No money to invest?

The Advocate, Wednesday July 5, 1995

When people ask me what I do for a living I tell them I am a financial planner. Occasionally, without me saying another word they say, "I don't have any money." It is rather amusing to me why they say this. It led me to write this article.

Of course everyone has some money to invest unless they are deep in debt and are living from hand to mouth - paycheck to paycheck. In these severe cases I recommend they see a credit or debt counsellor to help them attack the root causes of why they are overspending. However, this is not the case with most people. Most have a reasonable job and get a decent paycheck.

It's not that they don't have any money to invest. It's because they may have fallen into the trap of overspending via plastic. Maybe they are just mismanaging the money they do have. Other factors may enter in also. Perhaps they feel they don't have the mind or the time it takes to understand investments and fear of the unknown holds them back.

I'm sure many people have either read or heard of the very popular top-selling book on financial planning called "The Wealthy Barber" by David Chilton. He has appeared on television numerous times. He is from Waterloo where our head office is located. He is well known by us at Refal. Before he beame famous, we helped him distribute his book to out clients and friends. We believe it is the best initial book to read on the subject of financial planning. It is easy to read and not technical. Roy, the barber, carries on a dialogue with his customers in layman's terms.

There is a chapter in the book called the Ten Percent Solution. Simply put, you pay yourself the first 10% of your paycheck and invest it wisely. You do this in regular systematic payments (usually monthly via a P.A.C. account). This means you average the cost of your investment over a period of time, say 20 years. You will always sell higher than you bought over at least a 5 year period. We in the industry use the term Dollar-Cost-Averaging.

The following example of 3 scenarios are projected for 10 years. It is rather amaing what they reveal. The following represent a $1,200 a year dollar-cost-averaging program invested under 3 stock market conditions.

1. EVER INCREASING PATTERN: At the start of year one an investment of $5.00 increased 50 cents a year to a final value of $10.00. It doubled in value. It is worth a total of $17,250.51.

2. UP AND DOWN PATTERN:At the start of $5.00 at the end of year one it went down to $3.00. Year two up to $6.00. Year three down to $4.00, Year four up to $7.00. Year five down to $5.00. Year six up to $8.00. Year seven down to $6.00. Year eight up to $9.00. Year nine down to $7.00. Finally, it doubled to $10.00 in year ten, The final value was worth $22.061.91.

3. BELOW AND RETURN TO ORIGINAL PRICE:Started at $5.00 declines for the next 5 years to $1.00. The next 5 years it steadily rises at the same pace to only the original $5.00. The final value is worth $25,455.02. Difficult to believe, I know.

I have some excellent articles on the subject. Please contact me for your copy and learn about the Guaranteed Way To Beat The Stock Market.

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Created: Thu May 16 10:30:50 1996
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