 

For the last step, he explains what he has, on his journey to a million dollars, learned to be the keys to successful investing including:

 

  1. Invest for the long term
  2. Reduce your management expense ratio (MER)
  3. Index your portfolio
  4. Reduce your trading fees
  5. Reduce your taxes

Read more.

Bonus link: The Merits of Taking a Long-Term View of the Stock Market

Tip 2. Learn the Basics of Investing

The investment world can seem overwhelming for someone just starting out, says Gail Vaz-Oxlade.

 

Vaz-Oxlade is one of Canada’s most popular personal finance bloggers who even had her own TV show about investing.

Understand what you’re buying

If you go into investing with your eyes closed, simply following someone’s directions you’ll be sorry. If you can’t explain it to a 12-year old, Vaz-Oxlade says, you can’t buy it.

Understand how long it’ll be until you need the money

This is called your “investment time horizon.” For example, if you need the money in less than 10 years you can’t put the money into the capital markets – you won’t have enough time to recover from a downturn.

Understand how much risk you can tolerate

Are you highly risk-averse? Don’t get talked into investing in things with risk, Vaz-Oxlade says, since you’ll run screaming from the markets at just the wrong time. Are you comfortable with a little risk? Then branch out as far as the other two rules here will let you.

Read more.

Bonus link: How much will it cost to care for an elderly parent?

Tip 3. Learn If DIY Investing is For You

Taking control of your investing can help you save money by avoiding paying fees to money managers.

 

However, many do-it-yourself investors take up investing because an interest has grown into a passion. The challenge for novices is that DIY investing is time-consuming and may not be for everyone.

 

If you want to learn more about the nuts and bolts of investing and see if the DIY approach is for you, Ottawa-based Mark Seed’s My Own Advisor blog has a great list of pointers for managing a DIY stock portfolio, including:

 

  • How to research companies
  • How to buy
  • How to deal with “market noise”
  • How to monitor and measure portfolio performance

Read more.

Tip 4. Understand How Much You Need for Retirement

Part of setting a financial goal and taking steps to attain it means understanding how much you will actually need in retirement.

 

As part of hundreds of articles devoted to personal finance, the Retire Happy website outlines two methods for figuring out how much money you will need for retirement:

Method 1. Use a top-down approach to ballpark current expenses

Essentially, take your current income, and then account for taxes and investing to estimate how much your current lifestyle costs. Subtracting mortgage expenses and the cost of raising your kids, and, using the top-down approach, you’ll need about 70% of your lifestyle costs in retirement.

Method 2. Use a bottom-up approach

This approach involves understanding exactly where you spend every dime by tracking your cashflow. You can then estimate how this cashflow will change when you retire, and places where you can cut back or even eliminate spending.

Read more.

5. Be Frugal

Squawkfox is another popular Canadian personal finance blog written by Kerry Taylor. Taylor says that one powerful way to achieve your financial goals to to be frugal.

 

In 5 Unconventional Ways to Get Your Financial Act Together, Taylor’s tips include:

 

  1. Document exactly what you buy and “collect”, in order to figure out if you are wasting money
  2. Curb impulse spending
  3. Ask for a better deal if you can

Read more.

Bonus Tip: Keep Learning

This blog post is just the tip of the iceberg when it comes to learning about personal finance and investing for retirement.

 

To keep learning, check out this handy list of 15 Canadian Personal Finance Bloggers to Follow in 2015.

 

Popular Globe and Mail personal finance columnist Rob Carrick has a very lively Facebook Group where anyone can ask him brief questions about investing. Recently Carrick discussed the market meltdown in August in the group.

 

Alberta’s own Robb Engen, who runs the popular Boomer & Echo personal finance blog has also recently started writing on the topic again for the Toronto Star. Engen’s newest column explores how Canada’s big banks are providing incentives for savers.

Do you have any strategies for investing? Let us know in the comments!