My Best Financial Tip


A couple weeks ago, I promised that I was going to share my best financial tip on November 15th. Well, today’s the day. This initiative is part of a contest for Canadian bloggers to help promote financial literacy.

While I realize that my best financial tip need not be a distillation of all my financial wisdom (real or imagined) into one pithy slogan, I still felt the burden of trying to ‘make it count’. Why? Well, I’m claiming that it’s my best financial tip. If I die young and somebody’s reading this site, I don’t want them to see “SAVE AT LEAST 20% OF YOUR INCOME!” as the microcosm of what I offered to readers. And so, without further ado…

My best financial tip is:

Think critically.

It’s a short tip, but it’s packed with a lot of potential for improving your financial life.

First off, thinking critically isn’t about second-guessing past decisions. Learn from past decisions — hindsight is 20/20 — to avoid the same mistakes in the future. If you’ve made an error, stop repeating it. Personal example: gambling on penny stocks is stupid. Dividend investing or index investing are the only two smart and tax-efficient ways to invest in stock markets.

Before you make major decisions, question your assumptions. I heard this endlessly in managerial skills-type courses at University. More recently, and on the topic of personal finance, I heard it from Glenn Cooke at CPFC 2012. Jumping to conclusions helped humans survive in prehistoric times — quick decisions about threats and opportunities were essential. Nowadays, this is antithetical to personal finance wisdom. While reading Glenn’s series on Permanent Life Insurance, it was clear to me that an assumption I held as a definitive truth (“only term life insurance is acceptable”) is not universal (no pun intended). Sure, if everyone adhered to the “GET TERM” principle we’d be further ahead because everybody would be insured, but that doesn’t mean the outcome would be optimal.

Trust facts over emotion. Emotions cloud a lot of decisions. The proliferation of marketing and post-modern relativism (the idea that an opinion is valid in and of itself) has led to passive ingestion of disinformation and the acceptance of some pretty terrible ideas — financial and otherwise. Bank financial advisors, despite all of their advertising and posturing, aren’t worth the various hidden commissions they charge. Another example of people destroying their lives by trusting emotions over sober analysis: the Canadian housing bubble.

As a person grows up, their brain develops. During the teenage years, one hallmark of development is the ability to consider possible consequences. So if you’re in your 20s or beyond, start using this capacity to consider more than just the ideal outcome. Optimism is a synonym for naivety. A risky investment can plummet just as easily as it could gain. Then again, you’ll miss out on a lot of opportunities if you’re negative all the time. I’m not telling you to pull out your Six Thinking Hats (even if studies show this exercise aids decision-making), but start considering more possibilities while maintaining skepticism.

If you think critically about every major financial decision in your life, you will be a lot further ahead than if you don’t.

Bonus Best Financial Tips

There are also two lovely ladies who write for TF regularly (Adina J. and Sara). So I shot them an email to ask for their best financial tips, to add them to this post. I was all like…

my best financial tip - "Sup ladies?"

And they responded with some awesome “best money tips”.

Adina’s best financial tip:

Always ask yourself: “What would GV-O do?” except when it comes to designer handbags. For those, buy used, save 80% of the retail price; eat your cake and save it too.

Sara’s best financial tip:

Create your budget based on your pay schedule and not your bill schedules. It’s easier to keep track of how much you can spend, and you won’t be left with too much month at the end of your money.

There’s the most succinct financial wisdom you could ever hope to find on a site as verbose as TimelessFinance. This website, authored by a guy who struggles to convey just one nugget of wisdom in less than 1000 words, has now managed to publish three solid tips in about 750.

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14 Comments… Share your views

  1. When most people zig (selling their stocks when bad news hits) you need to zag (buy at the bottom). Great summary Joe, showing that many experts are misinformed and/or regurgitate data from others.

    I learned this in OAC ( old Grade 13 in Ontario) in my Science in Society class (don’t always listen to experts).

    • Absolutely. I had a third year course at Trent called the “Politics of Budgeting”. I’ve never seen the pretentious, false aura of economic prognosticators a.k.a. “experts”, so completely shattered. Looking at their predictions in retrospect (rarely does anybody pick up articles from years ago and say “hey, the reporter quoted these economists verbatim, let’s see how their GDP growth prediction actually panned out!”) it became clear that their predictions weren’t much better than divining of the entrails.

  2. Hey Joe, found you via Canada Life Insurance, but feel like I know you already as Derek (freeat33 and my Hubby) speaks highly of you. If this were facebook, I`d like your post. My tip today was to be bad for the economy. Hope I don`t die young because I don`t want that as my legacy, but it seemed fitting considering Canadian`s current struggle with debt.

