Personal Finance Masterclass | Zac Hartley | Skillshare

Personal Finance Masterclass

Zac Hartley, Entrepreneur and Day Trader

Personal Finance Masterclass

Zac Hartley, Entrepreneur and Day Trader

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13 Lessons (2h 9m)
    • 1. Intro

      4:18
    • 2. Net Worth

      8:48
    • 3. Assets and Liabilities

      7:08
    • 4. Income and Debt

      7:01
    • 5. Paying Off Debt

      18:12
    • 6. Other Strategies for Debt

      12:11
    • 7. Investing Your Money

      6:27
    • 8. Rent Or Buy a Home

      13:11
    • 9. Vehicle Expenses

      4:19
    • 10. Stocks

      12:52
    • 11. Index Investing

      13:54
    • 12. Bonds

      9:47
    • 13. Credit

      10:34
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About This Class

This course will cover everything you need to know when it comes to understanding personal finance and beginning your journey to security.  Throughout this course I am going to teach you how to establish a baseline, implement strategies, and reach your goals!

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Zac Hartley

Entrepreneur and Day Trader

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Transcripts

1. Intro: What's going on? Skill share. My name is Zachary Hartley, and welcome to my personal finance masterclass. Let me tell you a little bit about myself before we get started. So real quick. I'm a graduate of Mount Royal University, where I studied business management with a focus on finance. Since graduating, I've started and sold to different businesses. And since selling the last one, I'm now a full time investor and instructor, teaching people about the stock market, options, trading and personal finance. And so this is what I do full time now, I've taught over 5000 students that have gone through my courses and is now on my full time gig, completely dedicated to helping you achieve your goals. So I also picture on Dragon's Den. This was one of my business is about a couple years ago we did over a 1,000,000 revenue for two years in a row, and we sold it at the end of 2019. If you want to see that episode of the season 13 Episode four and since then I've launched two new courses stock market fundamentals and how to trade options. If you're interested in investing after this course, you should definitely check those out. Now, what are you gonna learn in this course? This is the really important part. Well, the goal of this course and the reason I am doing this is to help you and help people understand and control their personal finances. I know what is being like to be at the mercy of a credit card company or a debt, and so I want to help you put together strategies and methods to get out of those situations and to help build your personal wealth. Secondly, running your finances is like exactly like a business. I ran to manage all of the finances, and I run my life the exact same way. And so far, it's worked out extremely well. So I want to teach you those same methods and strategies. Thirdly, as money does not buy happiness, but it does by choice. It is never gonna make you happier having a $1,000,000 in the bank. But it will make you happy having the ability to choose whether or not to go toe work, where to go for vacation, where to go for dinner and what you can provide for your family. Those things will make you happy. And you can achieve that with financial freedom. Fourthly, is we're gonna build a plan to meet your financial goals were going to set your goals. We're gonna put together strategies and implement those strategies in order to help you meet those goals. And by the end of the course, you should have a road map for a plan off, how you're gonna get there. Next thing is, you need to diverse fire income, and we're gonna focus on that pretty heavily in this course. So we're gonna analyze your revenue and where you're getting your income from. And then I'm gonna help walking through a couple different ways that you can make more money by investing using an app called Rock if I and looking at real estate. So we're gonna evaluate all of those different options throughout this course, and I'm gonna give you all of the understand that you are gonna need to make those type of financial decisions. The agenda for this course is pretty simple. There is gonna be an excel sheet, and I'm gonna do a little video of how to use Excel, in case you don't know how to do that. It is gonna be the last video in this course. So if you're not familiar with Excel, please check that out. But the first thing we're gonna do is look at our assets and expenses. Figure out how much money is coming in. How much money is going out later In the course, we're gonna look at large purchases, managing debt and figuring out how to pay it off. In the most effective manner, we look at taxes and credit, how to plan for your retirement budget and planning and investing. How do you actually spend your money to generate more wealth for yourself? One of the fun exercise that we're actually going to start with is calculating your net worth figuring out how much you are actually worth and going through the entire exercise to establish a baseline off where we're started at the end, you should have a solid understanding of how money works. Ah, plan for building your net worth financial decision making skills, Meaning? Do you want to rent or buy? Should you buy this car? That car? Where should you put your money? I want to give you all the skills that you need to make those decisions thirdly or, fourthly, is basic investing knowledge. I'm going to give you a basic introduction to the stock market. I'm gonna break it down and show you where you may want to consider putting your money and where other people are generally putting their money. That could be in the same life situations as you. And lastly, I'm gonna ask you for a review. I'm gonna ask you to review this course and help me out by improving this course, making it better and showing other people what is inside of this course. So at the end of this course, I'm gonna ask you for a review. I'm gonna hope that you have achieved the four basic things ahead of that review. So if you have any questions, my email is gonna be in the description of this course. I'm happy to help you out in any time. Please feel free to send me an email, and I hope that you'll join us for the rest of the course than first exercise that we're gonna do is calculating your net worth. And that's the next video. So here we go 2. Net Worth: What's up, You guys welcome toe lesson to in this video, we're going to talk about net worth and use a power point just like the introduction video I'm also going to incorporate in Excel sheet. So if you're not familiar with Excel, jump down to the very last video in this course, and I'll show you exactly how to use it. Otherwise, let's get right into it. I'm gonna show you how to calculate your net worth and why it's important. So real quick. Net worth is calculated by your assets minus your liabilities. It's basically a snapshot of your financial position, that shell that tells the banks or investors or whoever it is exactly where you're at financially. It's a standard measurement of wealth that basically you can compare different people to compare them all around the world. So it's a very easy system, and it's a very easy measurement of how much you're worth or not what your net worth is. Now. This is used very heavily by banks. When you go get a mortgage, sometimes when you get a credit card, when you get a loan or a line of credit, especially when you get a business loan. They want to know exactly what your net worth is, so that if the loan or that money doesn't go well or it doesn't get repaid, they know that they can come after some of your assets, depending on how much you have. So that's the idea of net worth. It's very, very important. And the banks, we're gonna use it. Any time that you need to go in and get a mortgage to buy a house or to buy a car, anything like that, you're gonna need to fill in a network statement. So we're gonna talk about it, and we're gonna actually calculated in this video. But first of all, let's talk about assets. The calculation is, assets minus liabilities equals your net worth. So let's talk about assets real quick. Assets are cash, so physical cash or bega coins. Whatever you have, that is your physical cash. You also have your bank account, so any cash that you can get to today so your checking account, maybe your savings account, anything that is super liquid and easy to get to. After that, you have your investment. So if you own any bonds, young T bills you own stocks, anything along those lines. Those would also be considered assets on top of land or property. If you own a cabin, if you own some equity in your house is and you paid a down payment and you've made some loans, you own that chunk of your house that is considered an asset. If you own your vehicle and you don't have any payments and you don't know anybody money on it, that's an asset. Or, if you have a where collectible a coin collection of Jersey collection memorabilia, whatever it is, that's all considered an asset that as tangible value at the market and you can sell that, and that is considered an asset. On the other side of that, you have liabilities. This is usually pretty simple. It's anything that's like credit card debt. If you have a mortgage and your 200,000 on your house. Still, that is a liability. If you have a loan for your business, for anything else for a car, anything like that, that's a liability. Your car payments, your student loans, your liabilities. If your taxes to the government. That's also a liability. Anything that falls into the category of you owe somebody else money, and it's basically written out in a contractor some type of agreement that is considered a liability. So let's go jump into the Excel sheet real quick and show you how to calculate this. I've made template for you, so it's really easy to use. And this Excel sheet is something that we're gonna use all the way throughout the course. So we're gonna build on it, starting with today, The next lesson is going to use the lesson after that is going to use it, and we're gonna use it to basically map out your financial plan. And we're gonna help you build that financial plan as we go through this course. So try and go with a suit sequence all the way through. But let's get right into it right now. So here we go. OK, so this is a simple Google doc form. I'm gonna put the link to this in the description. I'm also gonna send it as an Excel sheet, and I'll try and basically send it out as many ways as I possibly can so that you have access to this as we go through the videos but this is a really simple net worth calculator . Now, when you do this for the bank, it's gonna be a form that you fill out with all your personal information on assets liabilities and they just subtract him. So what I've done is I've built a really easy calculator here for you. All you have to do is fill in your numbers, and it's gonna calculate your personal net worth. If you have additional assets or liabilities, I've left some blank spaces underneath. The formulas will work out, and you will be a to actually calculate your net worth. So let's go through this exercise right now. As you can see, I've got all the important information up here with the highlight and yellow showing you your total net worth. Let's go through the numbers, though, So this is a fictional example, and I'm going to use this example going through this course example here is basically a college student that has some student loves. They just graduated that got some debt. They have negative net worth. Right now, we're gonna put together a plan for them to get out of that debt and then build their networks so That's how this course is gonna be structured. It is gonna be very, very valuable for you, even if you don't have debt to go through these next couple sections because we're gonna map out the amount of money that you have left over after your expenses in order to invest . And then we're gonna start talking about adding revenue streams and where to invest your money. So let's start talking about your net worth for so because that is gonna be the benchmark of where you're at today. So when we go through this, we can see assets. This person has $1000 in the bank there for $1000 in cash. So maybe it's tucked away under their bed, and idiots and coins from working their waitress are bartending job. Whatever it is, they are $1000 cash that's at their apartment or at their house. They've got $5000 in a bank account. They have no investments, no RSPB because they're just graduated. They rent right now, so you don't have any home equity. They have no vehicle equity because it was given to them by their parents, and they're zero collectibles. And there are $1000 with the furniture, that's their bed, their dresser, their mattress and all of their household effects, including their laptops. So this is the assets of this person owns. As you can see, they also have $1000 on their credit card right now. They went out partying $20,000 because they just graduated university and their $5000 on their line of credit for all the expenses they had during university. So this is where this person is out right now. So when we add everything up, you can see that they have $7000 worth of assets. They have $26,000 worth of liabilities on when you subtract your assets from your liabilities, you can see that they currently have a net worth of $18,990 in the hole. There negative almost $19,000 now, is it? Should this be a concern? If your numbers close to this know it should not be, for instance, this first in here got a degree out that maybe you have some type of skill. You have years of experience in some different industry that's very about valuable that isn't reflected in your networks statements. So this network statement is by no means a reflection of you as a person or use your contribution to society. The only thing it is a reflection off is your assets minus your liabilities. That is the only thing this is a reflection of, unfortunately, ah, bank that values and favors is very heavily, especially when you're gonna go get alone or you're gonna get financing. So, as you see here, the example today has a negative $18,990 in net worth. Not a great look, not a great appearance. But you could definitely turn that around really quickly, and we're gonna talk about strategies on how to do that. The other thing that I've put in here is a five year tracker as an example and as an explanation for you guys. So, for instance, if you use this and you say OK, it's August 1st. Right now, I calculated my net worth and it is negative. 18 9 90 I go 1890 And now, as you go through the months over the next five years, you can start to track your net worth and what we're gonna do later on in this course is mapped out up so you can graph it over time and see your progress visually displayed in this excel sheet. So I have a five year track on almost all of our statistics so that you can use this going into the future. And you can seriously track your progress throughout this course and throughout your experience. But this is how you calculate your net worth assets minus liabilities. Super simple tracker right here in the Excel sheet. I'm gonna jump back to the power point used to finish off this video, so stay with me real quick. Okay? So we're back. I'm just going to finish off a couple sides real quick. If your net worth is positive, it's means basically good job. You're doing well so far. Now it's time to actually build that up and build some real wealthier. If your net worth is negative, that is no problem. May be just took on a mortgage. Maybe you have some student loans. That is absolutely no problem at all. What we're gonna do is talk about some strategies to find the most efficient way to pay back the debt that you haven't build wealth at the same time. In summary, the big thing you want to do is increase your assets, decrease your liabilities and reduce your expenses. That's gonna be a topic of one of the next videos. Here you go. Next, videos, assets and liabilities. We're gonna dive into that a little bit deeper. We're gonna talk about managing your expenses and how to pay off your debt. We're also gonna talk about credit cards later on, and then at the end, or not in the middle of the course 2/3 away through, we're gonna talk about investing large purchases and how to actually grow your net worth. Make more money and manager accounts in your expenses so real quickly here on the next video assets and liabilities. You do need to know this because this is an important thing when you talk about managing your expenses and figuring out how much money you have left over to actually invest in that verse for your revenue stream. So stay with me in the next video. We'll talk to you soon. 3. Assets and Liabilities: What's going on, you guys. My name is Zak. Welcome toe lesson to today. We're talking a little bit more in depth li about assets, liabilities and even expenses so real quickly when we talk about assets and we put them on our networks. Statement. When we're talking about valuing our assets at the market value, No, when I say market value, I mean, what is it worth today? If you had to go out and sell it right now, what would that be worth? So if you had a 2010 SUV that you bought for 100,000 in 2010 it's not worth that. Today, it's maybe worth 10 or 15. That's what the market value is of your SUV. And that's what we would list as our net worth or on our network statement when we go to fill that out. So some assets depreciate and some assets appreciate in the event example of the car, not as an asset depreciates. In other words, they will loses value over time, so those are the types of assets and purchases that you want to try and make as little as possible, or at least acknowledge and know that that assets not worth as much later on. So maybe you don't want to spend as much money on it. Or maybe you want to try and find a different option. The other side of that is an asset that appreciates over time. So those are things like stocks, collectibles, things that are gonna be worth more in the future. So if you have a very rare car, that was gonna be worth more if you had a stock that paid you money over time, we're gonna talk about that a little bit further on. That would be an asset that appreciates over time. And those are the types of things that you want to hold on to. Those