“Someone’s sitting in the shade today because someone planted a tree a long time ago.” ~ Warren Buffett
In today’s world of constant busyness and desire for instant gratification, Buffett’s words of wisdom illustrate what it takes to achieve long-term investing goals or any venture worth pursuing. Instead of looking for easy gains or quick fixes, be prepared to put in the time it takes. Good things take time to plant, grow and flourish.
The same philosophy applies to basic financial literacy and the importance of good habits. Individuals and families who are not armed with these skills or have become overconfident tend to feel more financial stress. For example, not saving for the unexpected — whether or not it’s an emergency — can set you back.
By the same token, delaying a non-essential purchase and seeing your invested savings compound over time earns you the long-term reward of financial freedom. Reviewing your progress regularly, including identifying any setbacks and celebrating goals achieved, will help keep you motivated and on course.
Saving and investing in the right things are great goals that every family can benefit from, no matter what age their members are at, or what assets they hold.
A tremendous amount of wealth has been built over the years, but the knowledge and values of how this wealth was built seem to be less apparent in many families today. Money has not always been an easy topic of discussion growing up, so investing may seem even more foreign to some (especially the younger generations).
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Often, many parents and grandparents (and even great-grandparents) have watched other families struggle during their lives, so they tend to prioritize saving and building their own wealth. This means their success was not by accident; it was a direct result of having long-term good habits.
Financial freedom is a function of adequate cash flow. A good practice is to monitor sources of income and expenses. Share with your loved ones what money has provided for your family. Be specific: for example, say what you saved and invested every month, detail the time it took to grow your wealth and the steps taken to achieve it, whether that is for a comfortable retirement fund or the ability to help a loved one buy a home or start a business.
Some younger Canadians have had the luxury of never experiencing a financial downturn and have lived with the belief that the good times will last forever. This means the lifestyle spending creep of non-essential discretionary items did not apply to their savings plans.
As a result, many individuals and families were not prepared with an emergency fund to deal with today’s higher interest rates and inflation. Lines of credit are not the same as a rainy-day fund, and they have just increased the financial stress of those families who were already struggling.
Taking lessons from these two circumstances, you may want to consider breaking down your plans for the future into three parts: the part you spend, the part you save (in case of an emergency) and the part you invest for the future.
Time is always our most valuable asset. No matter how much money you have, you cannot make more time, so spending your time wisely to do the things you want to do with the people you want to do them with is a lifestyle goal shared by many who have a plan.
Stephanie Woo, CIM, FMA, is a portfolio manager and wealth adviser with RBC Dominion Securities.