Experience is the mother of all wisdom, and some say the school of hard-knocks may be the best classroom, even when it comes to our personal finances. Still there are lessons we could have learned earlier, if only someone had taken the time to point them out.
“An advisor pointed out that I was paying almost $100 a month in withdrawal fees every month,” recalls Trixie Mangunpratomo, a 33-year-old Financial Planner with TD Wealth in Toronto. “I wish I had turned to them sooner.” Like Trixie, even the most financially savvy among us can have blind spots that cause us to lose ground on our financial goals. According to a behavioural finance study by TD Wealth1 many of the millennials it surveyed — which included those earning more than $100,000 a year — are choosing to go it alone with their financial plans. The study suggests that those in the 18–34 age group are three times less likely to have a financial plan with an advisor than those who are 55 and up. Only 15% currently have a plan with an advisor.
What’s more, the TD study found this group was less likely to rank high in financial conscientiousness (35%) and more likely to be highly reactive with their money (43%) than their older counterparts. This means they may be less disciplined with their financial habits, and more likely to make impulsive decisions when markets experience volatility. All the more reason millennials may find it useful to have a financial co-pilot, such as an advisor, to help them build confidence about how to invest and stay on track with their goals.
We asked 12 TD Wealth advisors — all under 40 — to share the money lessons they learned the hard way, and why using a financial professional might have helped them save time, money — and in some circumstances, even save face.
Lesson learned: Take care of the money together
"Opposites attract. My husband and I have completely different money styles. Growing up, my family was very careful with what little money we had, while my husband's family didn't have the same financial struggles. I was frugal, and he was freewheeling, and it was frustrating sometimes for both of us. When we bought our first house, I was tired of being the one to take care of the money in our relationship. So we decided I would take a step back and he would be the one who would handle all the bills. Suddenly he was seeing where our money went, and how fast it goes. My husband started to have an appreciation for my inclination to save where possible. Now that I brought him to the table, there is less frustration for both of us. Now as an advisor, I try to get both partners involved when we talk about their goals and their money and help them understand each other's blind spots."
Lesson learned: Use your money to make money
"At elementary school, my brother and I had an allowance of one dollar a week for doing house chores. I would use that dollar to reward myself with candies while my brother saved his. Eventually he had saved enough to buy THE video game console we both desired very much. I would then have to pay him my allowance to play his video games. He saw that I was focused on the here-and-now and immediate gratification, not so much thinking about the future. I learned that if you save your money, not only can you do more, you can make it grow. Unsurprisingly, we are both in finance today."
Lesson learned: A car is not an investment
Financial Planner/Certified Retirement Specialist
"When I was 17, I saved all my money and bought my first car. It was a one-year-old coupe that cost around $20,000. Not only did it depreciate, it was expensive to maintain and insure. I worked two jobs just to afford the car, even though I didn't really need it. I could get around easily on public transportation. Meanwhile, I needed to take out a student loan to afford university. I wish someone had been there to help me realize that my education was something worth investing in, while the car was worth just a third of the price I bought it for three years later. It is something I always keep in mind when I uncover goals and objectives with my clients."
Lesson learned: Your home is an investment
Advisor, Chartered Professional Accountant
St. John, NB
"One of my most important goals was buying a property. I started saving at 19 and worked co-op during university to save up. When I was finally able to afford a down payment, I found an old building with a unit that had been renovated, but the location wasn't so great. I was so focused on buying a home and getting into the market quickly that I probably didn't make the best investment decision. When it came time to sell, I didn't make any money on it. If I had just saved up a little more initially, I could have afforded something that would have been a better investment. An advisor may have been able to assist me in seeing past the excitement of the purchase."
Lesson learned: Your house is also a home
"Our first home was in a convenient spot in the city, near to where we worked. Eventually my husband and I realized we wanted something bigger, and we decided that we would move out to the suburbs to get more home for less money. Financially it made sense, but from a quality-of-life standpoint there was more stress living in a home that was bigger and farther away. We definitely didn't think deeply enough about the lifestyle changes of the move and focused more on the potential investment opportunity. Financially it was a good decision but the commute during the winters are brutal!"
Lesson learned: Don't waste that raise
"The first time I got a raise, I blew most of it on a big trip to Cuba with my girlfriends. I have great memories, but not much to show for it. When you get a salary increase, consider saving some for long-term goals. The temptation is there to buy a better phone, eat out more often or buy nicer clothes, but resist it. It's something I try to impart to my clients."
Lesson learned: Protect your future
"When I was younger my dad had a work accident. He had no disability insurance and was the sole breadwinner. My mom had to go back to work, and although they had an emergency fund, I witnessed the stress this put them through. Setting money aside for a rainy day saved our family. At our age, we think we are young and healthy and don't need insurance, but now can be the most affordable time to get it."
Lesson learned: Brushing your teeth can be an analogy for money
Portfolio Manager, Private Investment Advisor
"At our wedding, my wife made a speech in which she said, "In the world, there are toothpaste rollers, and toothpaste squeezers." I'm the toothpaste roller, and she is the squeezer. I am more careful and conscientious about almost everything, including money. She is the toothpaste squeezer, enjoying life and not thinking too much about what comes next. But over the years the two of us have realized that there must be a balance. Sometimes you must roll, like when the tube is getting empty. Other times squeezing is okay, particularly if there's lots of toothpaste in there. We apply this philosophy to our marriage and our money. The important thing for us is that we have a long-term plan that guides us along the way, and that we both brush our teeth."
Lesson learned: Tiny house, big happiness
Senior Financial Planner
"My wife and I originally wanted to live the dream of having a big house in the city with our careers being our top priority. But early in our marriage we realized we were working long hours, eating late when we got home, and spending little to no time together. So we decided to make a major life renovation. We rented our homes out and built a tiny house on my in-laws' farm. It's just 420 square feet. My wife quit her job as a pharmacist to work on the farm. We are much happier and much less stressed because we no longer have the financial and physical burden of a big home. We hope kids will come one day, and maybe our home will have to change, but we hope our philosophy stays. I try to remind my clients that stuff may not equate to happiness."
Lesson learned: Pay off that student loan
"I had a student loan in university, and even though there is a six-month grace period after you graduate to start paying it off, I didn't realize interest would still accumulate during this time. It was a high interest rate too. Once I saw how the debt was growing, I decided to pay it off as soon as possible. I got some good financial advice, a loan at a favourable rate and paid it off. Although I forfeited the student credit, when I did the math it was still worth it."
Lesson learned: Use credit cards for good, not evil
"When I was in university my dad told me to get a credit card to start establishing credit. I wish that thing had come with a user manual, because my $1,000 limit was maxed out in a pinch. Clothes, shoes, meals out…it seemed like free money. When I got the first bill, I did the math and realized how many hours I would have to put in at my part-time job to pay it down. I finally did, and instead of ditching the credit cards entirely, I now only use them for what I can afford, and I pay it off fully every month."
Lesson learned: Withdrawal fees can sabotage your savings
North York, ON
"I came from Indonesia to attend university in Canada, so I wasn't well prepared for how banking works. I had never even had a credit card. When I signed up for a bank account I went for the most basic account. When I finally talked to an advisor, they pointed out that I was paying $80 a month in transaction and withdrawal fees. If I had just put that $80 away in a TFSA or RSP, it really could have added up."
*About the survey: TD Bank Group commissioned the TD Wealth Behavioural Finance Survey which more than 1,600 Canadians, from across the country in 2017.
- TD Wealth. “Behavioural Finance Research Analysis,” Feb 16, 2018. ↩