are the types of things that you want. So on the other side of that is liabilities a little bit more in depth. Lee. These of the people that you owe money to some liabilities can become assets such as a mortgage. When you start your mortgage, you have a $500,000 house and you put a $40,000 down payment on it. Your own 40,000 of that $500,000 house as you start to pay off more, more more of your mortgage. That liability becomes smaller and smaller until that entire house becomes your personal asset. So some liabilities are great, because over time, as you pay them off at a good interest rate, they become your assets over time. Now, with liabilities, you're almost always going to have to pay interest on that money. So if it's a credit card, if it's a bank loan, if it's a mortgage, anything like that, you're gonna have to pay interest on that money. Most of the time, the interest rate is between 3% and 20%. Some credit cards can go as high as 25 or 29% but you're kind of getting a little bit out of hand at that point, and anything over that is almost illegal. So almost all interest rates between 3% and 20%. But your higher liabilities and the more liabilities that you have, the more interest that you're gonna be paying over time. So we're talk about strategies of how to pay that off most efficiently. Now your expenses, these air different than your liabilities, your expenses or all of your data date purchases, so your food and your drinks and where you go to eat that is not governed by a contract that is not governed by an agreement. There's no monthly subscription to that unless you're buying from one of those companies. But that's kind of a different scenario. It's completely optional, and it's a day to day purchase. Same thing with your entertainment and your Netflix things like that. Those are expenses that you have, but those are not liabilities because you cancel them at any time or you can change your plan. Same thing with gas, your insurance and your holiday gifts. If you stop driving, you no longer pay insurance No longer paid gas. You don't have to buy Sally Sue your neighbor, that expensive Christmas gift. These are all your daily expenses. These were categorised differently than your liabilities. Your liabilities are governed by contracts or agreements that you have to pay off your mortgage loan, your credit card. Whatever it is, you have to pay that off. Your expenses are almost discretion in their optional, and you probably have choices, and them, such as your insurance, your gas can just choose not to drive now, the big thing that we need to focus on here is knowing your expenses and understanding them , because this is what's gonna dictate how much money you have left over to build your wealth . This is the part that makes all of the difference, and the best part is that it's the easiest area to fix. You can decide whether you want to get steakhouse or whether you want to go to a grocery store and buy a steak and cook it yourself. You can decide all of those different factors to control your expenses much more strongly than you can control your liabilities. Once you have a student loan, it's very difficult to change that agreement. Once you have on your credit card, it's very difficult to change that agreement. You can, however, limit limit the types of foods that you eat, the expenses that you make and the number of video subscriptions that you have per month, for example, so the one thing that we're gonna talk about here's an expense tracker. I built this into Excel sheet. It's a really simple thing, do and use, and it's very, very powerful, so let's jump into it, OK So, as you can see, this is the net worth calculator that we had opened in the last video. If you go one tab over, you can see that we then have an expense tracker. So these are some rough numbers again, in the same example that I'm talking about here with student. So if we go through in, see again all of the important information right at the top, highlighted in yellow, and then all of the information that you need to input is gonna be down here. So monthly expenses. I just put in the categories that I'm most familiar with him that I have. But I left some options down here that you can add in a swell. So for me, I spend money on groceries, restaurants, alcohol, tobacco, cannabis, whatever it is that gets you going. Some people spend some money on that vehicle gas vehicle, insurance, utilities, video subscriptions, music subscriptions, whatever it is, these air all basically your personal expenses, there are almost discretionary expenses, or at least you absent choice in them, and you have some control over them. So when we look at this example, you can see that the monthly expenses we're $1965 is probably a rough, rough range of a middle class person that maybe have some student loans. So this is the number that we're gonna use for this example. Now, on the other side of this, I've also added in a liability tracker. So these air your monthly liabilities in other words, your minimum payments the smallest amount you have to make in order for it to not severely affect your credit or not be in default with these loans. So we put this in here, we can see that this person has a minimum credit card payment of $100 a student loan. They have a $20,000 debt on their student loans and then pay off $180 per month. So for this person, they're paying out of pocket $2200.45 25th $2245 in expenses and liabilities every single month, almost $2000 in exactly expenses and about $280 just to keep their liabilities in check and not default on them. So what's really important here is that you figure out your own numbers because in the next video, we're going to use that to calculate how much money you have left over in order to actually build your wealth or pay off your debt most efficiently. So let's get right into that video. But before we do, I got a couple sides that I just want to finish. OK, so in the next videos, we're gonna talk about income and figuring out how much money you can actually bring in a month. We'll also talk about bringing in a little bit more money through some additional revenue streams, and then we're gonna use it to calculate how much money you have left over in order to build wealth and pay off that debt. So let's get right into it. 4. Income and Debt: All right, you guys, welcome to another lesson in this video. We're going to talk about income and death, all right, So income is basically a really simple terms. It's how much money is coming in each month after tax. So it's after tax money of how much do you actually have to spend on your expenses? Cover your liabilities and save to build wealth or pay off your debt. Income minus expenses equals your money left over for a plan. So if you bring in 4000 you have $2000 in expenses. Means you have $2000 to pay off your debt or build some wealth. And we're gonna talk about strategies for that. In this course. The last thing is, this is the money that builds wealth. This is the money that's really important for actually accumulating real wealth and building a future for you. For your family and for your grandchildren. You actually have something to be proud of. This is the money that's really important, that you spend properly, that you invest properly and that you put aside for the future for basically your future and what's to come next. So we're gonna jump into an excel sheet real quick just so that I could show you how to calculate it and what we're looking at. Okay, so this is the expense tracker from the last video you go one tab over Really simple. And it's gonna bring you to the income tracker. So it's a really simple tracker and nothing, nothing too fancy here. All you need to do is insert your monthly income. Now I've broken it down into pay check. 12 and three. Most people received two paychecks a month. Some people received three, depending on how the day's lineup. But the idea here is you basically just want to track. How much are you bringing in each month through your regular job? Three. If it's bartending or salary or whatever you do, try and get that in here. I've left a couple of blank spaces and then at the bottom. I've also put in rock if I income rental income, dividend income and other income. So four other things that you could be adding to your income streams to diversify your income and build more wealth and bring in more income. We're gonna talk about all four of those topics later in this subject or later in this course. But first of all, you need to calculate your monthly income. So this person, this basically X graduate or student graduate, makes two paychecks. It makes $1500 per two weeks, so he makes about $3000 per month. Now this is post tax. And then again, you can see there's a five year tracker in here so that every single month, if you use this spread shooting, you calculate how much money you made. You can put it in here and you contract this over time, and we're going to turn this into graphs later on. But the big thing here is knowing how much money you have toe actually go in and say, OK, this is This is how much I make every single month. You need to know how much you make, and you need to know how you can add to that Over time. Let's jump back to the slides real quick. Okay, so we're back in the slides. I want to talk about debt real quick. Debt is a liability. You owe somebody, and it's de tracks from your networks. So any time you have debt or you owe money to somebody that is gonna detract from your net worth. And it's gonna be more difficult to go get a mortgage, get a loan or start a business. Paying interest on it is also a very expensive thing. If you're paying 3% that's pretty good rate if you're paying anything higher than that, while you're gonna be paying a substantial amount of money on that debt. So the big thing here is you want to limit your debt and get rid of that debt as much as you can. However, not all debt is bad debt. There is good debt and there's bad debt, and I want to break that down for you right now. Bad debt is debt with a high interest rate, anything above 8 to 10%. Anything above that sort of middle ground is, in my mind, bad debt. That is not good debt that is. Basically, somebody's trying to make a lot of money off you. It's a credit card. It's a bad line of credit. It's a really bad loan where something has a things. You have a very high likelihood of defaulting and therefore you're gonna pay a very substantial amount of interest on that bad debt can also dealt with bad payment terms. You could be locked in for a very long time with no flexibility. Could have very high fees in order to get out of it, making it almost not worth it. It could be very difficult to get out of it. So examples with their credit cards, payday loans, cash advances, anything like that is gonna be bad debt, because you're interest rate primarily is gonna be over 8 to 10%. And it's gonna be difficult to get out of that debt easily without paying terms or without meeting certain requirements. On the flip side of that, there is good debt. Good debt is what I would consider interest rate below. This is a typo here interest rate below 8%. Ideally, you wanted in that 3 to 5% range that would be considered really good debt and good payment terms. If you have flexible payment terms and you can get out of it as soon as you pay it off, for you can make a large chunk of that payment whenever you want. Those air considered great payment terms, and I'll be more flexible in that type of debt or if it has lower fees. It's also much more appealing, and it can lower your overall payments over time. Good debt could be considered things like mortgage business loans, home equity loans, anything where you're paying. Ah, low interest, wrote a low interest rate, fairly flexible terms, and you have some control over that loan. Now here's the reason why some of that debt could be good. A lot of people say I'm totally debt free. I have absolutely no debt. I have tons of assets. Well, that's great. But there are some downsides to that scenario. For instance, if you have a lot of assets for you even have some assets and you have zero debt, you could be under utilizing those assets. What I mean by that is, if you own your house, you have a $500,000 house that's completely paid off, and you don't know any money on that. Well, you could take out a home equity loan on that house, and you could pay 3% interest on that. You could get $100,000 if you could invest that money into a new house and turned it into a rental property. Or invest into the stock market and make a little bit of money. If you could invest it and get an 8% return through whatever different avenue you choose, well, you would be to profit that 5% difference. And if both of your avenues air very safe, then you could be utilizing your assets that you have to get additional financing to make that extra 5% or whatever the numbers work out to be. That's why you don't see any large corporations with zero debt on their balance sheet. No large corporation, no publicly traded corporation. We'll have a balance sheet with zero debt because it means that they're under utilizing their assets and not getting as good of a return as they possibly could. For investors, this exact same principles apply to people and managing your own personal finance. The only difference is you need to be able to manage your risk, and if you're just totally risk adverse, maybe it's not the right answer. If you're just really proud to say I have absolutely no debt, that's a great, great situation to be in, and there's nothing wrong with that either. So I just want to bring that up because people that say that maybe don't always understand the implications of that, or maybe aren't getting a maximum return on the assets that they do have. So next videos. What I want to talk about is paying off your debts. So now that we know what your net worth is, we know what your liabilities and expenses are, how much money you bring in each month. Let's calculate how much money is left over, and let's put that money to use by building a plan to pay off your debt or build your wealth. Here we go. 5. Paying Off Debt: are you guys? Welcome to the next video. In this lesson, we're gonna talk about how to build a plan to pay off debt. So in the beginning of this course, we've now talked about what your liabilities and expenses are, what your income is. And now we're going to calculate how much money you have left over and how to deploy that leftover money most effectively to pay down your debt and get started in building wealth. So let's jump right into it. So planning this is the big thing here because income minus expenses means you have money left over for a plan. This is the key here. If you congenital eight mawr income, you can reduce your expenses and museum more money left over to pay down your debt or build your wealth by investing your money. So we're gonna talk about specifically in this video is paying down your debt because it is more important than investing your money. And then after that, we're gonna talk about how to build your wealth by investing your money and assets, real estate, stocks, bonds and deploy your capital most efficiently. First of all, though, paying off your debts So this is Ah, high focus on bad debt. If you have a mortgage that you paying three or 4% I'm not concerned about that. We're gonna address that later in the videos. Right now, I'm talking about anything over that 8 to 10%. Even that 6 to 7 range. I want to know about that. And we're gonna put together a plan for how to figure out the best and most efficient way to pay off that debt. So the one thing a couple things that really want to highlight on here is paying off a credit card with 20% interest is the exact same is investing your money and making a 20% return. If you have $1000 you're trying to figure out should I invest my money or should I pay off my credit card? Always pay off your credit card. If you could get a 20% return on your money, I would take that all day long. No matter what, I would a funnel all of my savings into that survive a guaranteed return of 20%. I would be set for life now with a credit card. You do have a guaranteed 2020% return because if you don't pay that off, you're gonna pay it an interest. Therefore, by paying off your debt and paying off your credit card. It's the exact same ideas making that in the stock market or in the real estate market. The other thing about paying off your debt is that when you pay off your debt, you increase your net worth. It is a great way to increase your net worth, get better lending from the bank gold and get that mortgage. Get a better rate on your loan. Whatever it is, you want your net worth to be as high as possible, and by paying off your debt, you can start to achieve that. Now when I want to emphasize this again, because this is a really important fact. If you pay off your debt, whatever interest rate you are paying on that debt would it would be. The exact same result is if you invested that same amount of money into the market and generated that same return. Now, the advantage of paying off your debt is that you get a guaranteed return, you save 9% interest payments that you would have to make for the next year, whereas in the stock market, your first of all not guaranteed to return it all. And if you could get 6789 even 20% return, like on a credit card, that is a phenomenal, phenomenal opportunity. You need to take that every time. So those are the reasons why paying off debt should always be your number one priority before you invest. And it is the best first step to building your net worth. So how to pay off debt? Bad debt? That is what we're gonna focus on in this video. The biggest thing in the biggest, the most popular strategy and the strategy that makes the most sense for the most people is to pay off the debt, starting with the highest interest rate. So if you have a credit card at 20% interest rate and you have Stone student loan at 6% interest rate, you're much better off to pay off the credit card entirely and then start chipping away at your student loan minus your monthly fees or whatever you have to do to just keep that loan there. The idea here is you want to figure out how much money you have left over said a monthly target of investing that money into paying off your debt and then start to plan out your progress. And that is exactly what we're gonna do in this video. I'm gonna give you the tools that you need to get it all done right away. So let's jump into my excel sheet and