Advice that clicks

There’s no shortage of advice out there, but every once in a while you’ll hear something that clicks. When it comes to improving your own finances you might still be looking for that advice. We asked some financial professionals to tell us the best pieces of financial advice they’ve ever received. Here’s what they said:

Personal Finance

Even professional advisers can point to someone who helped them adopt good money habits. For Robert Abboud, a CFP with Raymond James, that person was his father. “My dad taught me about cash flow,” he says. “He carried a budget sheet with him wherever he went. He would always make sure that he wasn’t going over the monthly budget, and when it was time for a trip he always had money saved up. He only bought what he could afford. He taught me the greatest advice for financial planning is to live within your means.” Michael Berton, a Vancouver-based CFP with Integrated Planning Group, lives by two simple, but crucial, pieces of advice. His first piece of advice is to spend less than you make. “It sounds simple, but many cannot do this,” he says. “Few measure their spending with relation to either their goals or after-tax income.” His second piece of advice: pay yourself first. “That’s from David Chilton [author of The Wealthy Barber],” he says. “Set aside a portion automatically each month for the future. This can be in a regular investment account, RRSP, spousal RRSP, TFSA, or even in an RESP or RDSP.” The best advice Cynthia Kett, a CFP with Stewart & Kett Financial Advisors, ever received opened her eyes to money management. It’s not what you earn, but what you keep, she says. “I sometimes compare cash flows and the building of net worth to the process of filling a bath with water,” she adds. “If you use the plug judiciously, you can allow some flow-through, but still fill the tub over time.”

Investing

Abboud’s best piece of investing guidance came from an experienced investment adviser who counseled him when he was just starting out. The advice: don’t get caught up in the hype around an investment. “Stay focused on well diversified, plain vanilla investments,” he says. “Forget about hot sectors and look more to a turtle versus the hare approach to investing—and be the turtle.” Michael Schaab, a portfolio manager with Leith Wheeler Investment Counsel, has four key pieces of advice to add to that list. First, future rate of return is based on the price you pay for an investment. Next, investing is about making rational decisions when others are making emotional ones. Third, good companies get stronger in difficult times. “They gain customers, put poor competition out of business or buy competitors at discounted prices,” he says. And finally, take the “wallet test.” Ask yourself, “Do you trust management enough to leave your wallet in the room when you step out?” Risk, of course, is another important thing investors need to pay attention to. This is an underlying current in the investment advice Michael Berton offers his clients. “Invest within your comfort of risk,” he says. “Successful investors stick to their investment plan. Ensure that you have an investment policy that will serve you and that you can be comfortable with in good and bad markets.”

Tax

Doug Carroll, vice-president of tax and estate planning at Invesco, makes a living hopping around the country to tell investors how they can reduce taxes, yet the best piece of advice he’s received is to “not sweat the taxes too much.” That might sound strange coming from a tax expert, but his point is that tax isn’t the only part of the equation. “Each type of financial planning activity has its own focal point, with tax often being the next-in-line consideration,” he says. “For instance, savings vehicles follow from savings habits, investment tax profile complements investor risk profile, and overall income need for the long term should guide and coordinate the drawdown of income sources. Of course, tax can drain as much as half of one’s income, so it should definitely be factored into these and all other financial planning activities, informing decisions with the appropriate perspective and proportionality.”

Debt

Laurie Campbell has seen more than her fair share of people who are deep in debt. The CEO of Credit Canada Debt Solutions says people tend to make things needlessly complicated. If you don’t understand a financial product or aren’t sure how to save then ask for help. “If you still don’t understand it then get advice from someone else,” she says. “It’s that simple.” She also recommends limiting yourself to one credit card. “People who get into debt often have multiple credit cards that are all maxed out. If you have more than one card, cut up all but one and pay them off,” she says. Pat White, executive director with Credit Counselling Canada, agrees. She says if you can’t pay your credit card in full each month then it’s time to consider where you are financially and stop using credit. “Use your income as a limit for your expenses rather than viewing available credit as additional income,” she says. Of course, some of the best advice is often the simplest. White says she still lives by the advice her mother gave her years ago: save early. It’s a lesson she’s passed on to her children who started their RRSPs in their early 20s.

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