Debt-Free Forever by Gail Vaz-Oxlade (the beginning after the end read novel .TXT) 📕

Some people have huge expectations about how investments should perform. It’s probably because the media hype the Bestest Investments and promote the idea that someone knows what’s going on. Hello! I have some breaking news for you—nobody knows. So that’s the first thing you need to wrap your brain around. If all those gurus actually had the key to making buckets full of money from their investments, why wouldn’t they just do that instead of trying to convince us of how smart they all are?

The second thing you need to wrap your head around is this investment creed: the higher the potential return, the greater the potential risk.

So back to my question: how greedy are you? Or put another way, how much risk are you prepared to take?

Want to take the least amount of risk? Hey, I’m not here to judge you, just to inform you. There’s a rule you need to know about if you’re trying to figure out how your money will grow and it’s called the Rule of 72. It’s a simple way to determine how long it will take for an investment to double. It’s often used with people who are investing in interest-bearing options like saving accounts or GICs, usually to make them feel small and stupid because their return is low and it’s taking so long for their money to grow. But it’s a good rule and you should know it. It goes like this: 72 divided by the return on your investment will give you the number of years it’ll take for your money to double in value.

If you’re earning a 5% return on a GIC, then the formula would look like this: 72 ÷ 5 = 14.4 years.

This formula is actually a little off and gets more “off” as the rate of return increases, particularly when you’re looking at returns of 20% plus. But it’s handy, particularly for the math-challenged. And it can be used backwards too: want to double your money in six years? Divide 6 into 72 to find that you’ll need to earn a return of about 12%.

If you invest in a GIC earning 4%, according to the Rule of 72, it’ll take 18 years for your money to double. If you’re thinking to yourself, “Who would settle for a pathetic GIC when you could jump into the stock market and earn stellar rewards,” you’re falling into a trap. Before you go dissing GICs, might I point out that if you are in any way concerned about protecting your capital—making sure the money you sweated your ass off to earn doesn’t disappear into the ether—then you’re concerned about risk. The least risky investments make sure your capital is completely, totally, and utterly safe. Of course, they also have a tendency to earn the lowest return going.

Which is how I come back to the question: so, how greedy are you?

If you’re not prepared to settle for taking 18 years to grow your $2,000 to $4,000, then you’re willing to accept more risk. In doing so, you’re prepared to accept that some of your sweat-money might disappear if market conditions aren’t working in your favour.

It’s important that you understand how much risk you can stand before you start waking up in the middle of the night with the sweats. That’s no way to live. And it’s no way to invest. You should not only know how much risk you’re prepared to take, you should also know what you’re investing in. If you don’t understand what you’re buying, you shouldn’t be buying it. If you don’t know the risks involved, you shouldn’t be buying it. And if you think it’s too good to be true, you shouldn’t be buying it.

How Committed Are You?

This is a simple question that has a wide range of answers from “not at all committed” to “somewhat committed” to “passionately committed.” Do you know what you are?

Let’s call a spade a spade. There are lots of people who say they want to save but don’t have the tenacity to stick it out. They’re what I call Saving Wussies. Lots of talk, no action. Lots of whining about how hard life is, no commitment to doing whatever it takes to make savings a reality. And then there are the people, the Saving Demons, who won’t spend a penny that’s not in the budget because they are so determined to achieve their goal. Do you know what you are? Once you do, you’ll better understand how to save.

Not at All Committed

You love to shop. You can’t save a penny. You think you should, or you know you should, or you wish you could. But you’re not going to suffer one minute of discomfort. You’re never going to delay your gratification or say no to yourself. Nope. Money is for spending, and that’s what you keep doing.

You know what? It’s your money. Spend it all. Just remember that your conscious decision to spend every penny you make eliminates your right to whine when you finally quit working and can’t come up with food money.

How You Should Invest: You’re going to want to get at your money whenever the whim takes your fancy. You should keep it very handy. Of course, you could help your case of “got it, spend it” by locking your savings up so you can’t get at them. But if you’re hell-bent on spending your money, admit it and don’t do anything to incur penalties when you decide to take the money out. Stick with a high-yield savings accounts, 30-day or 60-day term deposits, a money market mutual fund.

Somewhat Committed

You’ve been told you should be saving and you think that it’s probably a good idea. It’s just that stuff keeps cropping up, forcing you to spend your savings. The car breaks down, your son’s hockey fees come due, your daughter needs a dress for the dance, your husband wants a new TV, your