let's get started on it. All right? So I'm back in the spreadsheet. And as you can see, this is the exact same tab that we finish the last video on. Now, if you go one tab over and you click on the profitability calculator, this is something that's gonna help us plan out how to pay down our debt. So on the left hand side here, this is super super easy. All it does is it pulls numbers from the 1st 3 sheets that we worked out. So your monthly income is $3000 in this example, your expenses or just under 2000 and you have monthly liabilities of $280 that's broken into the minimum payments for your student loan and your credit card. So what that means is that at the end of the month, your income minus your expenses and the payments that you have to make in need your leftover with $755 worth of profit. Now I'm using this as an example of a college student that just got out and have student loans. But what you need to do is figure out what your number is. Your profit at the end of the month. Hopefully, it's larger than zero. But you need to figure out what your crawford is at the end of the month, because that is the chunk of money that we're going to use to figure out what the best way to pay off your debt is for the best way to invest your money. So really, really important. Especially for the next action, you need to figure out what your monthly profit number is. This is the target. The monthly target I talked about just a minute ago off. How much money are you going to try and invest in paying off your debt or invest into the market? To build your net worth every single month, you need to set a goal and set a target for that. In this case, it's $755 that is left over. And now we're gonna put together a plan for how to utilize that money most efficiently based on their circumstances. So this is the profitability tracker really, really simple. Nothing fancy here, and there's not a whole lot to it. Now all I'm going to do is just enter my income this month. So this was the month of July, his first night, $755. And as you can see, we're gonna go through the months and we're going to track this all the way through so that you can measure your profitability over the months. And then we're gonna put this all into a graph at the end. So the next tab over is where we're gonna build our plan for paying off the debt. Now, this tab is a little bit bigger, so let me just walk you through it really quick. So on the top left here, we can see pretty much the same set up is all of the other ones. You have your monthly profit. Now, this is the number that we just calculated income minus expenses. This is your little chunk of change that you have left over at the end of the month and hopefully a monthly target for saving and investing. So $755 in this example this person is taking out $100 of that amount every single month and putting it into an emergency fund. This is the 1000 or $2000 cash that's heading under your bed in case the absolute apocalypse comes and you need it fast. So this is $100 per month of somebody's stashing under their bed into an emergency fund, and it leaves us with $655 left over on a monthly basis that we can now decide where to put it. We can pay off our debts. We can invest into the market, could do whatever we want. And in this situation, because this person has debt, we're gonna pay off those debts, and we're gonna figure out the most efficient way to pay off those debts. So let's get right into it. Monthly process profit of 7 55 were putting $100 into an emergency fund that means we have $655 left over on a monthly basis that we now need to decide what to do with. So on the left hand side here, there is a simple, simple chart here. It's just broken down into a list of the liabilities that this person has. So on the left side, you can see all of the debts. You can see they have a credit card, they have a student loan and they have a line of credit. I've also entered in a debt number four here. This person doesn't have one, but you can fill this in and we'll work all the way across the charts. So they have three different debts and a current balance of $26,000 respectively. Now I have also entered the annual interest rate on your credit cards. Is probably going to be 15 to 20% on a student loan is probably gonna be 5 to 10. And on a line of credit, it's probably gonna be meat to 15 or 16%. Now those air just rough ranges these in my estimates, but this is my experience in the market, so your credit card is going to have a minimum payment in this situation. It's $100 your student loan is also gonna have a minimum payment. In this situation, it's $180. Your line of credit will not have a a minimum payment if you don't know what a line of credit is. It is similar to a credit card, but you don't pay any interest unless you actually use the money. I'll talk about that a little a little bit later. Video. So what I've broken down here is we've got three different debts, and now we need to figure out how to pay them down most efficiently. If you remember at the beginning of this video, I said we're gonna pay down the debt with the highest interest rate first that is going to help us save the most money and pay off these debts the fastest. I'm gonna show you exactly what I mean by that. So on the right hand side of this page, this is where it starts to get a little bit bigger and you may have to zoom out of your excel sheet. What I've done is I've broken down into basically, breakdown a payment schedule on a monthly basis. So I'm gonna zoom all the way over here, and I'm going to zoom out just a little bit so that you can see this even better. So what we let's go to 90%. Okay, so what we've got here is basically a payment schedule on the left hand side here in column G. You can see the number of months. So when you start this spreadsheet, that is months zero and the first of the month the next month, That is gonna be a month one. Or do it however you want. But that's the idea. Here is we're just starting with month number one, and on the right hand side here, you can see total debt. So this is the total debt that you currently have to pay a month, one in month, two months, three and month for all the way broken down on basically a monthly basis. So you can see all the way down from 26,000 all the way down to zero. Exactly how long it's gonna take you to pay off these debts. And on the right hand side here you can see total payments. Now, this is the sum of all the pains that you're gonna make this month. Now, like I said, we have $655 of a payment that we can decide what to do with. On top of that, we have $100 credit card payment and 100 $80 student loan payment that have to be majors. Toehold alone and not defaults are total payments for this month is $935. Now, as we go across you can see I have it separated into three different sections. The 1st 1 here is credit cards. The 2nd 1 is Student Loan on the third column is your line of credit. Now all three of these sections air the exact same and they start out with You're starting balance on left side here. After that, you have your minimum payment. So if you start with $1000 you make $100 payment and then you have your interest accrued. So this is how much interest was generated this month that you now have to pay. So in this situation was $17 then highlighted in green here. This is the super important part. You have your flexible payment. So this is where you decide to put your money. So really simple. You can put it in any of these dream columns. However much you want in this situation are example a $655 left over at the end of each month to investor pay off their debt. So for us, we're going to put that full $650 into paying off our debt when we're gonna figure out what is the most efficient way to pay off her debt. So if you remember from the example, the first thing I said was pay off your highest interest rate debt first. In this situation, our interest rate on your credit card is 20%. So we're gonna pay off our credit card first, are starting balances 1000 with a minimum payment of 100 with $17 in interest. And we're going to make a payment of the full $655 that we have giving us an ending balance of $262 after that going into month to me now, the starting balance of $262. We make our another $100 minimum payment. We had crew $4 worth of interest and then we make a flexible payment of $166 to completely pay off our credit card. Now, that means that we have some money left over for the month. So now we can put that towards you. There are student loan or a line of credit. If we go over to the first page where we listed everything out, you can see that our student loan as an interest rate of 9% and our line of credit has an interest rate of 15%. That means that we should pay off our line of credit next because it is the worst interest rate that is left over. As you can see here, I have one call column called Payment Order, where I've actually listed out what order I want to pay down these debts in. And you should do the exact same thing in your spreadsheet. So I'm gonna scroll back over. That means that we're going to pay down our line of credit next. So, as you can see here and month one we put all of our money towards our credit cards so we couldn't make a flexible payment. In Month two, we put $166 towards our credit cards. Now we have $488 left over for our line of credit in the next month are opening balance was 4638. We did not have a minimum payment on the line of credit. We accrued $58 worth of interest and we paid down the full $655 towards that line of credit at the end of month three. It left us with an ending balance of 4004. $41. If we go down to the next month, we can see our ending balance is $3436. And all the way down until what is this look like? It looks like month 10 where we have a starting balance of $299. We accrue $4 worth of interest. We pay a total of $302 and it totally X is out. I think this is $303 actually, and it completely Some rounding error there, That's OK. It completely crosses out our line of credit. Now we have $353 or three. That doesn't make sense. We have about 300 about throwing your $50 to pay down our student loan. And as you can see, we go all the way down for a student loan. Until in month 36 we had $0 meaning that we just paid down $26,000 worth of debt in a total of 36 months or three years. And the total for this. If you scroll all the way down, you can see that we're gonna pay $29,870. So about $3870 worth of interest on these loans. But we managed to pay everything off over the course of three years, paying at $655 per month. And this would be the theoretical, best way to pay off your debt. Now, just to prove the point and show you why you may want to do it this way, I'm gonna I duplicated this tab with the exact same information. But I'm gonna pay it off differently. I do it in the reverse order. So I'm gonna pay it off with the lowest interest rate first and finish with the highest interest rate. So for us, the lowest interest rate is the student loan. So if we put $655 per month towards a student loan starting at the very beginning, that means that we will have paid our last payment in month 27. So in month 27 we will make our final payment of $239 that will bring our student loan to $0. After that, we will have to then pay down our line of credit because that is at 9% instead of the credit card, that's at 20%. So when we then pay off our line of credit, we can put foreign earned $16 towards in a month 27 it takes us all the way two month, 38 to pay off our entire line of credit. So, as you can see, they're just paying off these two factors. We have already crossed the boundary by an additional two months. Now. Our credit card actually had a minimum payment here. So by month 12 right here we had covered the entire balance of our credit card. So in total, it took us two months additional to cover the extra payments because of the order that we ended up paying are dead and and in total, it also cost you a couple $100 more in interest payments. You can see that this total is over 30,000. Almost $30,200 are last page WAAS 29,870. So you can see that the order that you pay off your debt makes an impact on how long you're gonna have that debt as well as how much money you have to pay in total because you're gonna be paying more interest. So the idea here is figure out how much money you have left over at the end of each month. D there, investor, pay off your debt and then use this spreadsheet and filling your own numbers to figure out when you're gonna be able to pay off that debt. How soon you can pay off that debt and what the total amount you're gonna pay on that debt really is. And you can play around with it a little bit to figure out the best way for you. But in general, the lowest interest rate is always going to be the one that you want to pay last and you won't pay the highest interest rates first. Now, just as some information here, if you have any questions about how to use this, definitely check out the final video. In this course, you will do in Excel breakthrough, but real quick. If you have any questions on how to use it, I'm just gonna do a quick walk through. So if you want to use this for a different type of debt, it's really simple. Just change this from credit card to thank alone, and it will change the name right here, so that works really well. Let's say it's a $10,000 debt. So now all you have to do is take this here, carry it all the way down, and as you can see, you just fill in your payments and it will give you all of the right information. So as you can see here, if this was a $10,000 debt, you would have paid it off by month. 15 will just delete out right here. So 655 you actually paid a little bit too much. You know, you didn't even need to make this payment. So, as you can see, really simple. You just changes from $10,000. It changes that starting balance that carries all the way down. And then all you do is highlight across here, copy and paste this, drag it down, and then fill in your flexible payments so that you can figure out what your total payment is going to be based on your starting amount of death. And you can figure out how long it's gonna take you to pay off that debt. Once you've paid off that debt, you then have $655 as your flexible payment. Plus, you have the $280 in minimum payments that you don't have to make any more. And now we can start to invest that 8 $900 a month in tow, actual investments in the stock market, in bonds, in real estate and in building your own personal wealth. So this is a great tool for planning out your debt, figuring out what the best method is to pay it off. Bring out how you're gonna pay it off, how long it's gonna take in what your total payment is gonna be. If you have any questions about this, police send me an email and I hope that this is a tool that you can use to plan out your future a little bit more. So look forward to seeing you in the next videos and we'll talk to you soon. 6. Other Strategies for Debt: All right, guys, welcome to another lesson in this video. I'm going to talk about some other strategies for how you may want to consider handling your debt if paying it back in an orderly payment plan, Like what we just discussed doesn't seem like it's super feasible. So what, We're gonna talk about it? Some other strategies. Now, before we go any further, I do have to let you know I am not a financial counselor. I am not a financial adviser. So before you enact any of these strategies, before you go out and execute on anything, please make sure you talk to a professional. You consult a professional before you make any decisions. So here we go. Let's jump right into it. This is just my advice, and this is based on my personal experience. But here we go. Okay, So when we're dealing with debt, you have a couple of other options. If paying it back in a monthly plan is too much for you at the moment. So here are the options that we're going to cover in this video. The first option is sell some assets. If you have some assets that are not generating any income for You're not doing anything and you're not using them. Sell them back, pay down that debt and make it easier on yourself. Now I know that's an obvious one, and maybe it's not feasible. So I'm gonna dive into the next four a little bit more in depth. The 1st 1 is changing your debt structure with seconds consolidating your debt. 3rd 1 is a consumer proposal, and the 4th 1 is declaring bankruptcy. Let's get right into it. So changing debt structure. What I mean by this is if you have a couple of loans out there and let's say you have a student loan like the one that we're talking about and it's just at a terrible interest rate Well, what you should do is approach that debt or approach that creditor and say, Hey, look, I'm having trouble paying this off. I can't really make make this. There's a risk that I could default on it. He worked with me to restructure this loan and possibly give me a better interest rate. Ah, lower monthly payment and stretch it out over a longer to period. Compound it less frequently so that I'm paying less interest. If your credit card is calm pounding monthly, see if they could compound it every six months or every year, maybe, or if there's any other perks. For instance, if the if the creditor is your bank, see if you can. They can waive some fees on your checking encounters, E transfers or whatever it is. See if there's anything else that they could do for you to lower your overall expenses. You'll be surprised to hear how often these creditors will actually be willing to work with you on this when you come in and approach them, because they would much rather work with you than have you default down that loan and be on the whole for that entire debt. So please reach out to all of your creditors. If this is an issue, they should be willing to work with you because if they're not, they could risk losing everything. So please make sure that you do this because this is sometimes the biggest step that could make the biggest difference. Secondly, consolidation now this is an option that a lot of people go through and the idea that here is let's say you have a student loan. You have a credit card and a line of credit, like in our example. What you can do is go somewhere and get one large loan to pay out all three of those debts that you have. The idea here being that one lone is going to be at a better interest rate than any of the loans where you have all three of them. So the idea here is pay only one person back, pay it toe one load. But make sure that the