Tuesday, 31 January 2017

Investing: Fake it 'til you Make it

Practice Investing with no Money

Investing can be terrifying...seriously! I've been working in finance for a while, and the actual picking and choosing of investments has never been (and likely will never be) my thing. Need to know the ins and outs of RRSP's, TFSA's, pensions, whatever....I'm your girl but want to chat analyst reports and company fundamentals, and you can keep right on walking past my office. Here comes the but though....investing is important, and if you really want to hit your long-term saving goals then you better go and make it your best friend (or we'll settle for acquaintance). Saving up your hard earned dollars is amazing but leaving it sitting in a bank account (even a high interest one) is not going to do too much for getting you to your goals. You need to get those funds in the market and working for you. The longer your time frame, the more you can take advantage of investing and compound interest will be working in your favour.

Whether you decide to go it on your own or enlist the help of a financial advisor, it's important that you at least know the basics of investing. It's crazy to me that we go through 12 years of school and never have to take one class on managing your money, it really should be a requirement for all high school students. Investing, building credit, student loans, staying out of debt...these are essential skills for being an adult. You know what isn't? Advanced algebra, studying poetry, and knowing the date Archduke Franz Ferdinand was shot have been zero use to me since I wrote the respective high school exams. Sidebar over, back to the point. Investing - like it, love it, or hate it....you need to know how to do it.

Where do you start? 
Probably the hardest part about investing is actually getting started. You can't just pick some random company, invest all your savings in their stock and hope for the best. Right? Nope...well not exactly. I am not telling you to actually put your money into anything before you've done your research, but there's no harm in practicing. One of the best ways to get a feel for you risk tolerance, learn about the volatility of the markets and what characteristics to look for in a stock is to build yourself a fake portfolio and watch what happens. This doesn't even have to cost you anything. There are free services available where you can build a mock portfolio and track the results. I like Google Finance but Yahoo Finance will also fit your needs, and if you want access to additional research and tracking software you can look into paying for Globe Investor Unlimited or Morningstar

To get started you'll need to set up a Google account (but really, who doesn't have Gmail at this point) and then go to Google Finance. Click on 'Portfolio' on the right-hand side of the page and you'll be able to start adding holdings to your portfolio. Stocks are an easy place to start as you can begin with adding companies you know. Maybe you're a coffee addict? Add Starbucks. Have a cell phone plan? Buy Rogers, Bell or Telus. Like to travel? Go for Westjet. You get the point. With Google Finance you also aren't limited to just adding stocks; they also have mutual funds and ETF's in their database so you can watch in real time how they compare. Here's a look at a quick fake portfolio I did up using some popular Canadian stocks: 

To get this data, I added each company to my portfolio and used the same purchase date (February 1, 2016) and bought 100 shares of each. I looked up the historical price (search for the company using the main search bar, then click on 'company' and 'historical prices' on the right-hand menu) for that particular date so that I could see a full year of performance. You can absolutely skip this step and use the current date and price to track going forward; adding the historical data just gives you instant results. There's also a graph you can look at to track performance, it's not anything special but does give you an idea of how your fake portfolio has done. Check off the S&P/TSX option so you can compare it to how the market has done over the same time period. As you can see below, my portfolio has tracked the S&P/TSX Composited Index pretty closely but is currently lagging behind. That makes sense because almost all of the companies I chose are on the index. 

Train Your Emotions
You've probably heard people talk about how investing is emotional and to really be successful you need to keep your emotions in check and not let them rule your decisions. It's not easy to watch a stock you own drop in price day after day but, as long as the company is still stable, that's the last time you want to sell. A loss isn't actually a loss (and a gain isn't actually a gain) until you push the button and sell. Same thing goes for if you've had your eye on a stock that just had a big jump in price and is trading at record high levels...probably not the best time to buy-in. By tracking a mock portfolio and watching your investments go up and down day after day, you will be training your brain to not over-react when you've got real dollars at stake. 

