5 Things I've Learned About Finance In The Past Month That Have Changed My Outlook On Life
The views expressed in this Opinion article are the author’s own and do not necessarily reflect the views of Narcity Media.
However, I am learning. These past few months in particular have been quite eye-opening. It's amazing what kind of life-altering data you can receive in 15 minutes by simply talking to an expert. Through these brief interviews, I've found that most, if not all of my financial stressors were the result of me being afraid of the unknown. So much so that I never actually bothered to learn what the heck it is that I am actually afraid of.
I, of course, like most functioning adults had some understanding of how things like mortgages and credit scores worked, but after making every financial mistake in the book trying to "make it" in Toronto in my 20s, I figured I'd destroyed my chances of getting the former due to how badly I'd screwed up the latter.
This assumption haunted me for years, I spent many sleepless nights wondering how I was going to salvage my future when, really, an hour of research would've cured me of my delusion.
Ailments like the one above are why I thought writing this article would prove helpful to anyone facing similar demons. Below I have listed my five biggest takeaways as a person starting their financial journey later in life:
Your credit score resets
I always thought bad credit scores stayed bad for your entire life. Turns out, it's the credit score that dies, not you. Yup, like a phoenix rising from the ashes — it resets every six to seven years.
The exact timing of this mystical reset can vary depending on a few factors. First, it depends on which category your financial information falls under. Then, your specific province or territory comes into play. Lastly, it's up to the credit bureau, which in Canada means either TransUnion or Equifax, to generate your report for you.
Do you hear an angel chorus right now? Because I sure do. I always do when Imagining all that old negative information fading away, making room for a brighter credit future.
It was during my phone call with Sue, an expert with the Credit Counselling Society of Toronto, that this truth bomb was dropped on me.
"Once that derogatory information, like the old credit card, drops off your credit report, which happens six years from the date of the last payment, your score should start to go up," she said.
Sue also advised me to get a credit card as a way to build my score back up, something I'm ashamed to admit I'd never thought of. But, then again, even people smart enough to do such a thing, may not be doing it right.
"Some people use [their credit card] and then pay it off the next day, which actually does not help your credit score because [it's not] requesting a payment each month," Sue explained. "You want to let it go to billing so it is requesting the payment [and pay that balance by the due date."]
Qualifying for a mortgage doesn’t mean you can afford it
I learned a lot from my recent conversation with Leah Zlatkin, an award-winning mortgage broker. But, by far the biggest takeaway from our conversation was her cautionary tale about a young couple who thought having parental guarantors meant they didn't have to budget their mortgage.
Zlatkin explained that young people with parental aid often sign up for fancy mortgages simply because they qualify for them while failing to factor in that the loan's monthly payment is based on a much higher income.
"You qualify for a lot more money [when] mom and dad's [names] are on the mortgage, but unless they're actually contributing to that monthly net, [you're] in a risk position," she cautioned.
Even bad budgeting is helpful
I may not be the financial guru I envisioned I'd be while writing up my first budget over the spring, but my stumbling efforts have brought about some improvements. In fact, I've found that the mere existence of my budget, whether looked at or not, has helped me save more every month.
You see, before I became a bona fide budgeteer (lol), my chequing account was nothing to me but a mysterious portal into the too-real world, never to be looked at. Now, I inspect that account like some kind of hard-nosed money detective, writing down every little anomaly I spot. It's a game of financial hide-and-seek, and I have to admit — it can be fun.
Sure, my overall financial progress in the grand scheme of things has probably only gone up by a measly 1% since I started my journey. However, even that small victory has made a world of difference. If I had an Obi-Wan Kenobi in my life I'd like to think he'd tell me that I've taken my "first step into a larger world."
Your emergency fund is your lifeline
It's important for one not to get so high that they forget what down feels like. It's an easy mistake to make, and it's one my partner and I made after failing to prepare for a crucial life event. My girlfriend used to work in film, an industry that greatly prioritizes money over sleep, and when she did, we ate really well. However, she only worked on a contract-to-contract basis. Typically, once she finished a show, she'd have a few weeks off and then be back at it — and then the writers' strike happened. Suddenly, the work was limited, and a few weeks off became a few months.
We made so much money during her working period that you'd think we'd be able to survive such a lull, but we didn't save at all. We spent our money on things we didn't need when we should have been saving smartly. We ended up in such a deep hole that, for the first time in a long time, we didn't know where we were going to get our rent money from.
I'm grateful to say that we've been able to pull ourselves out of that hairy situation and are now doing much better. But while we are feeling up now, we haven't forgotten all the restless nights we went through. That's why I look at the extra money in our bank accounts now less as a means for fun and more as vital bedrock that keeps suffering at bay.
Don't let money become your life
I'd like to take this concluding point to remind you of the importance of not thinking about money too much. I know I've just spent a thousand words telling you why you should think about it more. However, I've also learned how relationships and other endeavors can suffer as a result of focusing too much on how much you have in the bank account.
It's important to splurge on someone you love or treat yourself to an overpriced ice cream cone every now and then. We only live once, after all.
