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12 Money Hacks You Must Learn Now To Avoid Regret In 20 Years

12 Money Hacks You Must Learn Now To Avoid Regret In 20 Years

If you’re a young professional, the lifestyle of your 40s will be dictated by your choices in the coming years, and even in the coming months. They say 40 is the new 30, but for that to happen, you need to plan financially first.

Whether you want to build up passive income, get your dream job, or become immortal, you can’t miss the money hacks below.

1. Consider Moving While You’re Young

When you’re young, moving is much easier than once you’re older and have a family or elderly parents to take care of. If you limit yourself to jobs nearby, even if you’re in a big city, you’ll likely be missing out on your best career opportunities. Your first few jobs lay the groundwork for your long-term earning potential. When you are single, always remember that you have the power of flexibility. If you try out a high-paying job elsewhere, you can always move back if you can’t stand it.

2. If You Buy Stocks, Then Buy Ones That Pay A Dividend

According to The Motley Fool, stocks that pay dividends have historically outperformed other similar investments, with less instability. In addition, they pay out real cash. This makes them easier to keep during rough economic times. In addition, the dividend payouts of a good stock can increase as years go by.

If you put $3,000 into a stock with a 4% dividend yield, you’ll get $10 every month, in cash. That’s a free meal every month, by doing absolutely nothing! To encourage saving, try to go from earning 1 free meal a month to 2 meals per month, and keep going from there.

You can also look into preferred stock, which is more complex but can pay out much higher returns relatively safely.

Quick tips in regards to dividend paying stocks:

  1. Dividend payments can be cut, so look for big-name stocks that have a history of reliable dividend payments, and of increasing those payments as years go by. Ensure that they were paying dividends during the 2008 Financial Crisis.
  2. Do not look for high yields as a beginner. Between 2-4.5% is typical for major stocks. Because dividends pay “X cents per share,” if a company was mismanaged and it’s share price has dropped, the dividend “yield” or % return will look high. Avoid this rookie mistake.
  3. If love tech stocks, then 2 examples of companies that pay dividends include Intel (INTC) and Microsoft (MSFT). However, in my experience, investing in tech stocks is pretty risky.
  4. This recent article in MarketWatch showcases some interesting dividend stock ideas.
  5. Remember, I’m not a professional financial advisor. So, always do your research before you invest, and talk to a financial adviser first.

3. Wait For A Financial Downturn, Then Buy Stocks

We all know the mantra: “Buy low, sell high.” When Wall Street falls, it’s the perfect time to consider buying stocks. So, keep some cash ready for the next downturn. You can keep it in flexible investments like GICs, that can be taken out at any time.

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4. Do Not Rely On Stocks To Save For Emergencies

The most likely time for you to get laid off is when the economy is down. This will also be when your stocks are worth the least.

When the economy is down, family and friends may be in need. You may need extra cash, but there will be few side jobs available. Banks will be hesitant to loan people money. On top of this, your stocks will be worth much, much less at this time. If your emergency savings are in stocks, you will be forced to sell them at this low point.

In my opinion, this is one reason why the average person tends to make less money in the stock market than we are led to believe: they buy when they have savings and stocks are high. When the economy falls, they are forced to sell at a low point.

5. Buy The Place You Live In

Real estate is usually the best investment you can make. In my opinion, it’s a much better option than buying stock. While purchasing real estate for investment purposes is hard, buying your own home or condo is much safer, and often has tax advantages.

When paying off a mortgage, a significant amount of the monthly payment goes toward paying down your own loan each month (the “principle”). This increases your net worth by hundreds of dollars every month. (Rather than burning your money by paying rent.)

Keep this in mind: While there are fluctuations in the real estate market, the cost of rent goes up steadily.

When you buy a place for yourself, typically it will be a bit more expensive than renting, at first. However, over the next 3-15 years, the rent will go up, and if you don’t own a property, you’ll be finding it harder to make your rent payment. This is especially true in a big city like Toronto.

