9 Tactics for the Young Investor

Before getting down to tactics you’ll use to solidify your financial future, remember that many are in difficult financial circumstances or make financial decisions that threaten their long-term prosperity.  More than eighty percent of folks believe young people are ill-prepared to manage their finances when they enter the workforce and 85% believe that financial management skills should have been taught in schools to help solve this problem.  Clearly, people want financial literacy education for our youth but rising debt and insufficient retirement savings highlight a need for help at all ages.  We’re hoping to be part of the solution, Do Not Wait! to start saving for retirement.

1- Saving

Don’t put the cart before the horse, above all else: start to save some money.  The Wealthy Barber suggests to pay yourself first, the day your pay is deposit, move an amount to a savings account.  A preauthorized savings plan transfer will help you develop the discipline you need to put some cash aside.

2- Debt Reduction

Whether you like it or not, you most likely have some debt.  It could be student loans, car payments or a mortgage.  Match your debts to assets, long term debt such as a mortgage or subsidized loans (such as government student loans) should be amortized over the long term.  Attack consumption debt like credit cards and lines of credit.  Keep track of interest paid per month, remember you have nothing to show for this money spent.  The less you pay in debt interest, the more you can save and invest for your future.

3- RRSP

Less than half of younger Canadians, aged 18 to 34, have yet to start saving for retirement.  I hope you are the exception to the rule.  If you need some convincing, take a look at our Top 10 Reasons to Save for Your Retirement.

4- Leveraging

If you are the impatient sort or follow the credo that the fastest path to getting rich includes using other people’s money, this is your ticket.  Borrowing money to invest is a way to multiply to gains, but comes with risk.  Remember that if your investment lose money, you are still responsible to pay back the debt.  So, investor Be Aware!

5- DRIP

Be sure that you take advantage of this feature when available in your investment account.  What is it you ask?  Dividend Re-Investment Plan: this will ensure that the revenue generated by your investments is used to purchase additional units/shares with no transaction costs.  This is key to being fully invested while reducing fees.

6- RESP

If you live in Canada and have a child, take advantage of up to $500 in grants per year.  For more info, take a look at 4 Tax Effective Ways to Invest in Canada, Part II.

7- TFSA

The Tax Free Savings Account can help you make the most of the little interest revenue you are making these days.  As of January 2011, you can invest up to $15K and any revenue generated within the account will never be subject to personal income tax.

8- Disability Insurance

Make sure that you cover your assets by protecting your ability to make a buck.  A disability could jeopardize your savings and your debt payments.  If you own a house and/or have a family that counts on your income, meet with an insurance agent to determine how to protect yourself.

9- Share Your Favorite

Without a doubt, you have used tactics other than what I have listed here.  Comment on the post, we’ll be happy to update our list.

Author: Robert

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