interest rate on that won't loan is much better than the interest rate on any of the other three loans. If it's not and it's better than two out of three of them, for instance, then you're gonna want to go through my calculator that we talked about in the last video and see which option makes the most sense for you. But consolidating alone, especially when you have a credit card that's 20%. We have a line of credit. That's 15%. You can usually get a consolidation loan for maybe six, maybe 7%. It depends on where you live, but there's usually a lot of options. You can do this at a bank. And if you Google, just debt consolidation, Cos there's a lot of great ones usually specific to your area that can help you out with this and not only give you a consolidation loan but help you with the payment plans, automate the entire system and give you financial advice all the way through. So there's a lot of different opportunities for that. If you can't find one of those in your area or you don't like any of them, reach out to your current lenders and see if they will increase your loan at a better rate or a better structure so that you can pay out the rest of them. There are different options that you should look at, especially if a mostly payment plan is still within the ball park for you. Now, If neither of those options work for you, you can go through what is called a consumer proposal. The idea here is that you were gonna put together a proposal. It is gonna get sent out to all of your creditors, and it's going to say Hi, my name is Zak. Here's my financial position. I'm really struggling with this and I'm willing to pay back 20% 40% 60% of this loan on a very specific structure. But if we can't pay this back, then there's a chance I might just completely default on it. Now, in order to go through this process, you need to hire a licensed insolvency trustee and you Google them. They're really easy to find their basically just people that specifically deal with bankruptcies with debt, with consumer proposals and with that entire specific area. They're very good. They're extremely professional, and in my experience, they're very, very nice people. You should not be intimidated to call them. You should have you worried about reaching out to them. All of them will openly welcome you with a smile. They will pick up your phone and you will listen to you and hear you out because that is their job. That is what they get paid to do, and they do have help from the government to do it. So please reach out to them. If you have any questions about any of the aspects I'm talking about, they should be your number one person to call because they will give it to Honestly, they deal with it day in and day out, and they're going to be the best source of knowledge for dealing with debt because they're trained their professional and they know how to deal with this and they know what you're going through. They understand it. So they're not there to judge you. They're there to help you. I sincerely I sincerely mean that because I've talked to them before and they do a very good job. So making a proposal requires a licensed insolvency trustee. They're very easy to find. It is not difficult. You can find them almost anywhere you live there, a single person that has just gone to a specific set of training and signed a note that says yes, I'm going to uphold the law. I'm gonna do this correctly, and I'm going to help people now. It is a legal process. There are some legal documents. There is a specific way that these letters get mailed out, and that is why you need to hire a licensed insolvency trustee. Now, once that proposal goes out, creditors have two options. They can either accept or reject the proposal. If they accept it. You get to basically keep all of your assets. You don't lose anything. You just have to abide by whatever proposal you you put out there and your payments will go to the licensed insolvency trustee and then they will get dispersed. They will not go from you. Tear to your creditors. You never have to deal with your creditors again. That is what you hire a licensed insolvency trustee. For now, the other side of that is that they could reject your proposal. In that case, you have a couple different options. You can refile and trying to put together a better proposal. You can also find another way to pay that back. Maybe you go back in and get consolidation load. You find you in the lottery. You bore some money from a rich relative whatever way there or the last option is bankruptcy. And that's what we're gonna talk about next. So bankruptcy. This also needs a licensed insolvency trustee is just a person is kind of like a one step down from a lawyer, but probably better at accounting. So it's kind of a unique position. The idea here is that you were gonna be defaulting on all of your debts, you are not gonna be paying any of them back. You're gonna let your creditors know that you can't pay any of them back, and you will not be paying any of them back. The idea here is that you're basically saying I'm out. I can't do anything. I don't know what to do. And this is the option. You would go down when you maybe have business debt. That is a couple 100,000. You just can't fathom paying it back or it's too large or you have family that they got rolled over to you or a deal went wrong. Whatever it is, this is usually when the number gets a little bit too large that you probably won't be able to manage it, even if you work really hard over the next 5 10 years. So the idea here is you're gonna lose all of your large assets. If you own a house, you're lose part of that house, or at least the equity and that some of the equity in that house if you own a car over five or $10,000 you're gonna lose that. If you own a cottage or a second home or a boat or a motorcycle or any excess assets they you have for fun or that our enjoyment assets, you're gonna lose all of those they're going to get taken by your licensed insolvency trustee. They're getting a sold at market, and the funds from those assets are going to get used to pay back your creditors as much as they possibly can. However, they're usually liquidated so they don't get a whole lot. There are some small exemptions. You will have to look them up because they're different based on where you live if you're in Canada, the US, especially by province or state, so you do need to look that up. Generally, you're allowed to keep X a couple $1000 worth of clothes, a couple $1000 worth of furniture and home items, a couple $1000 worth of any professional equipment that you have to actually make a living and depending on where you live, the home and the vehicle allowances are different as well. But you are allowed to keep some of your home and some of your vehicle, depending on how it is set up. You do need to research that depending on where you live, though, and then you will say, Okay, I'm going to claim bankruptcy. You hire the licensed insolvency trustee than notices go out, your assets get taken, and basically you claimed bankruptcy. At that point. Now, bankruptcy is a period of time, and during that period of time, you need to complete certain requirements. Once you have completed those certain requirements, you apply for a discharge. And once you get a discharge, that is when you it eliminates your debt. Your debts are not eliminated. When you claimed bankruptcy, your debts eliminated. When you basically get that discharge from bankruptcy, and so that is something that's really important. Crane Banks does not get rid of your debts. Discharging from bankruptcy is what gets rid of your debts. So the downsides here are you're gonna lose all of your large assets. Your credit is going to drop significantly. You can't have a credit card for a certain period of time. This bankruptcy will appear on your credit report, and it can be looked up by people who pay for a search. And it is harder to get a mortgage or credit card after your bankruptcy However, over time as you build up credit, it will be available and it will be easier now. The upsides here are they Once you're discharged, not once you claim. But once you're discharged, you will have no debt. You will have absolutely zero the people that your money too, will not be it illegally do anything. They will not be Legally seize your assets. It will not be to garnish your wages. They will not get to see you. They will not be able to do anything in your debt will be a zero. However, during that basically period where you claim to get discharged, there are some requirements. Number one is usually some financial counseling requirements or depending on where you live . Usually it's two or three sessions that you actually have to attend. I have to learn about financial counseling and financial principles. You get a clean slate. Basically, when you discharge and that that point you can start to rebuild your credit. You can keep certain things like I mentioned with the allowances. However, there is a time period between when you claim and when you get discharged. That time period is determined by how much income you make during that time period. So if you make a small amount of income depending on where you live, that amount changes. But if you make a small amount, that bankruptcy period is a shorter amount of time. If you make a larger amount, it's usually longer and now burned at the limit is $2200 if you make under $2200 per month , you're in bankruptcy for nine months. At a minimum. If you make over $2200 you have to give up 50% of your income over $2200 every single month . That gets given up and given back to your creditors, and you will remain in that position for 21 months. I believe now, these numbers and these time periods changed completely as you go across Canada and the United States, so you need to research what it is and where you live. But this is just the information that I could find online and that I know about here in Alberta. So please double check your research. And before you go down any of these past, make sure you talk to a professional to get second hand advice in the next video, we're finally done talking about debt. How to pay off your debt and handle your debt. We're going to start talking about how to invest your money. We're gonna start talking about real estate stocks, bonds and actually putting your money out into the market to make a return. And after that, we're gonna talk about big decisions buying a car, buying a house, renting a property, all the different ways to make more money. So stay tuned. Lots more information to come. We're just getting started. 7. Investing Your Money: Alright, you guys, now it is time to start talking about investing your money. We finally establish how much money I've left over each month, how to pay off your debts most efficiently. And now once you get out of your debts or you just have a mortgage or a good debt leftover, it's time to start talking about how to invest your money and how to build your wealth. So let's get right into it. So the first thing, the first thing that you need to do when you pay off all your debts and you're ready to go and you've got some money coming in. The first thing you need to do is set up an emergency fund. Now on emergency fund is that little bit of cash that you have tucked away for that dire emergency, that car crash, that big medical bill kid got in an accident, whatever it is, it's your coupled $1000 that is stashed away for a rainy day that you're never going to touch unless you absolutely need it. My recommendation for this is a minimum of two months worth of expenses. So if it cost you 2500 a month to cover all of your expenses, you need to have at least five grand It's more than that. You need to have at least two months worth of expenses if the next covert rolls around and it happens to your industry and you're out of work. Well, how are you going to handle that? This at least gives you a little bit of peace of mind and it takes away that holy shit, How am I going to provide for my family? Or at least gives you a little bit of time in between those periods, you should keep it in cash. That's one great way to do it, or put it into a high-interest savings accounts. So a really easy count that you can get to pretty easily, but it's still going to pay you a little bit of interest. And the idea here is this is your last resort, money. Now, the reason you don't want to keep three years worth of cash in there and a huge amount of savings is because of inflation. Now inflation is the general increase in prices and fall in the purchasing value of money over time. So if you look at all the 19 twenties and 19 thirties videos and movies, you'll see that Coca-Cola was sold in cafes and little ice cream parlors for $0.05. Today, a bottle of Coca-Cola usually costs you a $1.2 dollars, at least $2 here in Canada. And that is because of inflation. That is because the prices of certain products, or almost all products and goods increases over time. And the value of your cash, the value of your $100 today is less the next year or it goes down over time. So a $100 this year is usually only worth $98 next year and $96 and next year after that. Now what I mean by that is Now that you're a $100 changes from 98 to 96, but it has a $100 worth of purchasing power today that is only going to have about $98 worth of purchasing power next year. Meaning that the item that you could have bought for a $100 this year is probably going to cause just a little bit more next year. So that's the idea behind inflation here, is that money changes in value over time. Money becomes less valuable over time. And that's why prices go up. And that's why inflation is the number one reason you do not want to hold a 100 or $200 thousand in cash. Because you're going to lose one or 2% on it every single year that you hold that money. That is why rich people don't hold large amounts of cash. When you look at Bill Gates and Warren Buffett and, and all of these rich people, when you calculate their net worth, it's not how much money do they have in the bank account. It's how much money do they have invested into stocks and real estate and assets and cars, and different things that are worth money that are going to appreciate over time, rather than holding it in cash, which is going to lose one to 2% over time. Now, where do I get that one to 2%? Well, it's just data that you can find anywhere. It's super available, it's online. Now this is Canada, the US looks pretty similar. It's almost the same numbers across North America. But as you can see, in 2019, we add 0.06 one and we had 1.261.952.271.43 all the way up to 2.91 in 20112012, 2.7.6, 2.72, and all the way down to 0.17. So it changes every single year. It is not super consistent a changes over time. But when you look at it over a 102030 year period, it averages out to about 2% per year. That's why the Coca-Cola in the 19 twenties was $0.05 and today cost $2. And that is why you want to be investing your money. Because if you hold all of your money in cash and a $100 thousand in cash, well, you don't lose two grand over the next year just because that's a $100 thousand, isn't going to be able to purchase as much as it will be able to next year. So that's the idea here and that's why you want to be investing your money. So where can you invest your money? Well, there's a lot of different options and we're going to break down all of them in this course here. So real estate is a great option and it's the number one place that a lot of people have their largest investment. When you buy a home, you're paying hundreds of thousands of dollars for that home. That is usually most people's largest investments. So we're gonna talk about that in the video rate after this one. After that you have vehicles. That's another big purchased and most people makes that isn't investment, that's an investment into your life, into your travel, into your ability to work, a number of different factors. So we're gonna talk about that freely in depth later. After that, we're going to stop bows stock market investing. How do how do you buy stocks? How do you sell stocks? How do you get into the market? How do you get a diversified portfolio? How you understand the basics that top-level, I'm gonna talk about all of that in a three-part video series. And then after that, we're going to talk about how do you retire? How do you build a 401K or an RSP or whatever retirement vehicle you have where you live. We're gonna talk about that and we're going to talk about all the different options, so stay tuned for that. But the idea here is, these are the four main areas where people usually invest their money. And so these are the four topics that we're going to cover and we are going to discuss in this course. So in summary real quick, the big topic here is inflation. Inflation is the idea that your money is not going to be able to buy as much next year. It's the reason that Coca-Cola started out at $0.05 and now it's $2. It means that your $100 thousand is not going to have a $100 thousand where the purchasing power next year and it's the number one reason that you should be investing, because if you have a $100 thousand in cash instead of letting it dwindle away to inflation, you could be investing it into the market or into real estate and making a return on that investment, building yourself up and retirement, building that wealth and setting yourself up for the future. And that is the goal of this course. So that is what we are going to talk about in the next few videos. We're going to break down all four of these topics in detail. So I hope you'll stay with us. 8. Rent Or Buy a Home: Alright, you guys, welcome to my favorite lesson in this course today we're gonna talk about renting a home or buying a home, which situation and which option is the best for you and what is going to give you the best return on your money? Let's talk about it right now. Okay, so renter by really, really easy decision, you've got one option and the other. What are you going to choose? Well, here is my take on the big thing here is that this is more of a personal decision than a financial decisions. So when to rent, this is the idea of the person that is maybe younger in life is going to be traveling around, isn't tied down to a specific job or travels a lot for their job, isn't tied down to family, isn't in debt, and they don't want to be tied down. They don't want to take on a lot of debt, they don't want to take on a mortgage. And then we'll wanna go be a little bit of a free spirit. That type of