Hi friends. Today’s question is: do you need a financial advisor or can you DIY? So what do you think? Can a financial advisor manage your money better than you?
Of course, there are pros and cons of hiring a financial advisor. Many banks and credit unions will provide you a “financial advisor” who will give you free advice. Generally that means investing in the bank’s financial products or something the “financial advisor” will earn commission on.
We all know the old saying: we get what we pay for. Free is a good deal but the financial advice might not be.
Generally, financial advisors either get paid commission from the company of the financial product they’re advising you to invest in, or you pay them a fee out of your own pocket for financial advice.
Financial experts
Bank staff aside with their free financial advice, that may or may not be applicable to your situation, there are other financial experts out there who we have to pay for their services.
A financial advisor can help with things like investing your money, buying insurance, planning for retirement, taking out a mortgage, creating a budget, and estate planning.
Financial experts can be helpful if a person has a high paying job, complicated finances, and a lot of money. However, most of the single women reading this blog do not fall into any of those categories.
Which brings us to another issue, mainly due to our low income and lack of money. Single women are largely ignored by financial experts.
Financial advisors receive a commission on the monies they invest. Will they prefer a client with $100,000 to invest or a low income single women who’s scraped together $1,000 to invest?
Many of the things a financial advisor can help with have been covered in other posts on The Lifestyle Digs such as creating financial goals. A search on Google or YouTube can also help low income women get tips on money management.
Financial struggles
I know there are many women out there just like me who struggle financially and never seem to catch a break when it comes to saving money. We might make a little headway, save money, and start feeling good about that success. And then an unexpected expense comes along. No one plans to get in a car crash or have their car break down, but when it happens sometimes the only option is buying another car. We do what we have to do. It’s all about survival.
Many of our parents weren’t good at investing money, and didn’t encourage us to invest. They might have been financially responsible, but that’s a different era they were brought up in. Houses were affordable on one income, both parents had a car, they didn’t have debt other than a mortgage, and they put their money into savings accounts. Back in the days before plastic and when savings accounts actually paid decent interest. These days if you find a savings account with more than 2% interest – it’s like whoopee!
The reality is having our savings, as meager as they might be, sitting around in a savings account practically doing nothing isn’t going to be much help at funding our retirement or growing our savings faster for big expense items like a new car or a vacation. With only a little money in our savings accounts, this is why financial advisors don’t want to deal with single women.
A little savings
Now that you have a little money put aside, what you do next depends on how much risk tolerance you can take. Your age is also a factor. If you’re young and lose money, time is on your side to earn more money. If you’re closing in on retirement age, you don’t want to take risks, but at the same time you probably need to make as much money as you can.
My first foray into investing was when I was 13 years old. I was looking through the stocks section in the Vancouver Sun newspaper and saw a stock called Billy Goat Creek. Loved the name! I have no idea what Billy Goat actually did, and at that age, I didn’t really care either. It might have been a copper mine. The shares were around 30¢ each. My mother used a stock broker and she helped me buy 100 shares in Billy Goat. It stayed about the same amount of money the whole time I held the stock. Within the year, it merged with another company or changed its name, and I was given the option to sell, which I did. What fun is it when it’s no longer called Billy Goat?
In my early twenties I bought Canada Savings Bonds. I don’t remember how much, but I think around $1,000. I held on to them for a couple of years or so until I needed the money and then cashed them out. Or maybe I had to hang on to them until the maturity date. They paid a low rate of interest.
RRSP – Registered Retirement Savings Plan
At some point in my thirties I started putting money into an RRSP, Registered Retirement Savings Plan, a Canadian product. If you’re in the states the RRSP would be similar to your IRA or 401k, depends if you’re doing it solo or through your employer. Not knowing any better I put money into the RRSP which was a savings account, not earning much interest. The “financial advisor” at the bank never told me I could buy products to hold inside the RRSP that had the possibility of making me money.
When I was in my mid-thirties I worked for a company called Ashley-Koffman Foods that had an employer match to deposit money into an RRSP. We could decide how much money we wanted deducted off our pay and the company matched up to 5% of our pay, I think. That’s free money! Yes, go for it! The money went into a company managed RRSP. I was also putting away a little money into my own RRSP savings so between work and my own RRSP I was probably putting away at least $200 a month.
Homeowner
My RRSP money became very useful when I bought a townhouse at age 36. New homeowners can use money from their RRSP towards the down payment. We have to repay that money back into an RRSP but have 17 years to do so.
