I was born in 1979 – a year that places me at the tail-end of Generation X but still makes me cool enough to give advice to Millennials about investing. My mom worked in a bank and encouraged me at an early age to save and invest. I started investing in mutual funds at 18 and, a few years later once I had $25,000 invested, took mom’s advice again and opened a self-directed RRSP account at TD. That’s where my DIY investing journey began, and I haven’t looked back.
Millennials came of age during the global financial crisis. They watched as their parents lost half their retirement savings when the stock market crashed in 2008. Couple that with historically low interest rates and it’s not surprising to hear that Millennials are weary of investing and unsure where to park their savings.
Indeed, TD recently issued a report, which found that 36 percent of Millennials don’t know if it’s the right time to invest, while 22 percent say it’s definitely not the time. Furthermore, 37 percent say they don’t invest at all.
All of these misconceptions lead to analysis paralysis – over-thinking a situation so much that a decision or action is never taken.
I know the feeling. I sold my mutual funds and opened a self-directed account shortly after the great stock market crash; when fear was very much still heightened and markets as volatile as ever. Looking back it was a great time to invest, but at the time I was scared that I made a huge mistake.
I learned to ignore short-term volatility and realized that the long-term direction of the stock market always points up. That means starting an automated savings plan and staying invested in good times and bad. Seven years after I started DIY investing I’ve got a fairly good grasp of my temperament and how to tune out market noise and stick to my plan.
My advice to Millennials who are on the fence about investing:
1. Get started
Nearly half of Canadian Millennials surveyed by TD who don’t currently participate in self-directed investing admit that it’s because they don’t believe they have enough money.
Believe me, I understand there are a million financial priorities competing for your hard-earned dollars. But everyone, and I mean everyone, can scrape together a small amount to put into savings.
Calvin MacInnis, senior vice-president at TD Direct Investing, says the first step to investing is simply to start, regardless of how much capital you have.
“With time on your side, a long investment horizon can help mitigate the risks of market volatility, and you also reap the benefit of compound growth and the prospect of multiplying returns,” he said.
You know the saying: the best time to plant an oak tree was 20 years ago. The second best time is now.
2. Put your money to work
It’s not enough to set-up automatic contributions to your retirement plan. If that money just sits in cash or a high-interest savings account, you’re missing out on the opportunity to participate in stock market growth that can compound and literally pay dividends for decades.
Paralyzed by all the different options available to a DIY investor? You don’t need an MBA in finance to put your money to work. TD Direct Investing’s WebBroker platform, for example, features a range of videos, webinars and seminars to help new and seasoned investors make informed decisions when managing their portfolios.
Related: My review of TD Direct Investing’s WebBroker platform
When in doubt, keep it simple. Whether it’s a portfolio of ETFs, e-Series funds, or dividend payers, find the investing approach that works for you and stick to a simple formula each time you add money.
3. Get comfortable
When it comes to investing, there are many benefits to being in the driver’s seat and steering the direction of your financial future. However, despite having easy access to technology, 24 per cent of Canadian Millennials surveyed who don’t participate in self-directed investing think it’s confusing to navigate online investing technologies.
That makes sense. If you’re not comfortable going online, moving your money around, and making a trade, DIY investing is going to be a challenge.
“Look for a platform that is user-friendly, intuitive and includes educational resources to help get you started, especially when you’re looking to place your first trade,” said Mr. MacInnis.
TD recently upgraded its WebBroker platform and not only is the new design much easier to navigate; it also offers useful information when it comes to tracking the performance of your investments, including capital gains and losses, dividends, and interest.
Final thoughts
Becoming a DIY investor has been empowering and it has allowed me to take more control of my finances, lower my investing costs, and help me understand who I am as an investor.
Along the way I changed strategies – moving away from picking individual stocks and instead adopting a two-ETF investing solution. My self-directed retirement portfolio has grown from $25,000 to $130,000.
It’s been a great ride, but I wouldn’t be this far along had I not started saving early, put my savings to work in the stock market, and get comfortable with both my investment platform and investing approach.
Millennials, what are you waiting for?
Please note this post has been brought to you in partnership with TD, all thoughts and opinions are my own.
Two decades ago, Thomas Stanley and William Danko set out to interview wealthy people for their best-selling book The Millionaire Next Door. They started out in the affluent neighbourhoods on streets dotted with extravagant homes with luxury vehicles parked out front and in-ground swimming pools in the backyards. They were shocked to find out that the people living in these homes were not wealthy at all. Many of these upscale homes had huge mortgages. The luxury cars were leased and, while the occupants had high salaries, they had very little net worth. They only seemed wealthy.
Instead, they found millionaires in modest homes in reasonably priced neighbourhoods, working and living next door to people who have a fraction of their wealth. They were living well below their means and not calling attention to themselves. They didn’t have the big-spending lifestyle most of us associate with rich people.
To be clear, for this purpose a wealthy, or high net worth, individual is described as someone who has at least $1 million in investable assets that is not inherited. These assets do not include their home or cottage.
Also not included are the ultra-high-net-worth, super wealthy individuals with a bankroll of more than $100 million who actually represent only a small minority of Canadians.
The road to riches
What can the average Canadian learn from the habits of the wealthy? Danko and Stanley found these factors common to wealthy people:
1. They live well below their means
When I first read this book years ago I thought – what a bunch of cheapskates with their Timex watches, $50 suits, and 10-year-old Ford trucks! If I had that kind of money, I’d at least upgrade a little. I’ve known a few people who had a large amount of assets and spent hardly anything, ultimately leaving their wealth to relatives, and often distant ones at that.