Home ownership has other benefits as well. For example, you can get a line of credit backed by the equity in your house, which has a very low rate. Be extremely careful with these since major banks love to offer new homeowners low-interest lines of credit in hopes that they accumulate debt that’s easy to collect because you have a hard asset. With such a low interest rate, it’s better to keep your line of credit as small as possible, since it’s tempting to dip in.

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Still have doubts about buying real estate versus stocks? A retired saleperson once told me, “All of my friends who invested in the stock market instead of buying real estate are in serious trouble.” I think that sums it up.

6. Stay In School Longer

After every graduation, there’s a temptation to finally enter the workforce. However, those who stay in school longer by taking a practical post-graduate degree end up with higher starting salaries. They are also more likely to be chosen for promotions in the long run. While they may be racking up student loans for a few more years, the long-term cumulative effect puts them ahead.

If you’ve dreamed of a career that requires a graduate degree and you’ve tried all other options for low-cost loans and tuition subsidies, find a bank that will lend you a student loan. Also, make sure the college program offers a co-op or internship. Graduating with lots of debt and no industry experience is a recipe for disaster.

Loans are awful, but leading a life in a career that you don’t want is even worse.

7. Negotiate Your Initial Salary

Most young professionals who get an initial offer don’t negotiate because they are excited or scared. It’s important to do your research by checking with friends, recruiters, and PayScale.com to see what you should realistically get as a starting salary.

Here’s a more detailed guide from The Muse which has some good tips. In my experience, the best bet is to find the salary that you think is reasonable and stick to your guns. If you get a much lower offer, I’d recommend using a printout of PayScale.com to demonstrate the expected market rate. However, be prepared for the possibility that they may reject you.

If you get an acceptable offer, typically there’s still room to negotiate. Asking for a huge increase for your first job may be unwise, but asking for an additional $1,000-$3,000 is pretty reasonable. The accumulating effects of that small increase over 20 years adds up a lot. It could be a big part of your down payment on a family home.

More importantly, future raises, pension benefits, and bonuses are often based on a percentage of your current pay. Even a small difference at the start of your career can snowball over time into a big change in lifestyle.

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8. Get Insurance

Insurance is extremely cheap when you’re young, but extremely expensive once you get older. Young people feel invincible. However, the instant they get a bad diagnosis it becomes too late to lock in a good price for things like life insurance and health insurance. Life insurance for a young and healthy person is extremely cheap.

Want immortality? You can even use life insurance to cryogenically “freeze” yourself until they find a cure for your disease (and freezing).

9. Eliminate Or Reduce Expensive Habits

Your daily cup of java or a smoking habit can have a huge consequence on your long-term finances, as well as your health. Make a list of all the expensive habits you have and try to eliminate those that are unnecessary, one at time.

Think of the free money you’d get by putting it into a stock with a monthly dividend instead.

10. Be Careful With How Much You Spend On A Car

60 seconds after you buy a new car, it loses 9% of it’s value, according to Edmunds.com. After just one year, it loses 19% of it’s value. However, the value drops only 12% by the next year. Furthermore, the drop is 9% between years 4 and 5. In other words, used cars maintain their market value better.

Dealers try to tempt buyers with low monthly lease rates on new vehicles. Avoid this at all costs. Even after years of payments, you’ll need to return the leased car unless you pay the remaining balance, which will seem insane 4 years later. If you do not have the cash, it’s better to get a loan or lease for a lower-cost used car. Aim to pay it off in a year or two. Later in life, you’ll have no monthly payments at all and you can sell that car for a significant portion of its value.

Financial Samurai recommends that the purchase price of your car should be 10% of your salary. That could mean you’re buying a car that will require a lot of maintenance. I personally think that 10%-20% is more realistic. From what I’ve seen, used Toyotas and Hondas can last over ten years with little maintenance.

