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🚀🚀Getting financial advice on and off TikTok
Plus other snippets of financial advice.
This is a bite-sized newsletter. There’s information that may not be long enough for a standalone issue but is interesting enough that I want all of us to know about it.
This article in the Toronto Star talks about how young people turned to TikTok for financial advice. Sam Lichtman, a certified financial planner who educates young Canadians through his TikTok videos and his Millennial Money Canada podcast, is quoted about how to vet said financial information.
I read it and my first thought was, ‘at what point do you move from getting financial information from TikTok to meeting with an advisor?’
Fortunately, I know Sam because we were on a panel last October and then we obviously connected on LinkedIn. So I asked him, “When should you talk to a financial planner?”
Sam says, “There is no rule of thumb answer, although income does play a part. Financial planning and good financial planners will look at these areas: income, assets, taxes, major life events, and debt.
Any one of those things could be a trigger. When you start making higher income or have multiple sources of income, like rental properties, employment income, side hustles, etc., that is a great time to get a planner. Major life events are another trigger, having kids, planning for parental leave, buying another home, getting married, etc. This is probably the most common reason millennials seek out planners, at least that is what I see.
Another trigger is that your wealth is growing, and you need to make sure you are properly managing your risk. So, for instance, do you pay down debt to de-leverage as interest rates go up, or do you grow your investment accounts?
Anyways, it all comes down to this. If you are not sure you are doing the right thing financially, or feel that you may be able to do better, it's probably a good time to talk to a planner.
In February I wrote about retirement, American style where I spoke with Herman Thompson, a financial planner with Innovative Financial Group in Atlanta.
Thompson says that once someone crosses 60, the 401(k) offers a significant advantage, “There's a catch-up contribution of another $7,500 on top of the $22,500 so you can get up to $30,000 in cash this year, and that continues to be raised every year.”
As he says, it intuitively makes sense as people have their entire careers and make the most money ever when they're in the last few years of said careers. So that gives them the chance to catch up and put that money in their 401(k).
Now, how to find that money to put into your 401(k)? Thompson says to look at your eating and ordering habits. “The worst thing that I've seen out of clients ever since the pandemic is Uber Eats and DoorDash.
I get it, somebody else cooks it and someone else brings it to you with minimal downtime from your day. But you pay so much for that as opposed to joining Costco and buying chicken or your steak at the beginning of the week.
Cook it on Sunday night and do the meal prep so you can eat higher-quality food as opposed to dropping 40 bucks on Uber Eats.”
I like to bring this back every so often as it never grows old.
A lot of financial advice is made on the assumption that people have assets whether it’s a home, a car, savings, or registered or non-registered accounts like an RRSP or TFSA. But what about people who don’t have assets? Half of Canadian workers live paycheque to paycheque, so what can they do if they don’t have a home to refinance or they don’t have a TFSA?
I emailed certified financial planner Shannon Lee Simmons who wrote back, “It’s about smartly doing a controlled debt burn. If you must go into debt, do it with a plan. Financial harm reduction.”
What is a controlled debt burn?
This is a way of using debt smartly. No one likes going into debt but sometimes you don’t have a choice. One example is to get a line of credit and use that until you can get back on your feet. A line of credit is a better option because the interest rate is much lower than a credit card or payday loan, so you can pay off the debt faster. Remember to pay on time so you don’t default and hurt your credit score.
If you absolutely have to get a payday loan, the Ontario government has put a limit on the amount of interest that can be charged. You can read more about that here.
Plan your financial habits including debt
Figure out how short you’ll be per month and only take that amount from your line of credit. This might be a lump sum. You’ll be in debt but you’ll know by how much and won’t be surprised by the number.
Borrowing money from friends and family
Get it in writing. I cannot emphasize that enough. Get everything in writing. That includes the amount, any interest on the principal and payment arrangements between you and your family member. Money arguments can ruin family relationships so putting everything down on paper including options if you default on the loan. Keep communicating with your family member about financial circumstances as they pertain to the loan. (This is also something where you may want to establish boundaries. They lent you the money but you don’t have to tell them every single thing about your finances.)
I hope it gives an idea or two on what to do if you don’t have assets. Whatever you do, read the fine print and ask for help if you need it.
If you’re like me, you’re probably reading about layoffs, work being brought in-house (the worst when you’re self-employed), and inflation. That can cause anxiety. I hear you because I’m feeling it too.
Here’s what I’m doing about it. I don’t know if it’s working yet.
Refusing to take the blame for everything. I had disappointing job news last week. Turns out, it wasn’t me but someone else’s attitude. I can’t control that so I’m not worrying about it.
What can I control vs. what I can’t? Then taking action on what I can control.
Being realistic. Financial anxiety can make you spiral so I am looking at what is coming in and what’s going out. It’s not as bad as I thought.
This week’s readings:
Minor brag: The Budgette is on this list. The best finance blogs and podcasts for 2023 (Ratehub)
I did other journalism in the following two pubs:
What Is A Canada PRO Deposit? (Forbes)
Why well-to-do families should be less shy about using social media (Canadian Family Offices)
I have never liked Dave Ramsey’s shaming people approach to financial advice. These Millennials and Gen Z'ers Have Major Beef With Dave Ramsey (The Street)
Why some young Canadians are choosing the DINK lifestyle (Toronto Star)
Canadians can’t walk the personal finance talk (Investment Executive)