Remember that financial plan I wrote last month? The one where I said I was going to pay off all my debt, then start investing. Well I didn’t. I just couldn’t wait to get started for even one more day. Sticking to a plan can be hard sometimes, and I’m just as guilty as anyone. But of all the investing mistakes and lessons I’ve learned, this transgression is one I don’t regret at all.
In preparation of investing I’ve been doing some research to make sure I understand some key terms, risks and benefits. I’ve read and watched videos about real estate, crypto, stock picking and so much more. I’ve been enthusiastically informed about the potential of GameStop (this video helped me grasp the situation). The biggest thing I have learned is simply that there is so much more to learn.
I’m the kind of person who generally likes to dive deep and understand every aspect of the choices I am making. But I’m also a person who works full time, has children, coaches a sports team and writes a blog. I kind of have a lot on my plate at the moment. I’m just not able to dedicate hours and weeks and months to learning how to invest on my own right now.
In 2003-2005 I worked a union job in hospitality. I was young and made decent money for those days, and my expenses were low. When I gained full time status I was offered employer matched RRSP deductions, so I took advantage of that. But I really didn’t know what I was doing, and after leaving that job and moving several times, I lost track of the investment.
Recently, as I was cleaning out some old files, I came across a statement from 2005 which said my RRSP account had $320. Not a large amount by any means, but I know how compounding works. Over 16 years, I should have seen some growth, which when added to the principle would result in even more growth year after year. Right?
Wrong. My investments were very conservative. I’m not sure if I chose that, or if someone recommended it to me, but regardless, I saw no real growth. The portfolio did not perform well, apparently because interest rates are down. Whoever managed the portfolio just left it to stagnate, and I guess I did too. When I called to inquire about the money that was there, I found that over the course of 16 years I had seen a growth of… -$12! Management fees ate in to the principle fund. Fees for which I clearly received no value.
I’m chalking this whole thing up to a rookie mistake. I was young, uninformed, and expected someone (who was being paid fees!) to make sure my money grew, without ever checking in myself.
In 2006 I went to college. At the beginning of September and January, I received lump deposits of student loan funds, which were meant to last the semester. A friend of mine gave me a piece of advice that I think worked out quite well for me. After paying that semesters tuition, break the remaining funds in to 4 monthly allowances. Invest those chunks in a 30, 60 and 90 day GIC with Tangerine Bank (then ING) with the remaining quarter for the current month. This way each chunk matured, with a tiny bit of interest, in time to cover that months basic expenses. This did not allow me the possibility of blowing all my money in the first month and being broke for the rest of the semester, as I have seen a number of friends do.
Years later, my extended family began planning a trip to Disney World in 2020. I saved up money from tips, and each time my account got to $500 I stuck it in a GIC, set to mature right on time to start booking our travel. I saved a few thousand dollars this way, and was quite happy with my forethought. Of course our trip was cancelled due to Covid. When the funds matured, I considered re-investing them, but I didn’t know what timeline would make sense. Because I was working hard on paying off debt, I decided to apply that money to my credit card to really get the momentum going.
Overall, I had a good experience with GICs and I would use them again if I needed to put money somewhere safe for a few months or years. But now that I’m focused on long term financial health, they just aren’t cutting it.
Pay off your debt, I told myself. You are paying 13% interest on your credit card, and your only a few months from paying it off. But you’re also getting three pay cheques this month. You have a little extra to play with. You can still meet your target of $1000/month on the credit card. Can you see the little angel and devil on my shoulder? Well the devil won. The temptation to start investing was too great. I signed up for a Wealthsimple Invest account.
The process was easy. After downloading the app, I filled out the forms and connected my bank account. I selected a TSFA account to invest in, chose the Socially Responsible Investment (SRI) because it better aligns with my values, and went with a growth portfolio, which may see bigger swings, but should result in higher long term growth. Wealthsimple will manage my portfolio and make adjustments as needed, without me having to follow the market or do anything myself. This is what makes a robo-advisor an excellent option for beginner investors like me.
I started off with $500, and set up automatic deposits of $50/month. It is currently projected to grow to $37.5k by the time I retire. Of course this won’t get me very far, but I still have that pesky $2500 on my credit card to deal with. Over the first 6 months of 2021 I used 35% of my income towards that credit card debt. When it is completely gone, my plan is to invest 20%, keeping the remaining 15% for household and lifestyle improvements. Investment calculators suggest that that should be enough for me to retire at age 65 with an income of $30,000/year. My home will also be fully paid off by this time. Even though, at age 30 something – cough cough – I am late to the game, I am thrilled that retirement may actually be in the cards for me!
Growth to date
I’m only 10 days in to investing with Wealthsimple, so it’s probably too early to even mention how my account is doing. But I’m going to tell you anyway, because I’m so excited about it. $7.32. On my measly $550 deposits I have made over a dollar a day so far! That is better than my RRSP performed over 16 years! And that is a better rate of return than I ever saw on my GICs. And all this without paying fees, because Wealthsimple offers multiple ways for users to have funds managed for free.
Every morning and evening I take a peek at the app, and every tiny change gets me excited for the future. I am digging my way, dollar by dollar, out of the broke life I thought I would be trapped in forever. I am so happy to have finally taken the first step.
I’m really happy with Wealthsimple as an easy to use investment solution. I appreciate that their Wealthsimple Trade option allows you to pick specific stocks, should you wish. That may be an interesting option when I have more time to dig deeper. For now $50/month will be added to my account, and I’ll bump it up once the credit card is paid off. I think that gives me the perfect balance of saving on interest while getting my feet wet.
I certainly have more to learn when it comes to investing. But while I figure it out, this service will take all of the guess work out of it. Let me know in the comments if you’re on the same journey. I’d love to here how other investment newbies fare.