person should rent a house, that birds have a person who should not take on a mortgage and buy a house because it is a long-term commitment. So there are some advantages of renting though, and you need to be aware of these. If you move cities often for work, renting is usually the best option if you're uncertain of your income and your work on commission, renting can be a better option if you don't want to be tied down to a mortgage, to a specific location or if you're not sure you want to live in that city, renting could be the best option. And if you're in serious debt, you're not, you're not going to get better by bringing on a mortgage. You're going to get better by being bringing on a flexible rent, a low rent that you can pay off and pay down some of that debt. So those are the advantages of renting and those are the times when you should rent to buy. This comes down to planning long-term. If you were going to live somewhere for at least seven years or more, I recommend you you should usually by the House. But we're going to talk about the financial implications of that a little bit later. The other town that you should buy as when you have low current debt, if you don't have a lot of debt right now, you've got a little bit of cash saved up. A could be a good opportunity to get a loan from the bank and build your assets. If you plan to stay in the same city, buying can also be a good opportunity. And if you have money for a down payment plus your emergency fund, then buying can be an opportunity. Do not buy a house. If you're downpayment, takes everything out of your bank account and you are living on a shoestring budget at that point, it is not going to be worth it. That is a bad decision. Do not do that and do not do it. If liquidity is a problem for you, if you want to be able to access your money, pull it out, put it into different investments, then liquidity will be an issue for you in your house because you will not be able to easily pull that money out and you will not be able to do it multiple times. So those are just the things that I want to say off the bat. As a personal situation, you need to evaluate all of those different aspects and figure out, does that cancel out one of the options right off the bat. If it doesn't cancel out one of the options right off the bat, and maybe you are a little bit more financially inclined to try and get the best return for your money. Well, no problem. Let's talk about that. We're gonna use an example here, but what I've done is build an Excel sheet with a calculator in it. So all you have to do is plug in your numbers. For us, we're going to use an example where you have $50 thousand in cash ready to go. You're a 25-year-old male or female and trying to decide whether or not you should buy or rent. And you are mostly focused on getting a financial return on your money. You turn to get the best ROI and come out in the best position with the highest net worth at the end. And for this, I have developed in the excel sheet for us to calculate these numbers out. So I'm going to jump into that right now. Follow me there. You have this in the excel sheet that I've attached to this course as well. So stay tuned with us. And follow along, okay, so you guys will remember this page from the last example we did. If you go one tab over to the rent or buy tab, it will give you this spreadsheet here. And basically what I've done is made a little bit of a calculator here to see what your end result is. If you go with a mortgage when you buy a house compared to if you rent it out. So the idea here is somebody has $50 thousand and they make a little bit of money each mountain they're trying to decide, do I want to use that $50 thousand to rent a towards sorry. Do I want to use that $50 thousand to buy a house or do I want to invest that $50 thousand and put it into the market and continue to rent. Those are the two options that we're going to look at here to try and figure out what is going to give you the best financial results. So let's look at it on this side, right here you can see my mortgage calculator. All we've done here, all you have to do is plug in your own variables and it's gonna give you everything you want. So for us, we're looking at a $500 thousand home, me $0.5 million home. And we're gonna put our $50 thousand down. So we're gonna put down a 10% deposit. We're going to pay $50 thousand down. And we are basically going to say, okay, that is our initial investment. And then after that we'll $450 thousand on the house and our interest rate is going to be 4%. So for this example, we're using a 4% interest rate on your mortgage. Now, this is where your variables are going to become really important. You need to input your own variables in Calgary. And now I know people getting mortgages at 2.82%.7. So this is a little bit conservative. You can do a lot better than 4%. You can also do a lot worse than 4%. This is kinda in the middle range, so monthly interest rate broken down. So all it is is 0.04 divided by 12. That's gonna give us our monthly interest rate. And then the number of months. We're looking at a 30-year term loan on this, so it's going to be 316 months and that gives us a monthly payment of $2148. So if this is the house that this person was looking at, this is what their monthly mortgage payment would be. Now, on top of that, you have a couple more expenses. They don't always come out evenly per month. For instance, you have property taxes is going to be one bill that you get at the end of the year. I know you can break it down into a monthly plan, but whatever is up to you. So for this example, we're using a one-percent property tax that gives you a monthly monthly property tax and $417, you also have a $150 per month where their insurance and roughly $200 per month and repairs. This is going to be the ice for your sidewalk, this shovel, the lawn maintenance, the lawn care, all of the all of the crap that comes along with it. This is what you're going to have to pay to actually own that house by it and have the mortgage is going to cost you $2900 per month. Okay, that's the oh, altogether all in cashflow. Now, at the end of this, you are going to have an ending balance right here. So at the end of this, at the end of 30 years, in reality, you're gonna have one house that is worth the market value. Hopefully in 30 years, it is worth more. And basically at the end of this, you're going to own one asset that is going to be one house and it is going to be worth the market value on whatever day you try to calculate that. Now, I've put in a simple calculator here to try and figure that out. However, this number does vary, so you kinda need to put your own. Best guess on it, depending on the area that you live in. So a $500 thousand house that appreciates at 2% per year, meaning it becomes 2% more valuable every single year over 30 years gives it a $905 thousand feature value. So in 30 years, if you go down this mortgage calculator, you buy them mortgage, you buy the house, you pay it off every single month. You're gonna be left with a building, a house then is worth $905 thousand. So that is the premise here. That is the logic here, that's the idea. You go down the mortgage at the end of 30 years, uf with $905 thousand and an asset that hopefully you can sell on the market for roughly that price. The other side of this equation is to rent. So on the other side here you can see rental calculator. All we're gonna do is plug in our own variables again, as you can see, the initial investment is $550 thousand. Really simple, exact same as the other side. It's a $50 thousand initial investment. However, we're gonna make a monthly investment. We're going to assume that our rent is lower than the mortgage. And there for we are going to invest that difference into our investment account. So that's where this monthly contribution comes in, is we're taking the difference between the mortgage and the rent, and we're just going to contribute that into our investment pool right here. Now, some people, this might be 0. If your rents really high, you can get a lower red place and save some extra money and make a contribution into this. Well then it could be a great option for you. For us, we're saving a bunch of money on rent. If you go out and get a $2 thousand mortgage, you can probably rented o for 1500. We're going to say that there's a $500 difference in there, and that is going to be our monthly investments. So we're taking that difference, we're putting it into an investment here. Now, the annual return on that investment, this is the tricky thing here. So how do you figure out how much money you're gonna make on your investment? Well, we're going to dive into that a little bit more later in this case, especially when we, in this course, especially as we start talking about stocks and bonds. But for real estate, it's a little bit more difficult. Now, let's assume that you're going to put this $50 thousand and your monthly contribution into stocks and bonds. And therefore we can get some good data on the S and P 500, which is the 500 largest companies in the United States and most influential companies over the last 50 years has returned about an 8% return. So over 50 years, over the long-term, if you invested your money into that account, you would make about an 8% return. For us. We're gonna keep it conservative and we're gonna go with a 7% return. Now, depending on how you invest your money, you can easily get a lot better than this. You can also do a lot worse on this, and it depends on your timing. If you invest in 2008, You're not gonna do very well the big recession, but it depends. So we're gonna say you got a 7% return on this. And then what I've done is I've broken it down into a monthly graph here so that we can see all of the details we need. So month 0, this is your initial investment of $50 thousand in that monster, you're going to put in $500 and you are going to earn interest or you're gonna make some money on your money that's already in there and you're gonna earn $292. That comes from the 7% annual interest that we have on our $50 thousand at the end of that month, at the end of month 0, you're gonna be left with $50,792. That's going to be your starting balance from month number one, you're going to add in $500. You're going to add in $296 worth of interest that you've accumulated that month. And on the left at $51,588. If you carry this all the way down, all it's using is a variables right here. But if you carry this all the way down, you can see I've broken it down for the exact same time period and you're left with 360 months. So the exact same length as your mortgage. And you can see that your ending balance here under these variables and under this information is 1.00, 2, $2 million. So over a 1000000.22 thousand on top of that, if you have these variables. So this is where it becomes really important because if you had rented, you would've been better off at the end of this time period, you would've been much better off. You would've had over a million dollars in your bank account. You wouldn't have had to worry about paying 6% for commission to sell your house. He would have had to worry about listing it. You would have had to worry about finding the right buyer and accepting an offering and lowball, you would've walked out with exactly a million dollars, especially if he hit this annual interest rate or at this annual investment returns. So in this situation, it would have been better to rent. Now, however, if we go 0.05, you can see that we only end up with $642 thousand. It would have been better to buy. So it depends on the numbers that you put in here. It also depends on your initial home purchase. However, at least now you have the tool to decide do I want to rent or do I want to buy? You can figure out exactly what your monthly mortgage rate is going to be. It's going to be $2100 in this instance. You're also going to have a couple of fees on top of that, and this is what you're likely going to pay each month. On the other side, if you invest your money, your initials to pause it here, $500 a month. And this is where you're going to end up in 30 years as well. So now you have the tools to figure out that decision for your own. I'm not here to say which one's better because it depends more so on your personal situation. And then if you're very inclined to figure out the financial return, at least now you have the tools to do it. So I'm going to hit the summary real quick and then we're going to finish up this video. Okay, so real quick here, just a summary on this video, personal factors and the most important, if you have family in a specific location, you plan on staying there in your router in that town, buying houses. Probably a good opportunity if that doesn't sound like you at all in you are the complete opposite and a free spirit. You probably shouldn't buy a house at all. That is the number one factor when it comes down to rent or buy. After that, you now have a financial calculator to figure out what's going to give you the best return on your money. The big thing here is that this is completely situational, it's completely variable. And there's a lot of variables to consider. The interest rate that you get, how that changes over time, and the amount of money that you'll actually make on your investment is completely variable. However, when you stretch it out over the long term, you can start to pull some pretty consistent data, especially from some of the longer-term ETFs and indexes that we're gonna talk about soon. So there's not always a right answer. It changes over time and especially in a 30-year time period, it can definitely change. So making an answer early or getting an answer, right, as sometimes a really tough thing to do. So I completely understand it and if you're nervous about it, send me an email and we'll help you through it. But onto the next video and we'll talk to you soon. 9. Vehicle Expenses: What's going on, guys, my name is Zach Hartley and in this video we're going to be talking about vehicle expenses. The reason we are talking about this is because I think it is the number one expense that most people underestimate. In other words, you know how much your lease costs, you know how much your insurance costs. But do you really understand how much the gasoline, the tires, the windshield, everything else combined really cost you on a monthly basis. That's what the purpose of this video and the purpose of this excel sheet that we're going to jump into right now. Okay, so this is just a really simple little excel sheet that I've put together for you to plug in your own numbers. It's the last little tau brain x to rent or buy. It's right in the middle there. And so all you have to do is plug in your own numbers. Now what I've done is I've plugged in my personal numbers for where I live. I live in Calgary, Alberta, Canada. And so I've given you basically the numbers for their so a $20 thousand car with a small down payment and 36 months to pay off the rest gives you a lease payment of 379 insurance around Calibri for that type of car or that price range of car. So usually about a 100 bucks and night month depending on your driving record and then depending on where you work, you could base 60 to $80 in gas. So that means your monthly expenses are going to be $539 in this situation. Now you guys just need to plug in your own numbers and it will auto calculate. So let's say that you actually spend a 120 on gas, it'll give you the new price. There are 599, so really simple to use and this is really this easy side. This is where it's easy to estimate how much it costs you on a monthly basis. But what a lot of people miss out is all of the other expenses that come with driving that car. So in Alberta costume, $85 a year just to register your car. You can get a new license. You have to get your license renewed every five years and it costs $93. That works out to about $20 a year. Your windshield. In Alberta, we have rocks everywhere because we have a lot of snow and a lot of ice. So nobody's windshield last more than about five years and you always have to replace it for a minimum of $250. And if you drive an expensive car, it's going to cost way more. You have to have winter tires here. And depending where you live, your tires may run out quicker or slower. So about 200 bucks a month or 200 bucks a year story on tires that could vary depending on the type of car that you have. If you drive a truck, that number's gonna be much higher. We also have about two oil changes a year and some maintenance is going to depend on how much you drive it, as well as if you have a breakdown. This is assuming you don't have a breakdown. Breakdown could be anywhere from 500 to two or $3 thousand. We're not calculating that in here. And that is why you need to have an emergency fund for when things like this come up and your car breaks down and you need an extra $2 thousand, you have it there, it's ready to go and you can work on rebuilding that afterwards. You don't have to go into debt and pay interest on an end. You not worried about it. Like it's going to destroy your life. Ok, so back to the chart here. Basically what we've done here is we've summarized everything into a total yearly costs. So this is what it costs you on a yearly basis to operate this car with all the miscellaneous registration, license, windshield, tires, oil change. I added a couple of rows in here, so if there's anything I'm missing, you can feel free to add those in. And then I put my assumptions in the middle column here on both of these. So, and you can play with these as much as you want. The real values that matter are the cost ones on the right here. But basically it's going to cost you about $600 a year to run that car. And it breaks down to an extra $51.25 per month in order to operate that car. So when you are making the decision of do I want to overdo? I wanna get to bust or I wanna get to train, or do I want to own a car? You need to be able to afford $650 a month. So all this is doing is just adding up the total monthly plus the total yearly divided by 12 months. And then it's giving you a total monthly cost of $650. So what you need to ask yourself is, can I afford $650 on top of my rent and what I want to save and what I want to invest, and my emergency fund and everything else going on. Can I afford $650 in order for me to drive that car now, if you need a car in order to get to work or to make a living while obviously you just have to have a car, you