I seem to recall when I started saving up my money again in the RRSP that I now learned I could buy mutual funds and hold them in the RRSP. I had about four different funds inside the RRSP when I got talked into transferring that money to that stupid Primerica to help out one of the deadbeat’s acquaintances. Dumb financial move. The pyramid scheme of financial products.
During that time I worked for a financial institution and part of our pay plus an employer match went towards a pension plan. We also got a small bonus every year, around $1,000 depending on how well the company was doing. I put that inside a mutual fund I’d opened at my company.
When I bought a house in 2007 I had to cash in just about all my retirement financial products for the down payment and closing costs. That meant those lousy Primerica funds so thank God I got away from that losing scheme plus I cashed the mutual funds with my company. The problem when you cash out your RRSP, 20% is withheld to pay taxes. So that really sucks.
RRSP for low income earners?
Pay attention. If you’re a low income earner – do not put your money in an RRSP. They’re mostly for high income earners who need the tax break. Call it people who earn at least $100,000 a year.
I talk more about that in my post why it’s a bad idea to take out a loan from Tangerine or any other bank to fund your retirement savings.
It took me too many years to figure out that low income earners don’t need financial products that offer tax breaks to help bring down our taxable income.
LIRA = Locked In Retirement Account
Getting back to the financial institution I worked for, when I left in 2009 the money in my pension plan had to be transferred to a LIRA, Locked In Retirement Account. That’s the rule. I talk more about my LIRA in my post on how my financial planner at Coast Capital can’t manage my money as good as I can.
The pension thing was very interesting. Over the years part of my pay was transferred to the pension. When I left the company, I estimated around $12,000 would be coming back to me. Imagine my surprise when the paperwork showed up and I had about 4 times that amount coming to me. It was like free money!
My financial advisor who originally set up the LIRA (not affiliated with Coast Capital or any other bank) said that some companies have pension plan rules for employees who leave that calculate how much they’d get at retirement and that’s part of their pay out. Well, I wasn’t arguing with free money!
TFSA = Tax Free Savings Account
Now things got a little better for low income earners in 2009 when Canada announced a new savings program called the TFSA, Tax Free Savings Account. However, they set a cap on how much we can contribute annually, but it’s carried forward, so if you didn’t contribute for a few years and have a lump sum, you can play catch up. As of 2024, our contribution room is $95,000. The great thing is whatever investments you hold inside the TFSA that earn interest or dividends are not taxable income. And you are not taxed when you withdraw your money. Yippee!
DIY investing
It’s time to bite the bullet and start investing. We can do it without a stinkin’ financial investor! We can buy stocks and don’t need a middleman to do it for us! Yay!
Open an online trading account and buy a stock or two.
Sure, it’s a little risky, but if you do your research, you can find some stocks that match your level of comfort.
I use Questrade for online trading. If you’re interested in setting up an account, you can sign up using my referral code 415632012426909 and get $50 worth of free trades. You will have to transfer $1,000 into your new Questrade account before you can start buying stocks. Disclosure: Questrade will also put $50 into my trading account too for the referral! Win, win for both of us. Free money to buy stocks!
Do you need a financial advisor or can you DIY?
So, friends, what do you think? Do you need a financial advisor?
Oh, come on, you’ve got this! You can DIY!
Spend time researching the benefits of a financial advisor or DIY. Find a couple of stocks that interest you and look into what people are saying about them on blogs or money forums like the Canadian Money Forum. Ask questions. These are experienced DIY investors who do a lot of research.
A lot of investing comes down to your confidence level. Stocks go up and down. Are you a set it and forget it person? Or do you check how many pennies your stock is dropping every few minutes. If investing in the stock market makes you anxious and stressed, then it won’t be for you. Term deposits and GICs (Guaranteed Investment Certificates) might be more your thing. No risk, low interest.
Starting point
Hopefully I can give you some ideas as a starting point to research and find your way through the world of finance. Which really isn’t as confusing as your bank’s financial advisors want you to believe! Here are a couple of easy approaches to investing using a couple of Exchange Traded Funds.
Lazy Portfolio analysis of the US Couch Potato EFTs
Always remember the one piece of advice that we’ve heard most of our lives: don’t put all your eggs in one basket. Keep some money in risk-free places like high interest savings accounts or term deposits and buy a variety of stocks. They can’t all lose money!
Happy investing without a financial advisor!
Published by Cheryl @ The Lifestyle Digs on July 22, 2024.