I understand now that the millionaires mentioned do tend to be frugal, but they enjoy luxuries that are meaningful to them, and only once they are well on the road to security and financial freedom.
2. They chose the right occupation
Many are small business owners or entrepreneurs, but you don’t have to own a business to get into this circle. Often they are hard-working, well-educated, middle-to-high income earners.
I’m not suggesting you choose a career primarily for the high salary. But, it’s obvious that if a person is educated and trained in some sort of profession, they will do much better than say, a cashier or shipper-receiver.
3. They have a good marriage
Dual incomes enable couples to get ahead financially much more quickly. However, even more important are spouses who have similar values and goals and are willing to resolve any differences and work together in building their wealth.
There is no quicker way to lose half the assets of a household than to go through a divorce.
4. They are skillful in targeting opportunities
People shouldn’t worry about the doom and gloom reporting on the news and things they can’t control. Instead, have a long term view of investing and don’t let emotions sway your decisions. Have cash available to buy when markets are down and to take advantage of any bargain opportunities.
Start saving and investing in your early years to take advantage of compounding and reinvested dividends.
Pay less for purchases by shopping for bargains and learn to negotiate. Avoid high interest credit card debt. Use smart tax reduction strategies.
Allocate your time, energy, and money efficiently, in ways conducive to building your wealth.
5. Their adult children are economically self-sufficient
Children are taught money management at an early age and encouraged to enrol in secondary education. As adults, they don’t ask their parents for money or bail-outs or help with the bills.
Final thoughts
Danko claims that it’s really about buckling down and living on less.
“How in the world can you be an investor and let compounding work for you if you are not a saver? And how can you be a saver if you are in debt? Many people who are strapped with debt are looking for a magic bullet, but continue the free-spending ways they have become accustomed to. Live on 80% of what you make, and save and invest 20%. Let the time value of money work for you.”
Calculate how much money you will earn over your working life. Most people will earn well over a million dollars in their lifetime, but very few will become millionaires.
Accumulating wealth takes discipline and hard work.
We all want a sense of long-term security and peace of mind as well as the comfortable lifestyle that wealth provides.
Saving diligently, being frugal, setting aside a portion of your income for the future and investing wisely are the strategies to becoming the millionaire next door.
Do you think you live next door to a millionaire? Or, is it you?
I’m a big believer in having multiple streams of income. A side-hustle can help you reach your financial goals faster and fuel your entrepreneurial spirit. Do what you love, on the side, and you can strike the perfect balance between entrepreneurship and a steady paycheque.
When I left my job in the busy hospitality industry I was putting in 60+ hours a week at work, plus spending time on various local boards and committees. After a decade I needed a change. So I moved to the public sector where the hours are much more flexible and I’m home from work before 5:00pm every night.
But instead of spending my ample free time on the couch watching television (or wasting it on Facebook), I turned my passion for personal finance and investing into a second income stream.
How my side-hustle was born
It all started the year our first child was born. After she settled into a solid sleep routine I found I had nothing to do in the evenings after 7:00pm. I started reading financial blogs like Million Dollar Journey and soon realized that instead of consuming content all night long I could be creating my own.
Most personal finance blogs had a similar theme: 30-something guys making six-figures a year looking to save and invest their way to financial independence. I wanted something different to stand out from the pack so I talked to my mom, a former financial advisor with one of the big banks, about a tag-team approach to the blog.
Boomer & Echo was launched a few months later. We split the writing responsibilities and managed to publish five articles a week for two years. Within a year-and-a-half the blog had 100,000 page views per month and earned several thousand dollars per month in advertising revenue. The extra income allowed my wife to stay home full time to look after our two kids.
There’s a reason it’s called a side-hustle and not a side-hobby. Running a profitable blog requires some business savvy. It takes time and effort to write consistently every week, not to mention promoting and networking with other financial bloggers, journalists, and advertisers.
Since then I’ve started another blog – Rewards Cards Canada – and landed a column at the Toronto Star. My mom and I even launched our own fee-only financial planning business.
My side-hustle now brings in almost as much income as my day job. The best part is that I can do all of this during the evenings and on weekends and still have plenty of spare time to play with my kids, go out with my wife, or stay home and watch Netflix.
Other ways to hustle
A personal finance blog is just one example of turning your passion into a profitable side business. What are some other ways?
A friend has his own landscaping and snow removal business in addition to his full time job. It’s grown so big that he’s had to hire two employees to keep up with demand.
A local entrepreneur started his own DJ business and has been booked solid for weddings and Christmas parties for years. His taste for entrepreneurship didn’t stop there, as he started a Booster Juice franchise a few years ago and expanded to five locations.
Our neighbour rents out her basement to help pay off the mortgage faster.
I also discovered that several people I work with have their own side-hustles. Here’s what some of them are doing:
- Photographer
- Promotional items (sourcing pens, t-shirts and other promotional items for your business)
- Mortgage broker
- Freelance writing for local magazines and newspapers
- Content creation for local websites
- Web design for local businesses
- Bartender
The point is there are plenty of ways to make more money outside of a traditional 9-to-5.
Final thoughts
Doing what you love full-time might not pay the bills. That’s why doing what you love on the side can fuel your passion and put some extra money in your pocket.
Can you turn your passion into a money-making side-hustle?