don't have a choice. But if you lived downtown or you have the option of whether or not to only car, you should use this tool and decide, do I want to pay $650 or how many overrides Could I get for four or $500 and save the difference and invest it? That's what you need to decide in your head. Before we move on to the next section where we're going to start talking about the stock market and what did really do with your savings and investing and where you can put it. So stay tuned for that one coming up. 10. Stocks: Are you guys welcome to another lesson here we're gonna talk about stocks. What are they, how do they work and how can you make some money on it? Let's get right into it. Okay, so stocks, stocks represent ownership in a company that can also be called equity or shares. If you're an equity holder or a share holder or a stockholder, they all mean the exact same thing. They basically mean you are the owner of that company and when you are a stock holder, you not only own the company, but you also own the assets and the profits that come from operating that company. Now, stockholders also can vote on major decision. So these decisions include things like who should be the CEO, who should be on the board of directors? And if Microsoft wants to acquire the company, well, do we let that happen and do we sell it to Microsoft? Those are the types of decisions shareholders, equity holders and stock holders will all be able to decide on and vote on at specific meetings. So what does a share actually look like? Well, this is just the Google share certificate that I printed off the internet. As you can see here, you insert your name here, you'd probably sign it right here. And then they would also give you a number. So this would be a shared number and this is basically what the paper copy looks like now, when he talked to stockbrokers or day traders or anybody like that and nobody actually deals with these paper copies. The only time that these are actually made and needed and useful is when you actually start a corporation, you need to have a physical copy of your share. So that's the only time, usually the only time that you will ever see these. Now, how do you make money using stocks? Well, there's two ways and there's pretty much only two ways when you're starting out. So the number one way is the value of the stock goes up. So you buy it in one period and later on you can sell it for a higher price. And number two is the stock pays you a dividend. Now I'm going to break that all down for you right away. But first of all, let's jump into point number one here. Now, the value of the stock increases. So this is a chart of the Amazon stock price. So on the left here you can see the dollar signs, 2 thousand at the top, 1200 at the bottom. And you can also see January 2018, all the way up until October 2018, where the stock price hit an all time high of about $2 thousand. Now at the beginning of the year, the stock was priced at $1200. So if you had bought in January, you'd sold in October, November, December, you would've done extremely well on this. You would've made about $800 on your $1200 investments. So this is one example of how you can make money in the stock market. Now the second way you can make money in the stock market is when a stock pays you a dividend. Now this one is a little bit more complicated, so I'm going to dive into this one pretty in-depth here and then we're going to summarize everything at the end. So a dividend is a payment to shareholders taken from the profits of the corporation when you operate your business or somebody operates your business for you because you're just a shareholder, that, that business generates a profit. Now some of that profit gets used in the corporation for a new facility and you equipment and some new tools and things like that. But the rest of the profit that gets leftover, it gets decided on by the board of directors and the board of directors will decide to pale part of that as a dividend, and that dividend comes back to the shareholders, the stockholders in the equity partners in the business. Now, these payments usually get given out quarterly, at least in the larger corporations. That's usually how it's managed. And you will get paid out based on how much equity or how many stocks you actually own. For instance, if you own 10% of the company, you own 10% of the shares in that company, you'll get paid out 10% of that dividend. And so basically this is a way of the company paying back the share holders for the investment that they put it into by the stalk. Now there's a couple of things you need to know about dividends. First thing is that not all companies pay dividends. All these small little biotech companies are small little start-ups or exploration companies are never going to pay a dividend because it's more valuable for them to take that profit and put it back into the company and reinvest it than it is to pay it back out to shareholders. The idea here is that instead of paying a dividend out to shareholders, they're going to try and grow the company as fast as possible, and that way the share price should increase later on. Now secondly, not all profits are paid out as dividends. So if Apple makes a billion dollars one year, they're not gonna pay out all of that money as dividends. They're gonna reinvest a lot of that into equipment, into people, into new technologies, and into different things that affect their operations. They are not going to pay out all of their profit as dividends. The third thing is dividends can be changed at any time. So every quarter the Board of Directors will meet in a room and they will talk about the cash position in the company and they will say, how much can we afford to pay out back to our shareholders as a dividend? Usually the board of directors who will try and like to keep that consistent. There will usually be a very consistent number for a one to two-year period. However, it does change a little bit. And that board of directors can actually decide to change that dividend completely and cut it to 0 if they decide or if the company is in a bad cash position. Now you may be wondering what is the board of directors? The board of directors is a group of people that is voted on by all of the shareholders. They vote together and say here are the people that we want to elect to manage the actual company itself. So the CEO runs the company. The VP of Finance does all the accounting. The marketing girl goes out and does everything. And then the board of directors basically looks down at the company and says, yeah, this is operating the way we want or no, this isn't going the way we want. We need to clear this OK, get a new CEO, get a new CFO in here, and reshuffled the board a little bit to reorganize this company. That is the job of the board of directors, and that is just a group of people that is voted on and selected by the rest of the shareholders in the company. So let's start looking at some charts. So all I did here was go to Yahoo Finance and I typed in Royal Bank of Canada. Now they're one of the largest banks here in Canada. I'm also going to look at apple right after this. So let's just look at this right now. And when you type this in, and this is the first page that comes up in Yahoo Finance. And we get a lot of information here. So the first thing, big bold letters here is $93.89. That is the current price of Royal Bank when I actually took this screenshot. And if you go down here, you can see the dividend highlighted in yellow. It says forward dividend and yield. And so what this is showing us is that Royal Bank of Canada is paying $4.32 in dividends per year. That's what this is showing us right now. And this 4.52% is the yield. So for instance, if you invested a $100 in Royal Bank of Canada one year from now you would receive 4.52% of your investment back in the form of a dividend. Now the problem with this calculation here. Is that it is based off the previous close price. Now this is the price from yesterday, the price of the stock close trading it yesterday. So what we wanna do is try and figure out the actual yield for today. So the dividend of $4.32 isn't going to change, but we need to use this current price instead of the previous close to figure out the live dividend yield on this stocks. That's exactly what we're gonna do. So when we look at Royal Bank, we can see the current price when I took that screenshot was $93.89. The dividend yield was $4.32. And when you divide those two numbers, you get a 4.6% yield. Now as you can see, the current price of Royal Bank is lower than it was at previous close yesterday. And so therefore it's lost about a dollar and therefore the yield on the stock has actually gone up. So now instead of a 4.52% dividend yield is actually giving us a 4.6% yield. So when the price of the share actually comes down, it means that the value of the dividend that you're getting for every $100 you put in is actually going up. And so that's what this sentence is here at the bottom. For every $100 you invest in Royal Bank, it will pay $4.60 per year in dividends, giving you a 4.6% return on investment. For every $100 you put in, you will get $4.6 back in the form of a dividend. And then you'll also be able to sell that stock at market price later on down the road. Now, if we look at Apple, you can see the numbers are slightly different. So with Apple, the current prices are a $114.36 and they are paying an $0.82 dividends. So much, much smaller than Royal Bank, and it's currently giving us the yield of 71% based off the previous closed. So let's calculate our new dividend yield. As you can see, the current price is a $114.36. The dividend yield is $0.82, and therefore you're generating a 0.7. percent yield on this stalk. So for instance, if you invested a $100 into Apple, you would get a 0.7% return on your investment, almost 0, especially when you consider Inflation. Now, this next chart here is a little bit more complicated, but basically what it does is it compares the Apple stock price compared to the Royal Bank of Canada stock price. Now, on the left-hand side here, both of them start at 0. Apple is in the red here, and Royal Bank is in the blue. And as you can see, over a period of 366 days, the Apple stock has slowly risen to a total of a 130% profit from where it started. So if we invested a $100, we'd be at $230 today. Whereas with Royal Bank of Canada, you can see that if you invested a $100 a year ago, basically Mandy 0% return. Therefore it's still worth about a $100. And so over that period, Royal Bank has still giving you for dividend payments equal to $4.32. And Apple is still giving you for dividend payments but only equal to about $0.70. However, the Apple stock price has gone up drastically higher than the Royal Bank of Canada stock price. Now all of this information was taken today, September 29th, 2020. So this will obviously change over time. Okay, so when we compare these two companies and we say if you made a $100 investment one year ago today, what would happen while Royal Bank you would receive $4 in dividends, but you would have had almost no change in your stock price. Whereas with Apple. Your stock would have over doubled. However, you would have only received a very small dividends. So at least you can go into the market and sell that and you would have made a lot of money. So on a one-year basis, Apple would have been a much better investment than Royal Bank. Now real quick, I just want to cover the advantages of dividends because this is really important and this is the reason that dividends are so popular and so many people are focused on them. Number one is steady cashflow. If you can build a large enough portfolio, dividend-paying companies, those companies will pay you enough money that you can live on. And that is the point of complete and total financial freedom. If you can build a large enough portfolio with the companies that you hold, pay you enough money to live on. You will never have to work a day in your life and you will be able to do whatever you'd like. Secondly, dividend payments usually grow over time. As you can see, Royal Bank is currently paying $4 per year. They used only paid $2 a year and before that it was $1 a year. So the great thing here is over time that dividend payment will actually increase and will increase your yield as well based on how much you got into the stock for. Thirdly, you can reinvest those dividends tax-free. So when Royal Bank of Canada pays you a dividend, you can reinvest that money, usually tax-free depending on how you have your account set up. If you're interested in that looking to a dividend reinvestment plan. Fourthly, the stock price can still go up Royal Bank and still pay you $4 a year. But maybe they have a breakthrough and banking technology and the stock sky, right? Rockets because they have more potential to make more money. Thus, stock price can very easily go from a $100 to $200 and still pay you a 4-5-6 dollar dividend, giving you the advantage of both options there. And lastly, when you hold stocks that pay dividends, you make time your friend, all you have to do is wait and be patient and those stocks will pay you out. And that means that you get paid to hold these stocks and do absolutely nothing making time your friend, and that is the ultimate position that you want to be in. Now let's cover the advantages of buying and selling here, the big advantage is that you can pick up on trends. So if you see that solar is going crazy, electric vehicles are about to be the next big thing, or that cannabis is about to consume the world. You can specifically invest into those companies and look for a larger return than you would get investing in just dividends. So the opportunity for greater return is definitely there when you're handpicking specific stocks and looking for growth and great industries, however, there is higher risk and that does take much more work, but it does give you more flexibility and more control over your own finances. So if you're interested in that, check on my other courses, but the goal here is to give you the insights so that you can make a decision of whether you want to be looking for stocks where they're going to pay you a dividend or whether you want to be looking for a stock that is hopefully going to go up over the next little while. They both have different benefits. But you really need to understand what is going to suit you best. Is that a dividend stock that you are going to be happy collecting the cashflow every single quarter. A stock where you want to check the ticker every day and looked for that big run-up. You really need to decide what's best for you now. And sorry, there's two ways to make money on the stock market. You can make money by selling at a higher price than you bought that stock. Or you can make money by holding a stock that pays you a dividend altogether, dividends provide you cashflow, whereas trading the market is a little bit more difficult, a little bit more risky, and it takes a lot more time. So you really need to make the decision. Do you want to just sit there and wait and let the dividends roll into you and let time be your friend. Or you want to try and buy and sell and timed the market and get in at the right time. So you need to make that decision. I'm just here to give you the information on to the next video. 11. Index Investing: Are you guys welcome to another video here we're gonna talk about indexes, ETFs, and mutual funds. What are they? How do they work and how should you incorporate them when you're starting investing? Here we go. Alright, so an index and index is very simply just a theoretical group of companies. And when we describe this group of companies or the value of it, we use a point system. Now the reason we use the point system is because when you put 30 different companies into a group and you try and say here's what the value is, it becomes very difficult to measure that over time when IT company buys another one, or you add one and take one out, or you go through a stock split or a reverse splits. So it becomes very, very difficult. So instead of trying to use a dollar amount, we actually use a point system. And that's why when you hear the Dow Jones or the nasdaq talked about, they are talked about and points, the Dow Jones gain 500 points today the nasdaq lost 200 points. The idea here is that it is a theoretical group of companies described in a point system and it is focused on certain markets. Now what I mean by that is when we look at the Dow Jones or the nasdaq or the S and P 500, which are the three largest indexes in the United States. All three of them are focused on the geographic area of the United States. The Dow Jones is focused on the 30 most influential and important companies in the US. The S and P 500 is focused on the 500 largest companies in the US. And the nasdaq has a very large tech focus. So those three different indexes are all focused on different areas of the United States economy. The S and P is generally referred to as the broadest, most best representation of the United States. Now the S and P 500 does not represent the economy. It represents how well the company's operating within that economy are actually performing. Now in this video, we're gonna talk about the different financial instruments you can use to invest into an index. Now the reason you are going to want to invest into an index is because you can make one transaction and that will give you the exact same result as buying that entire group of companies. So if you wanted to go out and you wanted to own the 500 largest companies in the United States. All you have to do is by one of the financial instruments that gives you exposure to the S and P 500. The idea here is that you can achieve instant diversification, steady out your portfolio and achieve your specific goals without having to pick and choose which stocks are going to work out, it eliminates that risk for you. Now before we get into the specific financial instruments, what I wanna do is talk about two of the indexes. So the first one is the Dow Jones Industrial. Now this is made up of the 30 most important companies in the USA. It's the second oldest index and it is extremely popular, which is why you will hear reported on the news, on Yahoo Finance and on the radio because it is a great representation of a lot of the companies in the US. Now it started at 62.76 points made 1880. Now when I was making this presentation on September 29th, 2020, it was