Financial literacy is one of those things we label boring without thinking much further. We all know that there's going to be tons of jargon that you need to learn the definitions for if you want it to make sense. A lot of experts make no effort to explain those terms, and it becomes exhausting to keep up with those who know what they are talking about. I often end up with flashbacks to sitting in class with the worst of my teachers.
The thing is, ignoring finance in this wave of job loss and price hikes is kind of weird. Just because it’s boring shouldn’t keep it from your list of learning, like all the other healthy habits. I lack discipline with my spending, but I do care about how money works. I made a budget earlier this year and predicted when I would run out of money, and I was spot on. That says more about my wisdom than my knowledge, but as I age, I learn.
Discipline is a topic for another day, but it requires awareness. Financial literacy helps breed awareness on how you spend your money. Awareness on how you spend your money leads to that elusive financial freedom, when mixed with discipline.
This line of reasoning led Chris Chrome and I to a free finance class in downtown Montreal.
Financial advisors are all over Montreal
Chris and I are friends with Rene Marshall. Rene is a pretend-Montreal (Laval) based financial advisor who works with The Financial Independence Club Inc (TFIC). If Rene were here right now, he would immediately give me some speech about how he’s in Montreal all the time. I guess he’s a demi-Montrealer.
Rene throws free classes with the TFIC team and has been peer pressuring us to come. Apparently when people go to your shows and support your art, they appreciate you going to support their hustles. While I can't say it was my original plan for a Saturday afternoon, I'm glad I went.
The topic was on RRSPs and TFSAs. Real riveting content. I say that both sarcastically but also I like knowing the difference between an RRSP and a TFSA. Realistically I could have tried to YouTube this information and gotten a superficial understanding. Rene, in his capacity as actual factual financial advisor, curated an experience that was relevant to Quebec people in my income range.
Financial advisors tend to ignore people like me, meaning people who don’t have enough money to make a financial advisor money off their money. This makes a lot of the YouTube videos and experts out there feel unapproachable. They typically use numbers like 10’000$ a year of investing, to scare away the broke plebs and attract people who can throw 10’000$ around.
Having someone give a subjective take on what’s worth for us local regulars hit different. There are a bunch of financial advisors in our city, take some time to look for one you mesh well with. It will quite literally save you money down the line to have a friend like Rene in your circle.
You can ask them questions directly and learn new subjects like what tax-free savings accounts are.
Tax-Free Savings Accounts are more than savings accounts
Let’s be real this blog is about my experiences in a 1-hour finance class and the thoughts that triggered. Let’s start with branding. I bet most of us think of tax-free savings accounts (TFSA) are savings accounts where you stash money for “tax reasons”. With the name, “Tax Free”, I always understood it as an similar to an RRSP, the money saved there was free from tax.
TFSAs are stupidly branded, let’s work through this together.
Somewhere along the way I learned a TFSA was not a regular savings account. I was aware that a TFSA could hold things beyond money, such as investments. My understanding after today is the gains on that money, that compound over time, are not taxable income. Now, this money doesn’t count towards your taxes at tax time, but you also aren’t taxed on it later when you take it out.
This means it’s super different than an RRSP. What isn’t taxed, is the money you gain as interest, which compounds. What makes it interesting is that it can become a real investment account. So instead of just relying on bank saving rates, as I initially imagined, you can grow it the way your RRSP would grow. Wikipedia says that TFSAs can hold any investments that are RRSP-eligible.
Basically, a TFSA is a more liquid version of an RRSP that approaches the entire game different. Why should you care anyway?
There is power in knowing financial tools
Rene is far more eloquent at expressing the nuances of how to deal with taxes. There are a lot of tools at our disposal, and with context, we can learn how rich people stay rich. We all know about how little the billionaires out there pay in tax.
What I’ve learned over the last while is that when you get into dealing with finances you may feel like a broke-ass dummy. Seeing there is a 6500$ contribution limit a year has me realizing there are people who save 6500$ a year. The truth is, with better decisions a lot of us actually “make enough” to start saving.
Personally, I face the debt demons of Visa and Master card. I know that dealing with this is a priority. I’m also the type to visualize a “success state” where I aim to be. I don’t want to get rich and then get robbed by my accountant like Rihanna. I also get tired of hearing all the corny advice that gets shared around the lunch table.
A lot of people who’ve never seen a million dollars in their life trying to teach each other how to become millionaires. I’ve been blessed to meet some millionaires and I soaked up their knowledge. They don’t treat money, nor the systems we go through in life, the same way we do. I’d rather be well versed in finances before I get real money, so I can know who’s full of it before I sign papers.