    • Thanks! Derek’s a great guy and it’s nice to hear positive feedback.

      That’s an awesome tip. I was afraid I would be bored reading the tips, but they’re really original and unexpected. Feel free to like TF’s FB group and I’ll reciprocate! Unlike the site’s other metrics, the FB “likes” are very stagnant.

  3. Spend less. Make more.

    I’m so original! Good tip Joe. It can be applied to so many things in life.

    I’ve been frugal for 2012 and I’m sick of it. To that end, I’m about to open my purse strings and spend on me the next few months. Do me a solid and come up with a post on how to spend your money to maximize happiness. I’ve now read 3 books on this subject and watched about 10 hours of Ted Talks, countless blog and newspaper articles. I want your take, it will probably be better than all of those.

    • Key problem: I love certain things that are completely unappealing to the large majority of society, e.g. Halo 4. My belief on spending is heavily rooted in economics (specifically marginal utility analysis) and one’s own personal desires — in sum, the optimal pursuit of what you personally want.

      It’s easy to talk about this in a theoretical sense but applying it to the lives of others is pricklier. Some people really do derive enough happiness from laying on a beach to justify expensive trips; I do not. Some people derive happiness from the prestige of their car, but I think the majority of these people are mistaken — it’s a very costly way to enjoy “prestige”, whereas the marginal utility of JUST a couple thousand dollars a year on a car (a junker) creates huge convenience/enjoyment (not for everybody, though; when I went to university I wouldn’t have benefited from a car almost at all).

      Nevertheless, I appreciate the vote of confidence. Great topic idea, maybe I should do something like that closer to Xmas. And perhaps it should be more about stuff that I think would improve my life significantly enough to justify the purchase price. And I could include at least one or two other peoples’ thoughts on the matter like I did today.

  4. I chuckled at Adina’s tip :)

    I really agree with Sara’s tip too. I budget on a monthly basis since I’m paid monthly and then I set aside money each budget cycle for the more infrequent bills.

    I think my best financial tip is to keep track of the irregular expenses, not just bills, and be realistic with your estimates.

    I bought a new laptop for $1,700 last fall. My budget had originally been $500, so that extra $1,200 meant I saved $1,200 less that month. Now I’m setting aside enough each month to buy a new laptop in 4 years at $1,700, not $500. Every time I have a “budget buster”, I add a line item for that in my budget. It’s made my budget spreadsheet quite large, but it so nice to know that all the money I need for something is there when it comes due. Non-monthly expenses account for over 30% of my budget each month.

    Some people prefer to put the money for planned expenses in a separate savings account and then pull the money out when it’s time to pay the bill (that’s what my parents do!), but I prefer to just keep ALL expenses in one budget spreadsheet. It’s kind of weird since not every line item gets money spent against it each month, but it works out well overall. And then I totally forget about the money accumulating to cover something!

    • The separate savings account is a really funny phenomenon. I agree with your approach. Online banks like ING sometimes encourage people to keep separate accounts for each goal. Anybody who’s taken an accounting course would know they should just keep their accounts on paper and divide up the cash among distinct actual accounts only insofar as it’s necessary (e.g. taxable vs TFSA savings).

      • Why would an accounting course tell you that? Do you earn less interest separating them out?

        • Using a complex web of different accounts is more conducive to ‘cash accounting’. Accrual accounting is the more modern system. Although in PerFi people use cash accounting, it seems kooky; tracking it on paper allows for instant realignment of planned spending rather than transferring a few dollars from one account to another times 5 or setting up a new account or closing one.

  5. Can’t agree more with the ‘critical thinking’ tip – and critical in all possible senses. From ‘make your life (and finances) a continuous learning’ to ‘be aware of what you are doing with and without money’. Not so sure about trusting fact over emotion; it seem to me this is not possible since facts are real (these are our interpretation of our environment that have very real consequences) and emotion pervades all this.

    • Thanks for stopping by!

      Emotion absolutely clouds judgment. Whenever I’ve made a money mistake, it’s been because I either lacked the facts or failed to properly consider them. I’ve never made a money mistake and thought “dang, I shouldn’t have looked at all those facts so thoroughly.” Meanwhile I’ve cursed my human tendency to jump to a conclusion based on a gut feeling.

  6. Joewood, your some financial tips are good and useful as well. I am agree with tips of Adina and sara. However not agree with “Gambling on penny stocks is stupid”. There is a huge list of traders who invest in penny stocks.

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