Of all the things people do wrong with their money, one error in particular stands out, says Canadian money guru Gail Vaz-Oxlade.
The number one sin? Not having a system to track your money, Vaz-Oxlade told more than 450 people, a sell-out crowd, at the Kamloops Convention Centre Sunday.
It is crucial that people track how they spend every penny they earn. Failure to track your earnings and expenses sets in motion a chain of other mistakes that leave many folk barely scraping by, she said.
Vaz-Oxlade, the host of the of the popular television show 'Til Debt Do Us Part, was brought to Kamloops by the law firm of Epp Cates Oien and The Daily News. The plain-talking Vaz-Oxlade gave the crowd her list of the 10 most common mistakes people make with money.
Next on her list of money sins was not knowing how to prioritize spending. It's important to understand what expenses are important and urgent and differentiate them from the things in life that are not. Know how to separate needs from wants, she said.
"You cannot have it all. You must make choices, based on your own values."
The remainder of Vaz-Oxlade's list of mistakes:
No. 3 — Not tracking your income and expenses. Too many people do not know how much they actually earn or spend every month. It's important to track every expense. Keep receipts and write it all down.
No. 4 — Spending money not yet earned, by using credit cards or lines of credit instead of saving for items.
"Do not spend money you haven't yet earned because the day will come when it is payable," she said.
No. 5 — Not saving enough money for retirement. A person in their 20s must save six per cent of their income for retirement, for their whole working life. If you push off savings until your 40s, you must set aside 18 per cent for your retirement. You need 20 years to properly save for retirement, she said.
No. 6 — Trying to keep up with the Joneses. That's a big mistake, Vaz-Oxlade said. We live great lives in Canada, yet we so quickly lose sight of what we have to focus on the things we want. The phenomenon encourages people to borrow money to buy new kitchens or a new car every two years.
No. 7 — Not planning for foreseeable spending that needs to be done. Things like new roofs, car maintenance and vacations. Borrowing money for such things is ridiculous.
No. 8 — Not having an emergency fund equal to roughly six months of living expenses to get you through when things go bad. Emergency funds must be kept in bank accounts, not in investment product, because it must be quickly available.
No. 9 —Investing in things you don't understand. Understand your investment risk profile, as well as your investment timeline. Don't invest in equities, for example, if you need the money sooner than later. There is the risk the market will crash just when you need the money the most.
No. 10 — Failing to build a plan for the bad events in life. That means having a will, drawn up by professionals. As well, you must ensure your spouse or other loved ones have the necessary powers-of-attorney should disability strike.
"You will die, you are all going to die, it's inevitable. Who has a will?"
Vaz-Oxlade urged the crowd to take responsibility for their futures.
"Your money is your responsibility and take full responsibility for managing your money. This is your money, this is your job, you are the only purpose who counts in the equation," she said.
Vaz-Oxlade also fielded answers from the crowd. Those who earn commission income must get one month ahead, while those who want or need debt consolidation loans are now probably out of luck as banks have been tightening up on their lending criteria. She told those with student loans to calculate their borrowing costs and decide if they can get a better rate in another kind of loan or line of credit.
"The thing about money — you have to do the math. It's all about the math. And it's only Grade 5 math."