You'll also get some insight into how much risk you'll be willing to take. For your first mock portfolio, I suggest adding a diverse range of investments. I wrote about some of the most common types of investments here if you are just getting into investing or need a quick refresher. Pick a few big Canadian companies from different sectors (think energy, banks, communications, retail, etc), a couple of various mutual funds with different risk levels (aggressive growth, income, balanced, etc.), some ETF's (iShares, Vanguard, and BMO all have offerings), and top it off with random stock picks you think might hit the jackpot. Maybe a friend of a friend was talking about this penny stock (medical marijuana is all the rage in Canada right now) that is going to make them a millionaire, add it in and see what happens. You've got nothing to lose at this stage (except maybe your ego) so do it all. What you want to focus on is how you feel when one of your holdings loses a bunch of money...you are NEVER going to be right on all your picks, so you need to know what it feels like to be in the red. If it makes you feel sick and like you are going to lose sleep then that sector is not for you. Figuring out what sort of volatility you can handle in your accounts is half the battle and will really narrow down your investment choices. 

Start NOW! 
The best part about building a mock portfolio is that there is no reason you can't go and do it right this second. Google Finance is free, and you won't need to use any of your own money until you are ready, so even if you're still struggling to pay down your debt and have no spare cash you can still participate. This way you'll be even better prepared when you actually do have the money to invest, and it might even help to motivate you to save faster. 

What do you guys think? Do you find mock portfolios helpful when you're just getting started with investing? 

Practice Investing with no Money

Tuesday, 24 January 2017

Do you really have to LOVE your job?

The Concept of a Dream Job

How many times have you heard the old cliche 'love what you do'? I'm guessing too many times. I actually hate that saying! It feels like one of those unattainable ideals that we're supposed to live up to; like having a supermodel body, having a perfect relationship or never getting a zit. What if you just like your job? You don't hate it, but if you won the lottery tomorrow you'd be handing in your notice lightning fast and packing up to travel the world or do whatever it is you ACTUALLY really love. If you all of a sudden had endless amounts of cash and wouldn't change a thing about your life (you're lying!) then yes, maybe you actually do love what you do but that's not the norm...not even close. I bet there are way more people out there that hate their jobs with a passion than love them with a passion. And you know what, that's ok? Well, maybe not hating your job that much but there's nothing wrong with just being so-so about it.

For a lot of people (me included) working is a means to an end. I go to work, put in the hours, cash my pay cheque and use that money to fund the things that are important to me. I'm lucky to have a great job and work with great people, so I enjoy my hours at the office but I enjoy my hours out of the office even more. And really, what's so bad about having to put in the time to earn money and build a life for yourself? Everything can't be all champagne and chocolate all the time! Having the ability to work for yourself is a relatively new concept. Our parents didn't have the technology to become famous on Instagram or Twitter or even to make money through blogging. Sure, some people ran their own businesses, but it's been a recent phenomenon for the entrepreneur lifestyle to be so highly regarded. I'm sure many of my fellow 'Millenials' (whether they'll admit it or not) would be all to happy to bump up their number of followers and run a successful blog. I'm not judging...I totally get it! However, it's worth thinking about how your parents made their money and if that was really so awful. 

"Do what you love, and you'll never work a day in your life." 

Ever heard that one before? Let's be honest, no one actually believes that right... Even those people who have a total dream job have bad days, and I bet those bad days feel a lot like work. Think of a person who you think has the greatest job in the world. Maybe it's a big name Hollywood actor or a blogger who works for themselves and brings in six figures a month. I guarantee you even those people have to deal with crappy co-workers, online trolls or just plain old lack of motivation. Having days where you hate your job doesn't mean you're in the wrong line of work, it means you're human...just like everybody else.

There is so much hype out there about becoming your own boss and having an entrepreneurial spirit, but that also comes with a lot of added pressure. Working for yourself means that you no longer have a steady salary to fall back on and you are 100% responsible for every dollar that comes in and goes out. In some ways, that's great and might be exactly what you want, but there is a downside. People who work for themselves are rarely off the clock and are more likely to be answering emails at 10 pm, always interacting on social media or waking up in the middle of the night in a panic because they forgot to send something out.You should also consider the added group benefits that are often included when you work for a large company. Health benefits, profit sharing, pension plans, and insurance are all things you'll have to pay for out of your own pocket if you're your own boss, and those things aren't cheap. Sometimes having a day job where you can leave work at the office and your weekends are all freedom doesn't sound so bad right? 