at 27,452 points. And when you look at it over a long time period, it gave an annualized return of 7.55% over the last 25-years. Now, obviously some years were better than others at 2019 was much better than 2008, and therefore, it does fluctuate a little bit. But over the long term, what we are trying to say here is that they do have great annualized returns of about 7.5% on the Dow Jones Industrial. And therefore, when you invest into a financial instrument that gives you exposure to the exact same companies, you can expect the exact same return and over the long term, that is an extremely good investment. Now let's look at the S and P 500. This is 500 of the largest companies in the USA. It started at 19.94 points in mid 1928. And on September 29th there was at 303,335 points, which is just a huge gap there. And so what I'm trying to display here, and what I'm trying to show you is that over time, the S and P 500, the Dow Jones than nasdaq and the US economy goes up. And so when you are starting your investing journey, you want exposure to the US economy because over the long term, it gives you great returns. If you can get a six or 7.5% return over 40 years, just as small investment upfront is gonna turn into something very large at the end. So what I'm trying to show you here is that the US economy, that Canadian economy, most economies go up fairly steady over time. They do have blips, they do have bad years, but over time the returns are 67, 8%, they're pretty good. So now we've covered two different indexes. I've showed you what it is, is just a theoretical group of companies that Dow Jones, the S and P 500. But over time, those indexes go up at a pretty steady and pretty evenly. So now the question is, how do you invest in them? Well, there's a couple of different options for you and I'm going to break all of them down for you right now. Okay, so how do you invest into an index? Well, the first couple options are a mutual fund. A mutual fund is really simple. It's just a pool of money used to invest into companies. Now an index fund is a specific type of mutual fund that is invested in companies and designed to get you the exact same return as an index. So when we look at the Dow Jones, you can buy an index fund that will hopefully get you the exact same results as the performance of the Dow Jones. Now the problem with an index fund and end mutual funds is that both can only be traded at the end of the day or settled at the end of the day. So if you see that the Dow Jones is absolutely plummeting and it's 12 noon. You can't do anything about it. You can't take your money out. You can't do anything until the end of the day, so where it's actually settled and you're probably going to have to pay some fees to get your money out of there it you're also going to have to pay some fees for people to manage your money because this is governed and run by a business that is going to manage your money for a fee. And so you're gonna pay a little bit for that and you're not going to be able to take your money out midday. So those are some of the disadvantages to a mutual fund in an index fund. And that's why I want to talk about ETFs. An ETF is an Exchange Traded Fund. This is how I invest for this is what I put my money into. This is what I recommend people put their money into. And there's a couple of reasons behind it. It is designed to track an index, so meaning it gets the exact same results as the S and P 500, the Dow Jones, whichever one you choose. But it can be traded just like a stock. So you can get in and out in five minutes. You can hold it for a lifetime, you can hold it for two days. Or if you see the Dow Jones is plummeting one day, you can cut it at lunch from yourself when you can do whatever you want, you can treat it just like a stock. And they have very, very low fees. It costs almost nothing in management fees. And to get in and out of those trays, depending on who your broker is, is usually free most of the time. Now the nice thing here is that it's also managed by computers, so you're not paying high management fees. There's nobody behind a desk. There's nobody that's actually working on anything here. It's completely computer managed. And what happens is when your money goes into the basically ETF, what it does is it disperses it amongst those companies that it actually holds and everything is done automatically. It's managed by computers and most of the time you will get better tax treatments than you will if you had invested in an index fund or a mutual fund. Now, I am not an accountant, I'm not a CPA. That is just me speaking from my experience. You'll need to look into that based on where you live. So real quickly and summary here, and index is just simply a group of companies that is listed and points an index fund type of mutual fund that you can invest into that is designed to get you the same results as that specific index. However, you're gonna pay higher fees for that and you will not be able to trade it intraday. An ETF is almost the exact same thing, but you can treat it exactly like a stock. So when you bind to an ETF, you are basically buying into that index and putting your money into that group of companies. And it will get you the exact same returns as if you had basically gone out and bought all of the 500 companies in the S and P 500. However, you can do it with a much, much smaller investment than it would've taken to go out and buy 500 different companies. And it will also auto rebalanced for you. So now let's look at an example of an ETF that I actually have some money in. So here you can see we are looking at the S and P 500. So on the left-hand side here you can see S and P 500 market index. This is the actual index from the S and P 500. You cannot trade this, you cannot buy it, you cannot do anything with this. All this does is show you how well the 500 largest companies in the United States are doing operating under the current economy. That is all this is going to show you. You cannot buy this for $3,335. This is just the index. It is displayed on a chart just like a stock chart, but you cannot buy that if you want to buy into this index, what you could do is buy the S and P 500 ETF from iShares. And so the ticker for this is IV, V. And if you look at this chart is almost identical to what is happening in the S and P 500 index. And so what I have here is the index on the left and the ETF of that index on the right. And so if you want exposure to the S and P 500 and the 500 largest companies in the United States, all you would do is buy one share of IV, V for $333. And it will give you the exact same impact as if you had just first on money in the same way the S and P 500 does into its index. And so the idea here is that if you invest into the ETF of this index, you should get the exact same results in, over the long-term. It should give you a six to 7.5% return. Now let's look at a couple more examples. So here are two other ETFs that I have my eye on right now. So this is a clean energy ETF and this is an e-commerce ETFs. So exactly what I described before. There's an index that basically looks at clean energy companies, and this is the ETF of that index. So if you want exposure to a large group of clean energy companies, all you have to do is buy one share in this index for $17.98 and it will give you the same results, the same ROI as if you had bought that index, the exact same thing on the right side here, I have an e-commerce index, and so this is one that I'm heavily invested in right now. And as you can see, it's at $27.20. And this will perform the exact same way as if you had invested into the 50 different companies that are in this index. And so what this does is in two transactions, I can now have exposure to about 30 different clean energy companies and 50 different e-commerce companies in two transactions I could get in in two minutes. I don't have to worry about picking and choosing different companies because I know that I'm diversified, I'm ready to go and now you can start to build your portfolio. Okay guys, so here my financial recommendations, this is what I would do if I were you. Number one is put your emergency fund in a high-interest savings account that way you know your emergency fund as completely safe if the stock market crashes, the housing market goes to crap. You know, that you'd have that back-up this completely safe and it's gonna make enough interest to cover the inflation. Secondly, I would start by investing in the S&P 500 ETF nine, no, it had a little bit lower returns than the Dow Jones. If you want to do the Dow Jones, that's totally fine as well. The S and P 500 would give you a little bit better diversification though. And I would invest up to about three thousand, four thousand dollars in there and just put all of your money into the S and P 500. Now, I know what you're saying. Don't put all your eggs into one basket. But when you buy the S and P 500, like I said, you're getting the same exposure as if you had just bought 500 different companies. So it is going to give you the exact same results as a portfolio that is diversified with 500 different companies. And so the S and P 500 is ultimate diversification at its finest when you purchase that as an ETF. And so don't worry about all your eggs in one basket. I would recommend doing that up to about three or $4 thousand once you've got that, go fine to more ETFs in industries that you will think will seek growth. So for me, it's e-commerce and it's clean energy. If you think it's cannabis or you think it's whatever, whatever other industry go find an ETF, go find an index and find the ETF and buy into that and add two of those. That way, you've got exposure to the entire market, you've got exposure to, to specific industries. And after that step four, I would say go find a dividend focused ETF, go find one that is gonna give you cashflow. Go find one that is large old companies. They're just spent no money that is going to give you four or 5% every single year for the next ten years, that would be Michael. And lastly out, put your money in some safe bonds, lock it up for five or ten years. Make sure you're going to collect a nice little interests rate and make sure your money is safe. It is much better to keep your money safe with a lower risk than it is to risk everything and have to go back to your wife, your kids, your girlfriend, whoever it is and say baby, I just lost a year's worth of savings. It is not worth that conversation to have. Just avoid it as much as you can. And if you follow these steps, I promise you, it's going to give you a pretty good chance of avoiding that conversation. Okay, so in summary, just a couple of things I want to cover. An index is just a group of companies. That is all it is. Etf is a financial instrument that tracks at group of companies known as an index, but it trades like a star. So unlike a mutual fund or an index fund, you can get in and out of an ETF and five-minutes whenever you want, you have full control for liquidity and it's very easy to do if you invest into an ETF, you don't have to worry about picking stocks when you invest into an ETF like the S and P 500, the Dow Jones, or the nasdaq. It's great because you're already diversified. You don't have to pick and choose. It gives you perfect diversification as soon as you get in. And it is going to auto rebalance for you, which is extremely, extremely nice. It limits the amount of work that you have to do and all you have to do to try and make some regular contributions. Watch your money grow over time and be patient. So that is my recommendation. If you've got a couple of $1000 that you're ready to start putting in. I would recommend the S and P 500 or the Dow Jones ETF. And after that, I would go find to ETFs that you really, really like and build all three of those at the same level until you're ready to start building some cash flow and then go find a dividend ETF. And then if you really feel comfortable, you can start picking and choosing a couple of different companies with about 10, 15% of your portfolio. But I would never, never ever recommend having more than 1015, 20% of your portfolio in one stock if you are going to build a long-term portfolio, day trading is a completely different strategy. You need to figure out what type of investing you are going to be doing. So this is just my advice. So you guys in the next video. 12. Bonds: What's going on, guys, in this video, we're going to be talking about bonds. So let's get right into it. Okay, so bonds, bonds are really simple. It's basically when you go out into the marketing, you buy a bond. What you're doing is you're lending somebody your money. Now, while they hold that money, they're gonna pay you interest payments, meaning you could get $5 per year back on the money that you lend somebody. And then at the end of a specific time period, they are gonna give you that original amount back. So if you give somebody a $1000 in year one and then they pay you $5 a year for five years. And then at the end of that, that gives you your $1000 back. That is exactly how a bond works. That's the basic principle. Now, there was a couple of definitions. So bonds are usually sold in units equal to about a $1000. That's kind of one unit is usually around $1000. Now the interest payments, so when you go out and you buy a bond, you're giving somebody else a $1000 and then they're going to send you interest payments, that those interest payments are called coupons. Now I'm gonna get into this in a minute why they are called coupons, but just keep that in mind. Now the full payment at the end is called the principle. So if you give somebody a $1000, that is the principal amount and at the end when you get that back, you're receiving the principle now, the date at which you receive that money back is called the expiration. So when you go out and you buy a bond for $1000 and then you collect a $5 coupon every single year for five years, you will then get the principal amount back at the expiration date five years after you've originally given that money. So that's the idea and the definitions that we're going to use when we talk about bonds. Now let's get to that coupon topic real quick. So this photo here is a photo of an actual bond from 1898. This is really cool. This is what they actually looked like. And so this top piece here, this would represent the principal. So when you gave somebody a $1000, you would get this entire sheet back. And this large piece up here represented that $1000. Each one of these little blocks at the bottom represented one coupon. And so the idea here was you would go to the market and you buy a bond, you would get this sheet back. And then every year or every month, depending on how often you redeem your coupons, you would take in one small little block of this right here, you would go to the bank or whoever you got the bond from, you would take that small little coupon, you would give it to them and they would give you your interest payment. And then at the end of it, once you've given them all of the little coupons, you would go back in and you would take them this large block at the top, and this would be your principal payment and that's how you get your $1000 back. And so this is how bonds worked for a very, very long time. And this is the reason that we call them a coupon, and this is the reason that stores give up coupons today. So super cool little piece of history, and that's how the word coupon actually started. So that is what a bond used to look like. Everything nowadays is completely electronic and automated. So you go into the market, you buy a bond, you know exactly what the interest rate is and the expiry, and then you get your money basically automatically sent to you. So let's dive into that. So when we talk about bonds, there's three different types of bonds that you are going to want to know about. So the first one is T-bills or treasury bonds, federal government bonds, where you are actually giving the federal government money and then they are gonna pay you interest. So. Really, really nice. And the great thing about this is it's super secure. The only way you're not going to get paid is if the federal government goes down and gets taken down and runs out of money. So this is the most secure financial asset you could actually own, is a T-bill because it is backed by the actual Canadian government. It's more secure than your house is more secure than your bonds. It's more secure than anything else. This is the most secure financial asset that you can possibly. O1 is a T-bill or a GIC. Pretty much the exact same thing is exactly this. So if you were looking for the ultimate level of safety, you are going to want a treasury bill. The second level down from that in the bond world is what we call munis. Now these are basically municipal bonds that are held or given by the state or the city or the province wherever you live. And they're basically smaller governments that are doing the exact same thing, except that they are lending you money. So when the city of Calgary and wants to go and build a big, big road or big construction product project. They could sell municipal bonds to raise money for that. And I could go out and be an invested in that. And then the city of Calgary is going to pay me back over time and give me the principal back at the end. So that is an example of a municipal bond. And the third option is corporate bonds. It's the exact same thing again. However, the bonds are then held and used the money by corporations. So you'd go out and you'd give Tesla Motors a $1000, they give you a bond back and pay you an interest rate on that. So it goes in order just like this. So T-bills are the safest mutinies are second, and then corporate bonds are a little bit riskier in terms of the bond world. However, all bonds are, are fairly safe depending on what kind of bonds who by now, the one thing you're going to want to look at, and usually the most important thing is the interest rate. This is the amount of money that you are going to get back in the coupon. This is how much money you're going to get it to generate from your bonds. So the interests rates, euro bonds are fairly small, they're not substantial by any means, a T-bill because it is so safe and it is so Guaranteed, has a very, very small percentage rate of 0.08 to 1.42%, meaning you're not gonna make a ton of money on a t bill unless you are putting in millions and millions of dollars. Municipal bonds pace slightly higher interest