Ten Days To Build Your Wealth

If you are just starting out or have accumulated cash after years of saving and are wondering what to do, this 10-day routine-building schedule could be helpful. It’s what I would do if I were looking to start investing today. Please note that I am not a financial advisor. Make sure you discuss any changes to your portfolio with your Financial Advisor.

Day One

Open a TFSA, Tax Free Savings Account. Ensure it allows you to purchase shares of companies and has a no-fee policy. It should cost you nothing to keep the account and nothing to make a trade. In the USA, this may be a Roth IRA; in the United Kingdom, it is an Individual Savings Account.

Day Two

Automatically transfer from $25 or up to 10% of your take-home income into this account every time you get paid. As an 18-year-old, it may come from a part-time job. As a senior, it arrives each time you receive your pension. As a working person, it comes every payday. If 10% seems impossible, consider 5% or even the $25 minimum. The key is to get started.

Day Three

Find ways to increase your income. Take on a few extra hours of work per week, or a second part-time job. All those funds should be deposited into your TFSA until you reach the annual maximum.

Day Four

Never buy a car on credit. Buy what you can afford, or consider using public transit or walking instead. A beater car is fine if it is roadworthy.  Never buy a new car. When you can afford one and if you need one, consider buying a 2-3 3-year-old car with low mileage. New cars and car debt suck the life out of your wealth plan. Educate yourself. Subscribe to free newsletters like mine, and regularly use the Ask Hank app. My podcast is also free. You need to understand what value investing is all about and then apply those lessons. On Day Four, pledge to avoid the common car mistake of borrowing for it and work to educate yourself on value investing.

Day Five

Do an emotional check. When it comes to investing, what happens to your emotions? You should leave your cash alone for at least one year without making any changes. When you start your TFSA, let the money accumulate for at least one year. If you listen to the junk on TV, don’t act based on it. Avoid temptation. Be calm and let your funds accumulate.

Day Six

Understand the magic of compounding. Begin entering ideas into this investment calculator to explore the benefits of long-term compounding. If you invest $100 a month at 8% return for 40 years, what would you have? Or $250 a month at 8% for 20 years and so on. Look at some paper stocks you understand, but not with real money. Use pretend money and hypothetically invest in five stocks from industries you understand. I focus on Real Estate and Health Care only. It’s all I understand.

 Day Seven

Understand Good and Bad Debt. Good debt is where money is borrowed to purchase investment-grade assets that produce more cash flow than the cost of the loan. Investment-grade real estate is one example.  Investing in real estate requires a significant amount of work and education, so consider finding a mentor and starting to learn if this is something you want to pursue. Buying a duplex where you live in half and rent the other can be a wonderful investment with good debt.

Bad Debt is using loans for anything that doesn’t produce a positive cash flow. Buying a car, a TV, taking a trip, or going to dinner and not paying off your credit card balance each month are all examples of bad debt.

Day Eight

Understand Arbitrage. Let’s say your credit union is offering you the chance to borrow $10,000 at 3.5% assuming you qualify for the loan. You also learn that they are offering a 5% return on a 3-year GIC. Let’s assume for a moment that the term of the loan is also 3 years. If you borrow the $10,000 at 3.5% and then take out a GIC at 5% is that a good idea? Well, of course, this form of arbitrage would net you $150/year before taxes or $450 for the three years. There is zero risk as both terms are locked in.

It's important to note that the GIC with the same credit union is risk-free. That note is guaranteed not only by the Credit Union but also by the government. This is an example of Arbitrage. 

Day Nine

Understand Gold and Silver, and consider buying some. You can buy small amounts of gold from banks in Canada to ensure the transactions are legitimate. For as little as $225 today, you can buy a one-gram gold bar from TD Bank. You would only have a very small part of your investments in precious metals, but having some teaches you some very important principles. The concept of inflation, as well as buying an asset that provides no cash flow. 

Day Ten

Buy a cash-flowing asset. It can be as simple as one share of a dividend-paying stock. Find as little as $100 and buy a stock of a company you have researched that pays a secure dividend. It can be a Bank stock or a REIT that you have researched. It’s important that your TFSA does not charge you a fee for stock purchases. Most companies pay dividends quarterly, while some REITs pay them monthly. Continue to build your cash in your TFSA, and consider holding $100, if possible, in a dividend-paying stock. Seeing how this works will motivate you to move forward with your investing. At the end of the first year, you will be set to move forward with your investment plan. Stay tuned as we address that in future newsletters.

From a beginning investor to a retired senior with more assets, these lessons can be helpful. For those with more resources, remember the TFSA has an annual limit. Make sure to research this and avoid over-contributing. If possible, consider contributing at least $500 per month or per pay period, aiming to reach the maximum by year's end.

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