In terms of buying a luxury vehicle, the costs are often a lot higher than anticipated. Here are some unseen costs of luxury cars:

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  • The maintenance and repairs costs on a luxury vehicle are much higher.
  • They often require premium fuel rather than standard fuel.
  • The engines themselves are typically more powerful and may get less mileage.
  • Once the car is old and loses it’s appeal, you’ll still be paying these overhead costs.

It could be wiser to use that money for something else, like real estate, which may appreciate in value rather than lose value.

If you hold off from spending $10,000 on your car, and put it into an investment that generates 6% compounded per year, you’ll have $32,071.35 in 20 years, or a $22,071.35 profit. Still worse will be the extra costs for maintenance, gas and repairs, which will average out to hundreds of dollars per month.

11. Maximize “Matching” Programs

Read the details of your employer’s benefits package. Often, there are offers where an employer will match contributions to things such as a pension. Do your best to max these out, since you’re immediately doubling your money.

In many cases, you can get low-interest loans to maximize the contributions. Because you’re doubling your money, this is one case where taking a small loan can be beneficial.

12. Contribute To IRAs And RRSPs

IRAs and RRSPs (the Canadian version) are tax-deductible accounts. Here’s an example of how it works:

  • Suppose you make $40,000 per year.
  • Suppose taxes are 25%.
  • Therefore, your after-tax income would normally be $30,0000.
  • However, suppose you contribute $10,000 into your IRA or RRSP.
  • That $10,000 contribution is deducted from your taxable salary amount of $40,000.
  • Your new “taxable” salary is $30,000. At a 25% tax rate, $30,000 x 25% = $7,500 in taxes.
  • So, by contributing to your tax-deductible account, you get back $2,500 in taxes ($10,000-$7,500).

Once money is in that retirement account, there’s no taxes on any investments you make. Any dividends inside that account, or capital gains from stocks going up, are completely tax free for decades, until you retire. Once you retire, you can withdraw the money from the retirement account. You’ll pay income tax on any money you use from those accounts.Because the money isn’t accessible until 65, it’s okay to start small (assuming there’s no employer matching program). Small monthly automated deposits are a great way to save.

However, assuming your employer’s contribution plan allows it, you can withdraw $10,000 of your IRA (or $25,000 of your RRSP) to buy your first home. For this reason, it actually makes a lot of sense to use these accounts to save for your first home. Canadians should also look into opening up a TFSA, which allows significant tax-free savings each year.

Final Thoughts

When you’re young, it’s hard to make decisions that you know will affect your life later on. It;s important to remember that this decision making process is a privilege of the society we live in. There’s no perfect answer or approach. The important thing is that you make a formal plan soon, based on the best facts you’ve got and with a little bit of gut instinct.

Featured photo credit: Frankie Leon via flickr.com

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Last Updated on July 4, 2019

25 Killer Sites For Free Online Education

25 Killer Sites For Free Online Education

Whether you’re five or ninety five, the internet has a lot to offer. Particularly when the topic is education, the resources on the internet are endless.

Best of all, many high quality sites are completely free. From history to coding, excellent free online education awaits on the following 25 sites.

1. Coursera

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    Coursera is a website that partners with universities and organizations around the world. This brings a wide variety of topics and perspectives to one searchable database.

    Coursera is a powerful tool for free online education, and includes courses from many top universities, museums and trusts. This gives the site an extremely wide range of in-depth courses.

    Coursera is extremely useful if you’re looking to study many different topics, or want courses from different schools and groups.

    2. Khan Academy

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      Partnering with many post secondary schools, Khan Academy offers a useable, well organized interface. Also curating many courses from around the web, Khan Academy offers impressive depth on many different subjects.

      Among the more well known educational sites, Khan Academy is also incredibly useable, which may make it easier to keep learning goals.