rate up to about 2.04%. And corporate bonds you can find as high as 3.27%. Now, this is September 20-20 visa. The rates that are active right now, these rates do change over time. So if you're watching this video six months a year from now, they may have changed slightly, but these are the general ranges that you will find in today's terms in 2020. And I know what you think and Zach, these interest rates are super tiny, especially when you compare it to the inflation rate, you might actually be losing money. And the truth is that some years you may lose money, inflation may be greater than the interest rate you're going to get a bond in some years. And the truth of the matter is a maybe the exact same case for your stock or any other asset you own. So unfortunately, not a great argument, but yes, it does happen. It does exist. If you looked at the last 20 years, you can see our averages about 1.5 to 2% inflation. We haven't had any major spikes up like the seventies of the fifties in recent years. Not to say that it can't happen again though. So if you go out and you buy a long-term bond was only a 2% interest rate on it. Well, you might be just breaking even on inflation at the end of the day. However, there are plenty of years where inflation is down to 0%, like what happened in 200820092010. There were certain years where interest rate was 0 or sometimes even below 0, and therefore you're making even more money on your bonds. So it is definitely something to consider. But the reason people go into bonds is for safety, security and cashflow. To make an exorbitant amount of money, especially when compared to inflation. Okay, touching on that topic again, bonds are super low-risk. That is the reason that people like them, that is the reason that people put their money into them, and that is the reason that the bond market is actually larger than the stock market in terms of total market cap. Now, people like this because a lot of people in retirement, a lot of people manage money for pension funds, for retirement funds and for long-term savings. And those type of people needed a low-risk and steady cashflow. And that's why bonds were grey for them. So T-bills are the safest, but they also have the lowest return. Corporate bonds have the highest return in comparison. However, if that corporation goes bankrupt or campaign back, you could take a loss on your bonds. In comparison, a government that is much less likely to do that. Now those are the only ways that you're really going to lose money on your bonds or if the interest rate just skyrockets, it could be another issue for you, however, are the last 20-30 years that hasn't been a problem for anybody. Now in summary, let's just cover the positives and the negatives of the bonds. So when you go out and you buy a bond, it's really nice because it's super low-risk and you have steady cashflow. You know exactly what your coupon rate is going to be, you know exactly what that cash payment is going to be every single month or every single year. And you can bank on it pretty steadily. It's also a CIF store money. So if you're just looking to store your cache, you don't need to invest in, you don't need to make a ton. You just don't want to lose your money. Well, T-bills are probably the best place in the world for that because they are backed by the federal government. And the federal government is going to pay you to keep your money with them. They're even safer than a bank. So I do recommend that if you're looking to just store your money safely, the last thing is they are absolutely phenomenal for retirement if you can get to the point where you can live off your cashflow from safe bonds, you're basically made it, you've hit the, hit the heavens of investing and you're all set and you're good to go because you have almost no risk here, steady cash flow and you know, you're gonna get your principal back at the expiration. So you have nailed that. You've hit the, the holy grail of investing and you've done it. Now the negative side of bonds, and this is, this is the kryptonite is wide, not everybody's in bonds. It's because they have a low return. If you're only generating one to three or 4% returns, it is not substantial, it is not great and you can get better returns. Different places in the market, such as stock, such as real estate and such as other different financial options. However, none of them will be as safe as bonds, and that is the reason that people would go with bonds. So those are the different things that you need to consider when you're managing your portfolio and you're deciding, should I buy bonds, should I buy stocks? Well, bonds are a great option and one rule of thumb that a lot of people use is, depending on what your age is. That is the percentage of your portfolio that should be in bonds. So 90 years old, you should have 90% of your portfolio in bonds. If you're 20 years old, you save 20% in bonds. Now, that is a rule of thumb that other people use. I don't personally stick to that because I'm actively trading. However, if you are just passively trading and looking to grow with a little bit of savings. That is the way to do it. That is definitely the way I do it. Put some money in bonds, keep it safe, bringing the cashflow reinvested into more bonds or dividend-paying stocks and grow your account that way. And that is my advice. So we will see you guys in the next video. 13. Credit: What's up, guys, welcome to another lesson. In this video, we're talking about credit scores, how they work, how they're calculated, and how you can improve yours over time. Here we go. Alright, let's get into it. So what is your credit score? Your credit score is a number that represents your ability to pay off your debts. Now it's usually a number between three hundred and eight hundred and fifty, eight hundred and fifty being extremely, extremely good, and 300 being extremely, extremely bad. Now, this number is calculated by two organizations called credit bureaus. And these credit bureaus get their information from people that give you money. So some examples of this are mortgages, credit cards, lines of credit card loan, student loan, or your cell phone. So any of those people or any of those services that you have, they basically report your payments that you make to them. They report back to the credit bureaus with whether or not you paid on time and how much you paid. Okay, now let's talk about why credit is important. Well, one great example that will save you a lot of money over time is that good credit will get you a better rate on your mortgage. So when you're buying a $0.5 million asset at 3% interest, if you can get it at 2.5% interest over 30 years, you're gonna save a lot of money, and that comes down to your credit score and your ability to repay debt when you go and sign up for that mortgage. Secondly, it can help you get a business loan. If you want to go open a business, you want to borrow some money from a bank to get started. It's a lot easier to do that when you have good credit. You can also access better credit cards and lower interest rates when you have credit, and it's easier to finance or lease a new vehicle or by a large asset. You will also pass all of your credit checks when you go out to rent a home, rent an apartment, whatever it is, if somebody runs a credit check on you and it will come back with flying colors and give more confidence into allowing you to rent that place out. Now there's a lot of other reasons as well, but these are kind of the five that most people are concerned about. So let's start talking about how it is calculated. Now, there are five different factors that go into how your credit score is actually calculated. Some of them are more important than others, and there's two that are the most important. So the two that are most important are your payment history and your level of utilization. So when I say payment history, a literally means how long you've been paying off that credit card on time. Did you pay it off on time and did you hit the minimum payment on it? All it is a one or 0. It doesn't matter if you blew it out of the park or if you missed it by one penny, you that paid it off on time or you didn't pay it off on time and that is referred to as your payment history. Did you make your payments? Yes or no. It comes up as an x or a 0 on your credit report and that is what they are looking at when we see payment history. The second thing we're looking at is level of utilization. So when we say utilization, it means that if you have a $10 thousand credit card, how far into that credit card are you going on a monthly basis? And what the credit bureaus like to see is utilization under 30%. So if you have a $10 thousand credit card, the best way to improve your credit and the best way to keep a good credit score is to only use $3 thousand of that on any given month. If you use more than that, your utilization goes higher and it affects your score negatively known as not a drastic effect, but it is a negative effect compared to keeping your score under 30% The other three factors that go into your credit score or the age of your credit. So if you have a credit card that you'd been paying off for one year compared to a credit card that you've been paying off for five years. That five-year credit card is going to have a much more positive impact on your credit score than the 1-year credit card. And so one of the tips that I'm going to give you here in a couple minutes is don't cancel those, those old credit cards continue to pay them off, leaves a matter Xero balance, but keep them there and do not get rid of them because it will extend the age of your credit. Now the next one here is that diversity of your credit. So there's a couple of different forms of credit. There's a line of credit, there's a loan, there's a credit card, there's various different forms of credit. And if you're able to show that you can pay off several different forms of credit at the exact same time or over time, even just consecutively, it gives a much better impact to your credit score than only being able to pay off credit cards, for instance. So therefore, the diversity of the credit that you actually have, whether it's between a car loan, a student loan, a mortgage, a credit card, a line of credit, no matter what it is, a little bit of diversity is a good thing when it comes to your credit score. Now the last thing here is the number of inquiries and that refers to how many times people have actually gone in and pulled your credit report. Now we're going to dive into that a little bit deeper here. But what I want to summarize it here is that those last three factors only make up about 35% of your credit score, whereas your payment history and your level of utilization makeup that other 60, 65% of your credit score. And therefore that is where you should focus the majority of your time is paying off your debt on time and making sure that your utilization is below 30% here, okay, so the next thing that we need to talk about is the credit bureaus because there is significant pieces of the puzzle here. So in Canada and the United States, there's two credit bureaus. The number one is TransUnion and number two as Equifax. Now, there's a couple of things that you need to know about them. One is that keep your credit score, but two is each credit bureau. So TransUnion and Equifax may have a different score for you. The reason that that happens is because if you go out and you take out a bank loan was let's say RBC, you're hearing Canada and you pay back that bank loan, but RBC only reports your positive payments to TransUnion. Then if somebody goes out and pulls your credit score from Equifax a could be different than what it is at TransUnion. And so for that reason, you need to check your score at both of them. Because some people will only report to one and some people will only pull for one. However, if you notice in discrepancy and you call them up, you can get them on the same page and you can settle that fairly easily. Now the best ways to check your credit score from what I've personally found is due credit Carmen.com and borrow well.com. Credit Karma will pull from TransUnion and boil well, we'll pull from Equifax so that you know, if you pull from both of these websites, they will be accurate and they will be up to date. However, you can visit both TransUnion Equifax directly, but it is not as user friendly. There's a couple more steps and it's not quite as easy to get the information as quickly. So you have both options there. I personally use Credit Karma and burrow. Well, you create an account on there and it's super user-friendly, super-easy to use. And that's how I personally do it. Now this question comes up a lot, does checking your score or your score. So for instance, if I go in every single month and I checked my scoring Credit Karma is I can have a negative impact on my credit score. The answer is no. The reason the answer is no is because there's two types of checks. There's what we call a hard pull and what we call a soft pull. A soft bull is basically just going in and saying, hey, what's this guy's credit and what's his payment history? Like a hard pull basically goes in and prints an entire report of your full credit history. This is what they use when they give you a car loan or they give you a mortgage, or even when you go and apply for a credit card, and when you get a hard pull, that will negatively affect your credit score. So if you go out and you get quotes for five different cars and every dealership pulls your credit that it will negatively affect your credit score. However, go on once a month that you pull your credit score from Burwell and from Credit Karma, it will have absolutely 0 impact on your credit score even over the long term. So you need to be very careful what type of pull your doing if it is a hard pull or a softball anytime someone who's actually going to give you money, it's more than likely a hard pull. If it's a soft bullets, usually just a quick little credit check. That's usually also what happens when you go to rent a property is it's usually just a softball. So definitely those two different types of pull that you need to be aware of, the hard pole will negatively affect your credit. The softball will have 0 impact on your credit. Now what are the best ways to improve your credit score? Well, I figured let's relate this back to the five factors that actually make up your credit score. So the number one factor is payment history. The best way to handle this, quite literally really simply make your payments on time, pay every debt on time, and just make the payments. If it's a credit card, a student loan, a cell phone, it doesn't matter what it is if you miss that payment by one sent, it is going to show up as a miss payment on your credit report and it is going to negatively affect your credit score. Secondly is utilization. This is the second largest factor when it comes to determining your credit score. And the easiest way here, it's just stay under 30% of your limit on everything. So if you have a line of credit that's ten grand, you only put up to $3 thousand on it. If you have a credit card that's $20 thousand, you only put up to $6 thousand on it. That is the blanket rule for any type of debt that you have where you can actually control the balance on it. It needs to stay under 30% and now we'll overtime boost your credit score thirdly, at the age of your credit. Now I mentioned this before, but do not get rid of that credit card that you mob signed you up for when you are 16, keep that balance is 0, keep paying it off because what happens is overtime. It shows a longer and longer payment history and it shows that you are better and better off at paying off your debts and it will improve your credit score. So do not get rid of your old loans, do not get rid of your debt or elastic credit. Keep them there for as long as you can and pay them off, or at least try and get the fees on them as low as possible. So it cost you as little as possible and it will continue to boost your credit score. Fourth is diversity of your credit. And the way to do this is your credit card, your line of credit or a loan. If you already have a credit card and you're looking to build your credit God, and getting lot of credit for $5 thousand and don't put much on it, go to get a loan for $5 thousand and invested in some super safe investments, or just leave it in cash payoff the interests, and boost your credit over time. Before you get a mortgage, you don't need to do that one over the long-term, but it can definitely help your rate raise your credit score over a year to And lastly is the number of inquiries. The best way here is to just limit the number of hard pulls that actually hit your credit score. So when you go out and get a car only let one guide to a heart full on you when you go out and get a mortgage, try and find a broker that's only going to do one hard pull on you. Things like that are going to significantly, significantly reduced the number of inquiries. They go into your credit and will boost your credit over time. Or you guys just want to cover a couple of quick points here in the summary. So good credit scores make life easier than make life easier by saving you money on your mortgage and your interest rate, you have more money left over for you and your family. Secondly is pay everything on time. If you have a line of credit, a credit card, whatever it is, do as much as you possibly can to pay them on time because it will boost your credit over time. And whenever possible you need to stay under 30% utilization because it shows the bank that you are not relying on that credit to live your life. And lastly, you need to go out now and you need to check your score. The reason I say that because I brought this up with one of my friends a couple weeks ago, hadn't checked a score and a little while and realized that he actually had a lien against him for one of his employers from a couple years ago. And so you need to do that because it will tell you if you have any liens against you, what's going on with your credit? If you have any weird loans that are a little fancy that you've never actually heard of. Well, you can call up visa, you can call up TransUnion and say, hey, this isn't me. You need to look into this because this isn't me, somebody stole my identity. All of these things can come from checking your score and all it takes is five minutes. So you really need to get out there and do it.