I've got a foot in both worlds right now. I have a (mostly) full-time day job that I enjoy but never imagined myself doing, and then I'm a part-time blogger. When people used to ask me what I wanted to be when I grew up, my answer was never once a 'financial advisor.' It's something I sort of fell into and have stuck with for almost 8 years with no signs of quitting anytime soon (unless I win the lottery!) I finished University with a Bachelor of Arts degree and no real plan for what I was going to do with my life. Topping my list at that moment was to work for a bit, save money and then maybe go back for another round of university (I like school, what can I say). My previous work experience had been mainly admin jobs, so that's what I started looking for. The hunt brought me to an interview with a financial advisor to be an administrative assistant and, well, the rest is history. I started out doing pretty basic work but was reliable and was eventually given more and more responsibility. After a few years, I had to make a decision whether to stick with it and hopefully continue to grow or pack up my things and go back to school. Obviously, I went with option #1, and that brought me to writing my Canadian Securities exams and becoming an advisor. The takeaway from my employment history? Don't knock it til you try it...that bridge job might just turn into your career. 

Working a day job might not give you the same thrill or instant gratification as being an entrepreneur, but it's also a lot less risky. There's nothing wrong with being satisfied in a job you just like and it's often the most reliable way to hit your long term goals.

How do you guys feel about your current job; love it, like it, hate it? Are you willing to settle when it comes to your career or are you on the path to your dream job? 

The Concept of a Dream Job

Wednesday, 11 January 2017

Annual Credit Check Time

How to get your credit report

How many of you check your credit score every year? I'm sure there are a lot of you out there who are just like me and really, truly mean to check it every annually but sometimes it just gets pushed off again and again. Well, NOT THIS YEAR! Here is your gentle reminder to go, right now, and make sure no surprises are lurking in the deep, dark world of credit reporting. 

But, why? 

I know, it sounds like a hassle but it really is for your own good. Sometimes mistakes happen, and there might be an entry listed on your credit report that can cause you serious grief if you are looking at buying a home, getting a line or credit or anything else that requires you to pass a credit check. If you can find the mistake now, you can take steps to correct it so future lenders won't see it and you'll have no issues. What kind of errors might you find? Your credit report is basically a transaction history of every time you've used credit, so anytime you've taken out a loan, signed up for a new credit card, paid a bill, etc. If you don't pay a bill on time the company you own money to can report this to Equifax and that entry will go on your credit report and lower your credit score. Usually, companies won't go and do this right away, as long as you call them and get the bill paid ASAP you should be okay. Every once in awhile though a company will forget to report an invoice as paid and send that information over to Equifax. This is a huge pain and it's a hassle to get it corrected, but it's better to know about it now than when you're sitting in your bank's office trying to get approved for a mortgage. 

Knowing where your credit score stands will also give you a good idea of how your financial situation is and if you need to work on improving your credit. A credit score of over 700 will really help out when applying for any sort of credit and will make sure you aren't wasting money on higher than average interest rates. It also puts you in a better position to negotiate and more lenders who would be willing to lend you money. 

Ok, how do I check? 

There are two national credit bureau's in Canada: Equifax (the most common) and TransUnion. Both can provide you with your credit report and credit score. When you visit either of these websites you'll notice that they are pushing a monthly payment plan to get your credit score/report and get monthly monitoring with it. If you want to do that sure, but I don't really think it's necessary as long as you take matters into your own hands and check it every so often. 

Now before you pay any money, you should know that you have some FREE options available. The government has made it the rule that TransUnion and Equifax have to give you free access to your full credit report once a year. They try to make this a little tricky since paid products are better for business but here's what to do. For TransUnion, you are actually looking for what they call the 'Consumer Disclosure' (who would have thought!) Go to that link and you can access a free online version of the report. Equifax still calls it a credit report, but the only way you can get it is to request a snail mail copy. This can be done by either calling them at 1-800-465-7166 or mailing/faxing them this form (old school right?!) That used to be the only way Canadians could get a free credit report, but the times are changing. 

Neither TransUnion or Equifax will give you your actual credit score for free, but there are now two alternative resources you can visit. Borrowell and Mogo are both online loan companies that have made deals with Equifax to offer Canadians free credit scores. They are basically doing this to get their names out there with the hope that you will use them for your borrowing needs. I actually just recently tested out the Borrowell system to get my credit score and it was super simple and quick. 

