One of the most important aspect of living is earning an income, for most of the population we leave our formal high school schooling (if you are older think about the personal finance course you had – likely very few if any) our dreams and aspirations are to gain income (job or start a business) to live the lifestyle we believe we should be doing. There is nothing wrong with our dreams – our economy is based on it. Unfortunately many people become skilled in earning a living but not in spending the money they earn. This is great of marketers, sellers of stuff and givers of credit. It is not so great for family finances and relationships. What are some advice?

1. Live off 80% or 90% of your after tax income. The suggestion was 80% but it generally takes a few years or 90% is more realistic. However you get paid – weekly, bi-weekly or monthly and you can only spend 80% of what you make on living. This includes rent or mortgage including the bills – hydro, heat, water, etc. car including payments and operating the vehicle, and food – consumed at home and outside. The other stuff you buy. If you can only spend 80% that usually means some where along the lines you will have to say no to things. If you have not saved for it, you can not buy it. Think of your parents or grandparents before credit cards and easy credit was available.
2. Know your cash flow and live off it.
3. Credit cards are a wonderful additional to your life – if you can not pay the balance off each month, then you can not afford to buy. Wait. Credit card companies (MasterCard and Visa stock are up this year) make their money off of the interest people pay. At 18% plus interest doubles in 4 years. (interest rate divide by 72) if someone pays the minimum. If you buy on credit, you are paying more for what you have bought. Remember if you are carrying an outstanding balance on a credit card by paying it off, you save money.
4. Everyone needs an emergency savings account of $1,000. If you dip into the account, your task the next month is to put the money back. After you have the $1,000 savings account, then you save for the next items in your life.
5. Ideally, you will have money to invest, which is good. Think of methods to use compound interest rates for you, rather than against you. The magic of compound interest rates is by doing a very little your money over time gets bigger and bigger and bigger…. this allows you to have many options in your life.
6. Paying lower fees saves you money unless you get a higher return than the lower fee. In you look at an ETF which has a low fee of 1% or less and it makes the same return as an active managed fund which pays a fee of 2.5% or more, then by buying the lower fee, you made more money for yourself.
7. Buying a house – ideally you will buy what you need and not be too influenced by your neighbors. If you your neighbors go away on vacations twice a year (not necessarily to see family) you will want to do the same thing. What you do not know is they maybe in debt to do it. If you neighbors are renovating their kitchen you may want to do it – even if you really do not need to.

Linking to dividend paying stocks, the great thing about them is due to the dividend you get compound interest working for you along with buying a stock which has a good opportunity to move higher. The reason is to pay the dividend on a consistent level the company has to be profitable and profitable stocks trade at higher multiples than non profitable stocks as well as if the market goes down, profitable stocks come back faster. In addition, one of the rules of investing is try not to lose money, if a profitable company becomes less profitable, you know it is time to find alternatives.

There are more questions than answers, till the next time – to raising questions.