When it comes to trimming the budget, most people start with line items like food and entertainment. Line items like insurance, which can account for a sizeable percentage, can often go overlooked. Since insurance renewals only come once a year, it’s easy to be lazy and to just renew with same provider. Sticking to the status quo can be costly. Here are a few lessons learned that have helped me cut my insurance premiums down.
In highschool, Emily’s economics class played a game where each student was given an imaginary sum of money to invest in a virtual stock market stimulation. The purpose of the game was to teach the students about investing and money management through trading stocks. The student with the largest equity in their portfolio at the end of the game was pronounced the winner. Most of the class chose their investment portfolios at random and hoped for the best. In the end, the winner appeared to have won through luck and did not display a higher aptitude in investing than the other students. Through playing the game, Emily came to associate stock trading with investing.
It was only later that she learned that there are two approaches to investing: active and passive. The first step to investing is to decide on which rabbit hole to go down. Active investing offers the possibility beat the market with the opportunity to limit losses. Passive investing offers the probability of higher market returns over the long term. While the prospect of the above-market returns potentially achieved through active management is tempting- it would mean reaching our financial goals earlier- there are four reasons as to why I’ve decided not to pursue active investing.
Financial literacy month has been pretty successful so far in my books. I’ve been forced to sit down and take a look at a few things that I haven’t given enough consideration to. Last week we took a look at the Tax-Free Savings Account. This week, I’m going to be trying to decode the letters behind the RRSP.
A few years ago, my parents urged me to read a book on personal finance: The Wealthy Barber. The book would teach me about money, they said. I wasn’t interested; as far as I was concerned, I wasn’t making money at the time and didn’t have any to save much less invest. RRSPs, RRIFs, RESPs and GICs were just a jumble of alphabet soup sloshing around in a bowl at the back of my mind. I told my parents I’d figure it out when I needed to. Well, that day came and went a while ago. Told you so’s aside, I do wish that I had gotten my sorry behind in gear and read the book a little earlier.
In the spirit of financial literacy month (seems like there’s a month for everything doesn’t it?) in Canada, let’s take a step back and cover some things that may not seem interesting but will be useful when that moment of reckoning comes. With fresh start and a clean slate, who knows, maybe we’ll learn a new thing or two.