Perfect credit score? I wish!

You will have to fill out some basic personal information and answer a few verification questions that come from Equifax (mine asked about previous credit history and the last digits of my SIN) and then just like that my credit score popped up on the screen. I haven't tried Mogo yet but from what I can tell it looks to be a very similar process. You're not under any sort of obligation to use their products after getting your free credit score, but you may have to unsubscribe from their emails...hardly the end of the world. 

What if it's bad? 

Ok, so you've got your score, and it isn't really where you'd like it to be. Not the end of the world but it means you've got some work today. The first thing you'll want to do is review your credit report (or consumer disclosure...damn TransUnion) and make sure there is nothing on there that shouldn't be. If there is an error, you will want to file a dispute by contacting either TransUnion (more info here) or Equifax (more info here) (whoever you pulled the report with). I've been lucky enough to never have to do this myself but have heard it can be a huge pain in the ass...brace yourself. 

If everything on the report looks to be correct, then you'll need to start taking steps to raise that number. This is NOT an overnight process, and anyone you find promising you a quick fix for your credit is straight up lying. You need to build your credit with good behaviour over time. The most important thing to do is always, always, always pay your bills on time. Having overdue bills reported will have an adverse impact on your credit and the only way to counteract that is to create some good payment history. Next, up would be reducing your debt. Being maxed out on your credit cards, a line of credit, etc. is not good for your credit score. It will look at your credit usage (how much credit you have vs. how much credit you're using) and paying off debt will lower your credit usage and increase your credit score. So what about raising your limits to reduce your credit usage? Real talk...this is a strategy you might see recommend in some places but not by me. If you are already having a hard enough time paying down your existing debt then adding more credit is likely to just get you in even more trouble. This is not a long term fix! If you desperately need to raise your credit score to get approved for a mortgage, car loan, whatever, you should take a long hard look in the mirror and ask yourself how essential that item really is. Pay your bills in full and on time, pay down your debts, and you'll start to see your score grow. 

What if you have no credit? 

Maybe you're just getting started on your personal finance journey and need to build up your credit to help your future self. To do this, you first need to get some accounts in your name and adding records to your history. Open a chequing and savings account, set up your cell phone, power, cable bill in your name and always make sure you pay your bills on time and in full. Next, you can look at starting out with a secured credit card. This is like a real credit card, but you put the money down so there's no risk for the bank. In this day and age (especially with house prices being so high), it's almost essential to be able to access credit from a lender. Starting to build your credit early and being consistent in paying bills off in full will set you on the right path. It's much harder to fix bad credit than it is to build good credit from the start. 

How to get your credit report

Sunday, 1 January 2017

2017 Financial Resolutions that are Worth Making

My Money Goals for 2017

You know how many times I had to re-type 2017 so it didn't say 2016...3 times! How embarrassing!!! Technically I'm still writing this in 2016 though so I'll use that as my excuse, plus it's New Year's Eve and I'm mildly doped up on cold medication. I know, super thrilling plans for this girl! I've never been a huge fan of New Year's Eve anyways, so it wasn't a huge loss; there's always so much hype but it just ends up being too busy and too expensive and just a let down at the end of the night. Staying in for the win, minus the sickness for next year, though, please. 

2016 has been a year of ups and down for many people, with too many notable deaths and tragic incidents around the world, but for me personally it's been a pretty great year. As you guys know I started a new job in late 2015, so I was able to get settled in with that all year, and I really couldn't be happier with my decision to make a change. We also went on a fantastic trip to Barcelona which bumped itself up to one of my favourite cities I've ever visited, and I've been consistently (more or less) been blogging for a little over a year at this point. Looking back on the year that's past always make me think of what's to come, and that means it's time to set some goals for 2017. I'm keeping my list short, sweet and not too specific this year to give myself some flexibility as the year plays out and make sure I'm not failing right off the bat. I like to think of New Year's resolutions as more of a broad outline for your year and save the more detailed goals for your monthly planner. 

For this year I would like to: 

1. Get healthier (along with 90% of you I'm sure) - The last few months I've been seriously slacking in my gym attendance, and there has been way too much eating out in this household. Here's to clean(er) eating and regular gym dates to shed a few pounds and feel happier with myself. 

