The One Hour Millionaire

 What if I said you can make a million dollars or more in one hour…and it doesn’t involve lottery tickets, gambling, or a bank heist?

Would you believe me?   No, of course not, and you shouldn’t!  But I do earnestly believe that sitting down for just one hour and contemplating a few simple questions could set you on a path to saving far more over your lifetime, maybe a million more! 

Before we jump in, just remember that having an emergency fund, understanding your risk tolerance, staying invested by not panic selling, and having appropriate life and disability insurance are all critical and form part of a comprehensive financial plan.

Am I throwing away free money from my employer?

If your employer offers matching savings plans such as a group RRSP, you need to take advantage  of this to the maximum extent  possible.   Now you might think that this is inherently obvious, and everyone must be doing it already, but  the fact is that participation rates are only about 70% on average with rates even lower in some industries.

So, do yourself a favour and double check your plan and contribution amounts  to be absolutely certain you taking full  advantage of employer matching plans.  If you’re not, then take the (usually very simple) steps  necessary to correct it.

Do I carry credit card debt (or other expensive debt) each month?

Credit cards are very convenient, and can even be used to  accumulate travel rewards and points.   I use them all the time too.  But you need to do something that is critically important; pay the statement balance before it is due.  If you don’t, know that  most credit cards charge interest in excess of  20%.

If you can eliminate just one  source of  debt, make it credit card debt.

Can I simplify my investments while getting better returns?

As surprising as this may sound, investing has been “solved”.  Forget high fee mutual funds, the latest “hot” trend, sure thing stock tip, dividend investing, day trading, crypto, private equity, private credit, buying and selling options, being a landlord, and all the other crap the finance industry tries to sell you.

Instead, if you buy and hold a low fee asset allocation ETF (that is risk appropriate for you), then over the long haul you will almost certainly do better than 90% of investors not doing the same.

There’s lots of reasons for this, including avoiding high fees,  but  if you don’t believe some random finance blogger like me, then checkout this video for a detailed and rational explanation as to why low fee and broadly diversified index funds are your best bet.

Can  I contribute more to an FHSA, RRSP and/or TFSA?

Canadians have many options  to grow their  money in tax sheltered accounts, and using these types of accounts will lead to  better outcomes and more money in your pocket.  If you have medium to long term savings that are not in (or going into) one of these accounts, you need to consider using them.  If you are unaware what these accounts do,  then do  some light research, there  is plenty of information online.  Take a few minutes to look  at your investments and ask  yourself if you should be moving some of your money into tax sheltered accounts.

Do I have money sitting  in cash  that could be invested?

As a financial planner, I have seen first hand clients that were sitting on too much cash or had cash in their RRSP or TFSA earning 0.05% interest.  Maybe they made a deposit at the RRSP deadline with the intention of selecting an investment later, and then forgot.  Maybe circumstances changed and the cash they were holding is not needed and can be invested instead.

A little goes a long way.  $15,000 earning 0.05% in a standard savings account will be worth $15,227 in 30 years.  That same $15,000 invested in an index ETF growth fund earning 6% per year is worth $86,152 30 years later.

Please, take 5 minutes to review your investments and make sure you don’t have any piles of money just sitting in low interest cash accounts.

Can I earn more money?

When he was asked what to invest in,  Warren Buffet, probably the most famous and successful investor the world has ever seen, replied  “By far the best investment you can make is in yourself.”  This quote not emphasizes not only the importance of personal development and continuous learning, but also that your own lifetime earning potential is, by far, the greatest financial asset you have.

AsI previously noted in this blog post, examples include my nephew’s completion of a masters level education program which both enriched his skills, it also included a decent-sized salary bump.   In  my own career, and  disappointed with a salary freeze, I got down to work and pitched a win-win commission change to my boss and got the raise.

Have I tried a reverse budget so I can save more?

A reverse budget is an easy way to “pay yourself first”. The concept is simple; if the money is automatically moved out of sight and out of mind, you won’t spend it.

It’s easy to implement too.  All you have to do is set a monthly savings goal, let’s say $200 per month to start, and have your bank transfer that amount into a separate investment account that automatically invests the funds in a low cost index ETF (many major banks and both Questrade and Wealthsimple offer this service.

Here’s the best part; Saving $200 per month for 30 years with investment returns at a modest 6% will give you $200,903 extra cash.  There’s nothing better than the power of compounding returns!

Can I drive a reliable but less luxurious car?

No, you may love driving a nice car more than anything and so if the answer is no, then so be it.  I’m nit here to judge.  However, if you can consider buying something that does the job, but costs, say, $20,000 less, you have that much more to save for the future.

That $20,000 invested at 6% for 30 years turns into $114,870.