Bonjour! This week I’m fortunate to be writing from the city of lights, Paris. It’s one of my favorite city in Europe as it offers so much culture, food, history, and wonderful people. While my French speaking skills are nothing to be proud of I am extremely grateful to all the people I’ve met here and glad to see everyone is in good spirit.
It’s been a couple of months since I started the blog and I’ve tried to avoid a top 10 creating wealth young list. But I’m in Paris and feel now is a good time for such a list after a couple of months of blogging. Perhaps it’s the champagne that’s the real inspiration. In any case, I do think now is a good time to do a quick recap of my top 17 tips to creating wealth young and I’m told I only have two hours to write this according to my wife. The tips are not in any particular order of importance.
1. Pay yourself first
Most people run into financial trouble simply because they don’t pay themselves first. I mean they believe they do by buying their daily Starbucks or paying their bill every month but that’s paying others first. You have to put yourself first on any payee list. The act of paying yourself first is symbolic and changes your thought process to understand you are the most important person your money should be working for first.
2. It’s all about net income, not gross income
If you make $35K per year, you do not take home $35K per year after taxes and any benefits you may pay for. Look at what you actual take home each month and budget your lifestyle far below your net pay. If you work a commission or get bonus/overtime pay, budget based on 80% of your expected commission or your base salary only. Overtime isn’t your pay hence the name over time.
3. Saving is what creates wealth
In order to create wealth, you need to save. If you do not have any savings you can’t really create wealth as you have no capital to take advantage of opportunities. You need excess money in order to start creating wealth. Save as much as you can and eventually work towards putting away more than 10% of your income away each year.
4. Earlier you start the better your chances of success
Things are much easier to accomplish when you provide enough time to accomplish the task. When it comes to investment and good financial planning, the earlier you start the easier things are. Money requires time to grow and it’s important you don’t waste precious time. Start putting your savings to good use like yesterday!
5. Inflation needs to be addressed and constantly defended against
$1 today isn’t $1 tomorrow. It’s important to constantly defend against the invisible thief (inflation). Failure to properly ensure your money is addressing inflation can be the difference between a decent retirement and working well into your 70s because you have to.
6. Set up your accounts to be tax efficient
They say the only thing guaranteed in life is taxes and death. This is less about trying to pay as little tax as possible because I think ultimately if you’re a global citizen it’s important we all pay our fair share. However, the tip is more about ensuring you set up your accounts to be tax efficient and ensuring you’re taking advantage of tax planning strategy available, such as the TFSA account.
7. Keep an eye on all your fees, particularly those you can’t see
I have no problem paying for things but I expect results when I pay for something. Most people do a terrible job at keeping track of their fees. They pay for multiple accounts they don’t use, have investments with high fees that do not deliver the returns promised. Failing to keep your fees low will make someone rich, it just won’t be you.
8. Protect your human capital
The most important asset is not your job or your house. It’s you! I can’t stress how important it is to protect yourself. Protecting your human capital shouldn’t just only a physical thing like eating right or going to the gym every day but should also include mental well-being.
You have to take care of you mental health. That means if you’re going through a difficult time in your life you need to reach out to family and friends. Mental illness doesn’t need to be suffered in isolation just because people can’t see its scars. Some of the toughest battles we face are in our heads. Protect your mental well-being.
And lastly, do the essentials things to protect your income and family. Don’t buy a house if you don’t have life insurance policy in place or home insurance. Look into disability insurance because chances are you will get hurt at some point. Is my point sinking in? You are the most important asset and you need to protect your human capital because without you there is no wealth creation or worse income for those who depend on you.
9. It comes down to lifestyle
Yes, it’s less about the right job or right business and more about focusing on getting the right lifestyle in place. I once heard someone say no one really wants to be a millionaire, rather we all just want the experience the lifestyle of a millionaire. I couldn’t agree more. Happiness comes in understanding what type of lifestyle you want to live. What do you really enjoy doing? What type of life do you want to live? Once you’ve figured that out, you do everything within your power to set yourself up for that lifestyle while ensuring it can be maintained over the long haul.