How an RRSP can be used
I’ll give you another example Rene shared with us today. Typically, we plebs look use RRSPs to reduce our income a couple of thousand dollars by the end of the year. The TL:DR version is if you make 40’000$ and then you put 1500$ into an RRSP the government would act like you made 38’500$.
This makes your tax return a little sweeter come tax time. The money will grow and compound, and we get old and live off it. In theory if we invest enough, for long enough, we will not suffer in our elderly times.
The thing is RRSPs have all kinds of extra conditions that I’ve never heard mentioned by my peers and colleagues. Here is a short list:
You can declare your RRSP each year but save the benefits for a future year when times are richer. This means you can delay the reduction on your salary until a year you really need it.
The amount of money you can put in your RRSP stacks over your life, so you can drop a fat amount of money into an RRSP in a year you make 250K. I mean like put 10 years of RRSP money into it at once thus making your life simpler when you have big money.
You have alternatives to an RRSP that should be explored before jumping at an RRSP.
However, if you ever get an RRSP deal where your company matches your contribution, it’s probably worth taking that free money. Everything is so specific to your life, that a financial advisor homie helps.
Everything financial starts with a budget
This is not my first TFIC event. Rene did drive me there and back, but I went all the way to the quasi-mythical land of Laval to learn about budgets back in the winter.
The RRSP vs TFSA vs other acronym class was more enjoyable to me because I know how to budget. I think a lot of us do. However, having someone go through every step of budgeting in your face, makes you think about your budget.
You either find finances fun, or you don’t. Just like you either find cleaning fun or you don’t. Both are relevant and necessary things to focus on. A clean apartment apparently helps give you focus and keeps vermin away. Clean finances let you spend your money on dumb things like Netflix by telling your accountant it’s in your budget.
My accountant would prefer I spend that money on life insurance, but the reality is, Disney+ makes the lady happy today. Which is kind of like life insurance if you think about it. Jokes aside, the key part is me telling him I budgeted it.
That means I took the time to prioritize everything, decide I can afford this and pay for it within my luxury items per month section. I may have to sacrifice Uber Eats and my soft drink addiction, but the potential for intimacy that subscription services give me is worth it. A budget helps me visualize these costs and make decisions appropriately.
I knew how to make a budget before hand, but having heard someone explain theirs, I felt compelled to revisit mine. You should probably revisit yours. I definitely did, and have many times over my adult years.
Money comes and money goes but financial literacy helps
With the start of COVID, I moved to a work from home model. This impacted how much I was able to smoke, given I was now home all the time. Before COVID, I copped by the ounce.
As my tolerance grew, the number of ounces I bought at once increased. I ended up hitting a point where when I ran the math I was spending around 1200$ a month on weed. When I was younger I recognized I had a habit, so I just learned to increase my salary. I literally could afford that.
It was a stupid use of money that currently I’m kicking myself for. However, seeing how much I spent, I realized that there had to be a better way to smoke as much as I wanted while not spending more than a person makes on welfare a month, on weed.
At that time in my life, I was in a lot more pain and things like budgeting didn’t matter. I was very self-destructive and was okay creating holes of debt and urgency, living paycheck to paycheck even though I made a LOT of money for not having children.
I have literally smoked away the down payment on a house, my music career, and a lot of other things. I will forever rationalize that it was worth it, addict that I am, but I’m aware of how much money I spend on weed. Believe it or not I’ve slowed down a bit, you may not see it, but a good 10-15% less in consumption literally saves me a couple of hundred a year.
To be clear I spend way less a month on weed now. Learning about how money works forces you to accept that with discipline and change you can create positive money growth cycles in your life.
Go to a free finance class if you see one
Go to a free any kind of class that’s outside your comfort zone. A lot of people, like Rene, are experts who have a burning passion to see change in the world. They make money off knowing things, so in a philanthropic effort share that knowledge to those normally gatekept from access.
I am fortunate to have many such people as my friend. Folk who in their respective domain can provide a very sincere breakdown of crucial information. Like what a “tax-free savings account” even is.
This blog in general is meant to share the insights I learn as I go. There was more cool stuff that Rene shared with us, but I really didn’t want this blog to be a recap of his class. You can go take it, it’s free. You just need to give him your time.
He can also answer your questions. Making sure that in your specific circumstances, like if you are dealing with immigration, how you are affected.
The class reminded me of the Talk 4 Talk 11 seminar I went to. It was a little boring like when I’m in class, but I walked out learning some new and actionable stuff.
I recommend you check it out.
Live Long and Prosper Everyone
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