The Snowman's Guide

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Navigate Through the Entire Book Starting Here

The Snowman’s Guide to Personal Finance provides an introduction to a wide range of important personal finance topics. It uses a series of analogies and examples to demonstrate simple and actionable ways to get the most from your money. Each chapter below will take you to the respective page on this site. Once there, you’ll learn more about the key takeaways listed below each title.

Introduction

  • Part I outlines saving and investing.

  • Part II provides additional tools, like budgeting and account options.

  • Part III explains where to go next and what to consider along the way.

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Chapter 1: Your Income

  • Get to your money first and set aside savings, so you maintain your standard of living in the future.

  • Start today and build your savings habits gradually to avoid taking on too much change at once.

  • Automate your savings to remove the temptation to spend.

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Chapter 2: Growing Your Savings

  • Invest your savings to earn interest or other returns and put your money to work.

  • Compound growth is critical to reaching your long-term financial goals.

  • Earning a higher growth rate and starting early are key to growing your savings.

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Chapter 3: Quality of Investments

  • Create a list of investment options you understand and trust.

  • Spread your money across a diverse assortment of investment options.

  • Give your investments time, allowing them the best chance to grow.\

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Chapter 4: Risk and Reward

  • Some investments will lose money, potentially placing your goal at risk.

  • Taking on some risk is required to earn higher returns, which are vital for growing your money.

  • To manage this trade-off, accept a suitable amount of risk and gradually lower it as your goal approaches.

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Chapter 5: Inflation and Unexpected Expenses

  • Your future goals will be more expensive than today due to inflation.

  • It’s important to invest your money, so it’s not losing its value over time.

  • Set up a rainy day fund with three to six months’ expenses to protect your other investments.

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Summary I

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Part II: The Accessories

  1. Set money aside for the future.

  2. Earn the highest returns possible given the situation.

  3. Protect against the threat of the unexpected.

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Chapter 6: Expenses and Budgeting

  • Lowering expenses is often more effective than raising your income if you want to save more.

  • Set up a budget to assign your money to the most important items in your life.

  • Saving money is a balance of enjoying your life today and in the future, don’t sacrifice one for the other.

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Chapter 7: Credit Score and Borrowing

  • Spend the time and effort required to build up and maintain your credit score.

  • Avoid borrowing when possible, especially at high interest rates.

  • Pay off debt starting with the highest interest or smallest balance, depending on your goal.

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Chapter 8: Insurance and a Will

  • Insurance and a will are crucial to your financial plan to protect against unmanageable risks.

  • Disability insurance and life insurance are important if you have dependents.

  • Shop around for the best rate and avoid add-ons that you don’t need.

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Chapter 9: The Registered Retirement Savings Plan (RRSP)

  •  Postpone paying higher income taxes today by depositing money to an RRSP.

  • Invest in any of a broad range of options to grow your money tax free while in the account.

  • Manage your withdrawals from an RRSP or RRIF to avoid paying excess taxes.

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Chapter 10: The Tax-Free Savings Account (TFSA)

  • Reduce your taxes and have more money for any goal using your TFSA.

  • Start with a TFSA for retirement savings until you’ve determined if an RRSP is right for your needs.

  • Monitor your contribution limit to avoid paying unnecessary fees.

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Chapter 11: Employer Retirement Plan

  • Find out from your employer if they offer retirement plans and whether they make contributions.

  • Deposit enough to the plan to get the full matching from your employer.

  • Payroll deductions let you get to your money first, automate the process and keep your money out of sight.

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Chapter 12: The Stock Market

  • Stocks are a common way to grow savings at a faster rate while taking on more risk.

  • Minimize your risk by investing in many different companies over a long period.

  • Stock prices are determined by what a company owns, owes and earns, as well as investors’ emotions.

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Chapter 13: Fixed Income

  • Fixed income investments offer a more predictable way to grow your money, typically at a slower rate.

  • Diversify your savings by investing in multiple fixed income options.

  • Bond prices are determined by how much, when and how likely you’ll be paid by the borrower.

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Chapter 14: Investment Funds

  • ETFs and mutual funds simplify investing by purchasing stocks and bonds for you.

  • Minimizing the fees you pay will put more of your money to work for your future.

  • A difference of just 1.25% in annual fees can lower your savings by 30%.

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Chapter 15: Real Estate

  • Consider costs, your needs, your comfort with risk and more when deciding to rent or buy.

  • Investing in real estate offers another way to diversify your savings.

  • Assuming house prices will continue to rise is risky. Before you buy, consider the case where prices fall.

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Chapter 16: The Registered Education Savings Plan (RESP)

  • Grant matching on deposits and tax advantages help your money for post-secondary schooling go further.

  • You may qualify to receive money from the government without having to make deposits yourself.

  • Complexities of the RESP make it worth learning more when you’re ready to use the account.

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Chapter 17: Taxes

  • Sales tax, income tax, payroll tax and property tax are paid to different levels of government in Canada.

  • Reduce the amount of tax you pay by using registered accounts and claiming eligible credits.

  • Continue to learn about taxes to take advantage of all the incentives, or work with a professional as required.

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Summary II

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Part III: A Helping Hand

  • Your subconscious mind and how it’s constantly working against your best intentions

  • Important things to consider when reading through facts, opinions and suggestions

  • Programs you can use to keep track of your finances

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Chapter 18: Your Subconscious Mind

  • Your subconscious mind takes shortcuts to make decision-making easier.

  • Mental shortcuts can lead to errors called biases that make managing your money more challenging.

  • Automating your saving and investing is the best way to protect you from your subconscious mind.

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Chapter 19: Further Research

  • Understand potential conflicts of interest and the intended audience before acting on information.

  • Earn the highest returns available by investing in your financial knowledge.

  • Explore multiple opinions and take advantage of different modes of learning to retain new information.

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Chapter 20: Organization and Practice

  • Find a set of websites, apps or software to help track your progress and spending over time.

  • Use calculators to see what the future could hold and prepare for different outcomes.

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Chapter 21: Helping Others

  • You can have a major impact on others by helping them learn about personal finance topics.

  • While your financial plan may relate to you and your family, it’s impacted by Canada’s success as well.

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Closing Remarks

  • Part I covered saving and investing, showing that the steps involved are no different than rolling a snowball after a fresh snowfall.

  • Part II discussed additional tools and examples that can be added to your plan like accessories are added to a snowman.

  • Part III explained the resources that can help you along the way to reduce the workload and share the benefits with those around you.

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Appendix: Next Steps

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Appendix: How to Start Investing

  • Seven simple steps will allow you to pick the right investment approach for your needs.

  • Don’t delay starting because you want to find the perfect approach. Start early and learn as you go.

  • Ensure you’re getting value for the fees you pay, otherwise switch providers or be more hands-on.

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Appendix: How Much to Save for Retirement

  • Save 10% of your income for retirement if you’re starting early and slightly more if you’ve waited to start.

  • Aim to have twice your income in savings by forty and eight times your income by sixty-five.

  • Once you know when you want to retire and what it’ll involve, you can adjust these amounts accordingly.

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This blog is a duplicate of the recently self-published book The Snowman’s Guide to Personal Finance available for purchase here.