      3. Open Culture Online Courses

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        If you are struggling to find exactly the material you are looking for, try Open Culture’s listing of free online education courses. The page highlights 1000 lectures, videos and podcasts from universities around the world. The site features a lot of material found only on universities private sites, all in easy to browse categories. This means you can find hundreds of university courses, without having to visit and search each university’s own site.

        Open Culture’s list features courses from England, Australia, Wales and many state universities around the United States. A very helpful resource for finding many courses in one area of study.

        4. Udemy 

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          Udemy’s free courses are similar in concept to Coursera’s but additionally allows users to build custom courses from lessons.

          Working with many top professors and schools, the site mixes the customizable platform of other sites with a heavy emphasis on top quality content. This is another site however, that mixes free and paid content.

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          5. Academic Earth

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            Another site with courses from many different schools is Academic Earth. Much like the three sites above, Academic Earth brings together top notch courses from many different sources, and focuses on offering a wide variety of subjects.

            Academic Earth lists courses by subject and school, so it might be easier to find what you’re looking for.

            6. edX

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              Another great option for free online education is edX. Also bringing together courses from many different schools, the site has impressive, quality information for everyone. edX covers a great range of topics.

              7. Alison

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                Unlike the previous sites on this lists, Alison is a free education site offering certification in some areas. Alison offers courses mainly in business, technology, and health, but also includes language learning courses.

                It’s a great option if users need certification for their learning as Alison also offers school curriculum courses.

                8. iTunesU Free Courses

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                  A very convenient place for free online education is iTunesU, because it integrates seamlessly with your iPod, or any app-ready Apple mobile device. On iPad, iPhone, or iPod touch, users download the iTunesU app.

                  Desktop users can access  iTunesU on the upper right hand corner of the iTunes Store. iTunesU is also convenient because the store is categorized much like iTunes.

                  Users can search learning materials in many different ways, including genre and topic. However, courses are often a mix of free podcasts or videos, and paid content.

                  ITunesU does include courses on a pretty wide scope of topics, but does not integrate with Android, Google or Windows mobile devices.

                  9. Stanford Online

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                    Your hub for all the online offerings from Stanford University, Stanford Online offers self-paced and session based courses. While Coursera features some courses from Stanford, many classes are only available via other hosts. Some courses require iTunes, but most are completed in your web browser.

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                    Stanford Online is a great site for high quality courses, though the topics are somewhat limited compared to sites partnered with more than one school.

                    10. Harvard Extension

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                      Like Stanford Online, Harvard Extension features free online education courses from Harvard only. This is another excellent source for top notch course material, though the course variety is less rich than multi-school sites.

                      Additionally, Harvard Extension allows you to search for courses by professional certificate. This makes it much easier if your online education goal includes certification.

                      11. Open Yale Courses

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                        Open Yale Courses echoes Harvard Extension and Stanford Online, in that it offers only courses from Yale. While the site is similarly limited to topics taught at the school, Open Yale Courses offers a lot of videos of actual campus lectures. The availability of videos makes the site a great option if you’re looking for quality courses, but learn better by watching than by reading.

                        12. UC Berkeley Class Central

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                          Much like the other schools on this list, UC Berkeley has a variety of free online education options. The school has slightly fewer courses than the schools above, but includes some supplementary lectures, webcasts and RSS Feeds, making it easy to keep up with the topics you choose.

                          13. MIT OpenCourseWare

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                            Similarly, MIT offers a variety of free courses. The school has a comparable number of courses to the schools above, plus includes very in-depth course materials on the subjects available. MIT also offers free RSS feeds, a convenient way to continue learning.

                            14. Carnegie Mellon Open Learning Initiative

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                              Carnegie Mellon’s free online education site is comparable with the other school’s on this list, however, Open Learning Initiative also covers a smaller range of topics. But for the topics that are covered impressive, in-depth material is available.

                              15. Codecademy

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                                Codecademy is a website dedicated specifically to teaching coding. Where other coding sites follow an example/practice session workflow, Codecademy includes a live practice window. This means you can practice coding while still viewing the lesson material.

