Hitting Life’s Milestones

Three major life milestones happened in the first week of November 2021:

1. I became a first-time home owner 🏠
2. I started a new job at Microsoft HQ 👩🏻‍💻
3. I paid off all of my student loans 🎉

But first, a little history…

My parents are both first generation immigrants—my Mom was a refugee and my Dad was sponsored by his brother. Our middle class family lacked financial education and we even struggled with finances at times throughout my childhood. Although my parents spoiled my brother and I with lots of love, my family never lived in the biggest home or drove the nicest cars out of our friends and family. While there may have been opportunities for them to learn about personal finance, I don’t believe it was top of mind when they were more concerned about learning English, navigating a new culture, and raising their family.

Heck! Even being a first generation Canadian, personal finance wasn’t really top of mind until the end of my university career…

When I got my first job as a Summer Camp Instructor, my parents told me to save my money for a rainy day. But being the rebellious teenager I was, I spent it on food (yes sushi 🍣) and clothes. These bad (or lack of) financial habits stayed with me throughout university, and I made some questionable spending decisions:

• I maxed out my student loans with absolutely no plans on how I would pay it all back (this was a future me’s problem) #Regrets
• When I landed my first internship, I felt like Midas 👸🏻 and blew most of my money going out for meals 1-3 times a day and shopping even more… #Regrets
• With the money I saved up, I somehow spent $10K on my first study abroad in Japan—which was 5 weeks (including 2 weeks of vacation). Let’s just say that I really indulged in the sushi, ramen, and shopping. #NoRegrets
• In my last year of university, I studied abroad in Singapore for 5 months… which cost $20K! #NoRegrets
• On average, my monthly credit card bill was 2K in my later years of university. #Regrets

Evidently, I approached my finances with a #YOLO attitude… and my parents lectured me A LOT about the challenges of making money and saving it for a better future. However at the time, their words fell on deaf ears and a very hungry stomach.

Coming to My Senses

Luckily, I met some great mentors and role models along the way. They sat down with me to chat about personal finance and they encouraged me to start investing because saving wasn’t enough. Although I had no idea where to start, I was inspired by one of my mentors who told me that I could retire before 50 if I started young and did things right 🤯 💸

And so, I started doing more research and learning a little bit more about the world of personal finance… Here are my Top 10 learnings (Note: I am not anywhere close to being a financial advisor, so make sure to do your own due diligence).

Lesson #1: Know Your Credit Score

Fortunately, I knew and lived by the golden rule: always pay off your credit card bill in full. This ensured that I built up an excellent credit score that eventually helped me secure a mortgage for my first home.

I kept track of my credit score every month by using Credit Karma and Borrowell to see reasons why it went up or down. I also learned more about credit utilization and other factors that contributed to a credit score.

Lesson #2: Track Your Net Worth

Since I started working full-time, I decided to track my net worth each month. It came down to a spreadsheet that listed my Assets (e.g. savings and investments) and Liabilities (e.g. student loans).

In January 2020, I started off at -$40K because of my student loans. Every month, I would see my liabilities go down by at least $1K. At the same time, I was also actively investing at least $300 per month into my Questrade or Wealthsimple accounts.

Gradually, I started seeing some returns and it was great to see how my assets vs. liabilities fluctuated month-over-month. There were times where my net worth grew by only 1% and other months where my net worth grew by over 100%.

Lesson #3: Set Some Goals

When I graduated from university in 2020, I was committed to the goal of paying off my student loans within 2 years and stuck to it. This meant setting up monthly auto-payments and making lump sum payments whenever I got rewards or bonuses from work.

Although I thought it was impossible at the time, I also told myself that I would get to $100K net worth by the age of 25. Every month, I would see my net worth grow a bit… but $100K just seemed so far away! But again, I loved a healthy challenge and so I kept saving and investing to eventually reach my goal in a little over a year.

Another goal I had was to buy a home with my Mom, who always dreamed of living in a newer and bigger home (though my Dad didn’t really think it was necessary). Last year, it didn’t make as much sense to upsize because I’d moved across the country for work and my brother also expressed his interest in a career outside of Calgary. However, after seeing Calgary’s real estate boom and being optimistic about the city’s economic future, I decided that buying a home would be both a good investment for the future and an opportunity to make my Mom happy.

