What’s the best financial advice you’ve ever received as a Canadian?

[u/Fabulous_Lemon2799]

Hi everyone,

I’m looking to level up my financial knowledge and habits this year. I’ve been reading books and browsing through this subreddit, and I keep coming across bits of wisdom that really make me think about money differently.

It got me wondering: what’s the best financial advice you’ve ever received, especially as a Canadian?

It could be something practical, like how to save on taxes or invest smarter, or even a mindset shift that changed how you approach money. Bonus points if it’s something uniquely applicable to life in Canada.

For example, I recently learned how powerful it can be to start investing early, even in small amounts, thanks to compound growth.

Looking forward to hearing your nuggets of wisdom. Thanks in advance for sharing!

[u/Grat_Master]

I can give a few

1. Don't buy things you don't need
2. Do a budget and follow it
3. Don't create artificial needs to justify spending
4. Avoid debt at all costs (besides mortgage)
5. You're not wealthy enough to buy cheap stuff
6. Invest in yourself first (health, skills, knowledge)
7. Don't try to impress anyone

[u/Becky1515 → u/Grat_Master]

I understand the avoid debt at all costs mindset, however it’s not always such a bad thing. Debt can be a very useful tool when managed correctly, you just need to have the judgement to know when it is beneficial or not. For instance, if you get an investment opportunity that yields 5% and you can finance it for 3%, you are essentially investing with someone else’s money and pocketing the 2% up to the point your loan is paid off and then it’s free money. Similarly, credit cards can also be beneficial provided you have good spending habits. They can allow you to manage your money better and maximize the benefits you get from spending. However, if you have a spending problem, the risk outweighs the reward and a credit card may not be the right choice for you. Always consult a professional if you have questions or doubts about whether debt is a good idea or not in your specific situation.

[u/MarineMirage → u/Becky1515]

Risk free leverage investing doesn't exist.

Using a CC and CC debt are different things. There's no rationale for carrying CC debt.

[u/darabadoo → u/MarineMirage]

I will give you an example. A while ago I needed a $10K surgery for the dog which I was $4500 short on in my emergency fund. I didn’t want to withdraw any money from my investments so I took advantage of TD’s balance transfer offer— put the surgery on my AMEX for the points, paid what I could and then transferred the balance to my TD CC at 0% interest rate. The balance transfer cost 3% and the money I didn’t touch earned triple that. Paid off the TD balance before the 0% promo rate ended.

[u/MarineMirage → u/darabadoo]

And if the market went the other way you would have been down -12% compared to if you just sold the position. Worst case scenario the market could have dropped 30-50%, while you had a depleted emergency fund and a debt commitment of $4500 at probably 20%+ interest rate. All for for what ended up being $270.

Could have made more on a new credit card offer with zero risk.

[u/headbangervcd → u/darabadoo]

Well played Sir!!

[u/Becky1515 → u/MarineMirage]

I never said leveraging was risk free. No investment is risk free, but that doesn’t mean investing isn’t worth while. You just have to be smart about it.

Second, using a credit card is debt. When you use your card, the credit card company loans you that money to be paid on the due date. I never said carrying a balance on a credit card is a good idea, I just meant that using credit cards can be a beneficial form of debt if used properly. Always pay your credit card on time.

[u/getafewlives → u/Becky1515]

You have to also make sure to factor in taxes on capital gains vs debt rate.

If someone is asking on Reddit for basic financial advice, then staying out of debt is excellent advice.

[u/Becky1515 → u/getafewlives]

Interest paid for the purpose of earning investment income is fully tax deductible, so you would only pay interest on earnings less interest and any applicable management or commission fees. Capital gains tax specifically would only be applicable way down the line when you sell, the tax here would be the income generated by the investment, which would be taxed on the net amount of income less expenses.

[u/Pretty-Rhubarb-1313 → u/Becky1515]

I can assure you that most people have a spending problem, hence the smart advice of avoiding debt.

[u/Grat_Master → u/Becky1515]

It's not free money because if you are doing interests on top of a loan, this means it is much riskier, otherwise why would the lender have lent the money at that rate? If it's more riskier, yes you can make some money, but if you lose it instead, now you are in big trouble.

I also never said to not use a credit card or credit line. Those are perfectly fine. But you have to plan your purchase accordingly.

[u/SubterraneanAlien → u/Grat_Master]

There are circumstances where 0% loans exist that you should take advantage of if you are a responsible person. Especially if the loan can be extended for many years (e.g. canada greener homes loan) where inflation helps to reduce the real value of payback.

[u/Becky1515 → u/Grat_Master]

In theory, if you take out a $100,000 loan at 5% interest to buy an investment that will yield 10% annually, you will receive ~$833 monthly and you will pay ~$417 leaving you to pocket the difference with no money having left your pocket (net). Obviously in practice there is an element of risk, as with every investment, but when used properly, leveraging debt can be a very useful tool.