2. Road trip! - We've been talking for years about packing up the car and going on a road trip, and I'd love to see this summer be the one for that. At this point, we don't have any travel plans set in stone so it would be nice to save up some vacation days and hit the road. We're lucky in Edmonton to be near the Rockies so our route would certainly include a few days in the mountains and then maybe on to Vancouver Island. It wouldn't be the most frugal of vacations (I'm not a camper), but it would be fun to explore by car, something I haven't done since I was a kid. 

3. Blog productivity - I really enjoy having a little place on the internet to write and share my thoughts, but I'd like to push this a bit more in 2017 and make the blog more productive. I'm keeping my expectations low, but I'd like to earn at least a few bucks and get a little more traffic. This also includes becoming a more avid reader (and commenter) of blogs that I love. One of my main goals is to get ahead on writing posts. At this point, I write when I can and try to post something at least once a week. Going forward I would like to build up a small library of future posts, so I'm not forced to write when I really don't feel it and have a more consistent schedule. Work in progress guys ;) 

So that's where I'm sitting with my New Year's resolutions, but I'd also like to share a few financial resolutions that you might want to add to your list if you're looking to get your finances in order. 

1. Debt Repayment Schedule 
If you've got any sort of debt (minus your mortgage, small fish first), let's make 2017 the year you get that in order. The first thing you need to do is choose a strategy for paying off your debt and start putting it into action. Check out this post and figure out if you'd prefer to go the debt avalanche or debt snowball route. 

2. Automate your Savings
This is perhaps the #1 thing you can do to make the most noticeable difference to your savings rate and start to build your net worth. What I mean by this is set up all your payments to run automatically, as soon as your pay cheque comes in each week, month, whenever. By making the process automated, you won't have to remember where, when and how much to move into each specific savings account and you won't miss the extra money because you never really had a chance to spend it in the first place. You can do this with your RRSP contributions, TFSA deposits, emergency fund top-ups, or just your slush fund. 

3. Make a Budget
Having a workable budget is one of the most important tools you can have in your personal finance arsenal and what better time to set your budget than the start of a new year. If you're already a budgeting pro, this is an excellent opportunity to take a detailed look at your current outline and see where you can make any tweaks to make it function even better. Maybe you got a raise last year and need to allocate those new funds, or maybe it's your new year's goal to spend less money eating out and redirect those funds to savings. If you're new to this then start simple, look at all the money coming in and the money going out. Then break down the money going out into needs vs. wants and see where there are excesses (or where you can create excesses) and set those amounts into savings (see #2). Give yourself a few months to live with and make adjustments to your budget so that you can stick to it all year. Saving is great (and a necessary evil), but I don't want you to cut back too much and not be able to enjoy life now...everything in moderation. 

4. Take Advantage of Workplace Benefits 
Make 100% sure that you are making use of any group RRSP's, pension plans, health benefits, etc. that are provided to you by your employer. Nothing is more frustrating than finding out someone has been passing up free money just for not reading their benefits guide or asking their boss about available programs. Even if you are taking advantage, it can be worth asking if anything has changed, or maybe you can get bumped up to a higher matching limit if you've been working for the same company for awhile. I would love to see it become to norm for companies to make you 'opt-out' of benefits instead of having to 'opt-in.' You should also find out if there are any corporate discount programs available to you. Lots of companies work out discounts for their employees for things like cell phone plans, gym memberships, hotels, etc. 

5. Start Investing
Maybe you've been saving money, have your debts paid and a healthy emergency fund but you haven't stepped into the world of investing yet. Time for a change and really get your money to work for you. It's easier than ever to get access to the market and the earlier you start, the better because compound interest will really have your back in the long term. You don't even have to know much about investing to get started, even if you put your money into a moderate risk mutual fund you'll get some of the market upside without having to do much research or track performance. Alternatively, you could take on more risk and put a portion of your money straight into the stock market and invest in companies you think have a positive outlook. Whether you choose to find an advisor or go the robo-advisor route, there's no time like 2017 to get started;) 

Where do you guys sit on resolutions, are they must-haves or do you skip the task? And what about your finances, anything you are working towards in 2017? Share your progress in the comments below, and best wishes for the upcoming year!

2017 Financial Resolutions that are Worth Making