Lesson #3: Opt Into RRSPs & ESPPs

Fortunately through work, my employer matched my RRSP contributions. I made sure to max these out because it is essentially free money. Plus, it reduced my taxable income which helped my tax return at the end of the year. By mid-2021, I was close to maxing out my RRSP and was able to use most of the funds towards my home purchase through the First Time Home Buyers’ Plan.

I also opted into the Employee Stock Purchase Plan (ESPP), which automatically withdrew money from my pay checks to purchase Microsoft stocks (which fortunately have been doing well lately). Again, I realize that I am really lucky to have these types of opportunities available to me.

Lesson #4: Invest In Your TFSA (ASAP)

A lot of people create TFSAs and put money in it… but they don’t invest it. I learned that if you just leave the money in your account, nothing will happen. You need to actually invest it to make money, and then the perk is that you withdraw it tax free in the future.

Many, if not all, of my mentors told me to stay away from mutual funds because of the fees and rates which add up over time. Their advice was that if I put in some effort to research the right ETFs to invest in on my own, I would be saving a lot of money over the long run that would otherwise go to the big banks.

Hence, I opted for both robo-advising through Wealthsimple and self-experimenting through Questrade. Wealthsimple was great for making the decisions for me (based on my risk levels) and Questrade offered me the opportunity to poorly imitate Warren Buffet 🧐

Lesson #5: Understand Compound Interest

My mind was blown when I learned about the wonders of compound interest. Here’s a YouTube video and article that explains what a huge difference it will make when you start investing while you’re younger vs. older.

Once you learn about this, you will probably experience the OMG moment and feel like you’re falling behind (just like I did). But remember that the best time that you can get started is right now!

Lesson #7: Make It Easy For Yourself

Instead of doing things manually each month, I chose a set-it-and-forget-it approach:

• For investing: set up monthly auto-contributions from my bank accounts to investment accounts (tip: try to time these after your paydays)
• For credit cards: set up auto-payments from my bank accounts to pay off my credit card balance in full (tip: try to leave a buffer in your account to ensure no bank overdrafts will happen)
• For loans: set up auto-payments from my bank accounts to pay off a chunk of my balance each month (tip: try to leave a buffer in your account to ensure no bank overdrafts will happen)

Lesson #8: Try the IWTYTBR Approach

One of my mentors suggested that I read Ramit Sethi’s I Will Teach You To Be Rich book, which is where I learned about the ideal monthly breakdown of your salary:

• 50% = Fixed Expenses (e.g. rent, mortgage, utilities, insurance, groceries, phone, transportation)
• 20% = Savings & Emergency Fund (3-6 months of fixed expenses just in case)
• 10% = Investments (money that you can set aside for your future and let grow over time)
• 20% = Guilt Free Spending (my favourite bucket… where you can spend on whatever you want)

Although I don’t necessarily follow this to a tee, I still keep it in mind as guidance. The book itself was a great read, as well as Robert Kiyosaki’s Rich Dad, Poor Dad.

Lesson #9: Do Your Research & Due Diligence

Sure, a financial advisor is an expert who can give you formal advice. But at the end of the day, it’s their job to talk about money… which means that some of them may act out of incentive in favour of their employer. Perhaps I haven’t found the right advisor yet, but I feel like they’re always trying to sell me something.

Hence, I try to do a little bit of my own research first and then ask my peers and mentors for their opinions and perspectives. I’m aware that they aren’t formal experts and that my financial future is in my hands at the end of the day. But over time, I strive to build context and knowledge to figure out what’s best for me.

Lesson #10: Talk About Money More

I’m aware that money isn’t the easiest topic to talk about with your friends and family. It can get touchy at times because you don’t want to embarrass yourself or come across the wrong way. However, the more we can talk about our different approaches to money, the more we can learn about it from each other. I’ve started talking about personal finance with some of my friends, but I definitely hope to do it more.

In my relationship, my partner and I are very transparent about our finances and goals for the future. Every month, we share an update on our respective net worths and we occasionally contribute to our joint savings account (though we put a pause on this because we want to max out our individual RRSPs and TFSAs first).

Just get started.

Some of you are likely way ahead of me in this ballgame, while others may feel like they’re already behind. Although I am proud of where I currently stand today compared to where I was last year, I still believe that I could’ve done much more. However, like everything else in life, we learn and grow and get better!

The goal with this blog post is to share some more insights and learnings from my own personal finance journey with those who may not know how to get started. Bottom line: daily habits add up over time. Stay tuned for more posts on this topic and here is to brighter financial futures for all of us 🤑