10. Time is the most valuable commodity you have
Time is money. As cliche as it sounds, it’s absolutely true. Time is the most precious commodity we have but yet we often trade or sell it well below its market value. We can’t buy past time back but we certainly can look to create more time to spend with our kids, spouses, extended family, friends, and in my case more wine drinking (don’t judge, we are out of champagne now).
The point I’m trying to make is simple. Understood time is an extremely valuable commodity and before you decide to trade it for more money, understand once it’s gone you can’t buy time back. Focus on creating more time for yourself to do the things you love and spend time with those that matter to you.
11. Globalization shouldn’t be feared, rather it should be embraced
Who says you have to be live and retire in the same country you were born in? Globalization has made retirement and wealth creation easier, in my opinion. Who says outsourcing is only for businesses or ultra-wealthy? Learn to plan and look at things from a global standpoint.
If you only focus on what’s in your backyard you might be missing out on huge opportunities. The reality is we are moving into a boarder-less world with the help of technology, and while some continue to fight this change, my advice is you stop fighting and look for the potential opportunities it offers you and your family.
12. Some use technology to improve their lives while others are used by technology
Technology has done so much to improve our lives. But like anything in life, there’s always two sides to every story. Some people utilize it to improve and enhance their lives while others use it to improve their selfie pictures. I’m not passing judgment (as I take selfies too), rather you need to be mindful of if you’re using technology or if it’s using you. Avoid over-consumption of technology.
Last point on technology. As more of our lives go online you need to be mindful of your online brand presence. There really is no private online forum because once it’s online it’s on there forever. If that’s the case, make life easier for yourself by not destroying your biggest assets, you. Avoid destroying your brand before you even have a chance to build it.
13. Be aware of who’s in your inner circle
Friends can have such a huge impact on your finance. If that’s the case, you need to be selective about who you hang out with. Have a healthy mix of friends with different points of views. Surround yourself with people who understand life isn’t always perfect and things don’t always work out the way they want, but they don’t let the difficulties stop them from living today. Avoid friends who cost you money or worse actually take money away from you.
14. Challenge your values to validate them
Values are not facts but we assume our values are facts. That can be a problem particularly if you start to believe the values you hold to be absolute and the only values that can be true and acceptable. Look, I don’t know what your values are but I want to stress it’s important you actually challenge your value. It’s said a great debater is one who can not only argue his or her belief on a subject matter but also argue a position that doesn’t fit with his or her belief system.
Values are the same to me, being able to see the potential weakness in your values doesn’t mean you have to abandon them, it simply means you are able to recognize the potential weakness with your values and how that might influence your decisions.
15. Don’t spend too much on post-secondary but don’t spend nothing either
Education is one of the biggest investment you can make in yourself. But the increasing cost of post-secondary school is making wealth creation for young people increasingly difficult. Debt is a huge barrier to creating wealth as we continue to move through the digital revolution.
Things are changing and you also have to rethink education and the cost associated with getting an education. Look for unique solutions to reduce your school expenses. Most importantly, work while in university to pay off your student loan.
16. Aim to leave this world in a better place
Take some time and do some good. Start small by treating those around you well. Make that phone call to that uncle you’ve never talked to. Reach out to that family member that you haven’t spoken to before.
Progress to friends and eventually move to helping those you do not know but simply know you have the means to help. Charity and helping others is like an addiction. There is no better feeling than knowing you’re making a real difference is someone’s life.
But I must warn you. Charity can also be frustrating. There’s a lot of hurt in this world and please understand you can’t fix everything. You can only do what your capable of doing but don’t let that stop you from setting high goals.
Often, the easiest form of charity is giving your time to hear someone and let them know they are valued.
17. Success is what you make it
Everything I’ve said really comes down to this final tip. So many of us are chasing other people’s dream or expectation of us. We are not comfortable in our own weakness and imperfection. We are obsessed with excellence to the point being normal as a failure.
Look, success is what you make it. As you get older you tend to realize you really don’t need to impress anyone. Do yourself a favor and start thinking that way now. At some point, you have to stop living for others and start to live for yourself. This life is far too short to spend it trying to live up to other people’s expectations of you. Take success and wealth creation into your own hands and understand success and wealth is what you make it.