                                The courses at Codecademy are well written and easy to follow and the website is organized very nicely. Codecademy features a centralized dashboard where you can monitor your progress, plus organizes lessons into complete modules. This lets you learn an entire language without needing to pick the next course manually.

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                                16. Code

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                                  Code is another website focused on coding and app writing. A site with high quality courses, Code also features learning options for kids.

                                  In addition to kid friendly courses, Code offers free online education classes on a wide variety of technology topics. These classes include app writing, robotics and Javascript.

                                  Most of the courses are also geared in a such a way that they can be useful in a classroom setting. This makes Code a great resource for harder to find coding topics, as well as various learning settings.

                                  17. University of London Podcasts

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                                    The podcast page on the University of London website is another great source for free education. While the courses are limited to podcasts, the site features podcasts from it’s own campus, as well as eleven universities in and around London. This gives learners a wide base of topics and lectures, but still ensures in-depth material.

                                    18. University of Oxford Podcasts

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                                      Similar to the University of London, the University of Oxford features many different podcasts. Most are public lecture series or lectures from visiting professors, with several different recordings available.

                                      The advantage to this particular site is that podcasts are organized into series, making it easy to subscribe to multiple lectures on one topic. Another good site for thoroughly in-depth lectures.

                                      19. BBC Podcasts

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                                        For the more casual learner, the BBC offers a wide variety of podcasts on many different topics. Most podcasts are updated weekly, and focus on everything from finance, to sports, to current events.

                                        Through the World Service line of podcasts, there are also many in different languages. The focus of these podcasts are less in-depth and theory based, which may be more accessible to the average person.

                                        20. TED-Ed

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                                          Another great destination for more general learning is TED-Ed. From the same people that brought you the all encompassing, motivational web series, comes a site chocked full of educational videos. Most include impressive animation, and all are ten minutes long or less.

                                          Not only is TED-Ed an excellent site for the curious, it also includes supplemental materials and quizzes on the videos. This makes the site extremely useful in formal education settings, as well as in entertaining ways to brush up on new discoveries and topics.

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                                          21. LessonPaths

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                                            LessonPaths is another great tool for those looking for a more usable and convenient way to access learning material. On this site, users create link playlists of their favorite learning materials from other sites. Users then rank these collections, making it easy to find many different high quality, accessible sources on a given topic.

                                            22. Memrise

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                                              Another impressive free online education site offering ease of use and convenience is Memrise. Available both on desktop and as an app, Memrise is a particularly powerful tool if you are studying a language. The site encompasses many other topics as well, though some of the course material is user generated content.

                                              Part of what makes Memrise special is their integration of games into the learning materials, mixing learning with entertainment.

                                              23. National Geographic Kids

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                                                The kids site for National Geographic is another site that makes free online education applicable for younger users. For those looking for kid friendly education, a large variety of games, puzzles, videos and photos keeps kids interested on this site.

                                                National Geographic Kids doesn’t organize learning into courses, making materials available by topic and medium instead. This makes National Geographic Kids a good option for those looking for a more casual learning environment.

                                                24. Fun Brain

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                                                  Fun Brain is another good option for kids who want to learn online, but focuses on games and fun puzzles. Particularly focused on math and reading, Fun Brain’s game based approach can be valuable if the child in question struggles to pay attention.

                                                  Fun Brain offers rewards and challenges as well, and is another site aimed at a casual learning experience for kids K-8.

                                                  25. Whyville

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                                                    Similar to the sites for kids free online education is Whyville a destination for preteen online learning. The site includes a variety of social features, with a focus on learning materials geared for young teens.

                                                    Whyville also mixes in educational games, to make the site a well rounded option for kids too old for simple games, but too young for heavy reading based material.

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                                                    Featured photo credit: Dai KE via unsplash.com

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