The Money Scope Podcast

Ep. 5: Debt, Saving, & Investing

Jan 12, 2024

Explore the journey of navigating debt, savings, and investing at different stages of life. Discover the emotional weight of debt, distinctions between good and bad debt, and tips for financial resilience. Learn about the relationship between saving, investments, and risk, as well as the importance of time horizons and considering taxes. Build a solid financial platform and empower yourself to live the life you want, both now and in the future!

01:07:58

Creator website

AI Summary

Highlights

AI Chapters

Episode notes

Podcast summary created with Snipd AI

Quick takeaways

Using debt early in life can make economic sense, but it's important to consider the emotional weight and negative impact it can have on subjective well-being.

Debt, saving, and investing are interconnected in personal finance, with debt being beneficial for young individuals while savings and investing create a strong financial foundation.

Managing income, consumption, and savings throughout one's life cycle is essential for maintaining a balanced distribution of wealth, and building financial resilience before transitioning from saving to investing is crucial.

Deep dives

The importance of setting long-term goals and measurable targets

Setting long-term goals is an important aspect of personal finance. Financial independence is a common goal that provides flexibility and freedom to achieve other objectives. It is crucial to establish measurable targets along the journey towards financial independence to track progress and stay motivated. Making the long-term financial journey rewarding and avoiding distractions are also key considerations.

Prioritize Savings over Investment

01:22

Spending While in Debt is Equivalent to Taking Out a Loan

00:46

Introduction

2min

Understanding Debt and Building Wealth

11min

Connecting with Your Future Self

3min

The Role of Debt in Financial Decisions

10min

Risks and Considerations of Callable Loans and Line of Credit

2min

The Importance of Liquidity and Safety

26min

Tax Deductibility of Investment Loans

13min

Our relationship with money changes throughout our lives. While this journey will vary between individuals, there are broad trends that will apply to many of us. In today’s we investigate how to navigate debt, savings, and investing at different stages of our lives and break down how these mechanisms can help you move your economic value through time. From an economic perspective, it makes sense to use debt early in life.

But taking on debt can be a scary prospect, and it’s important to take into account the emotional weight of debt and how it can negatively impact subjective well-being. Tuning in you’ll hear valuable tips on how to approach debt in a constructive way, the distinctions between good and bad debt, and how to ensure financial resilience and cash flow security. We discuss the various approaches one can take to saving and investments and their relationship to risk, before providing a breakdown of the various account types one should consider.

Our conversation also unpacks the concept of time horizons, how to balance inflation risks and investment risks, and how taxes factor in when assessing debt. We want to help you build a solid financial platform to launch from. Tune in as we discuss how debt, saving and investing can help you move your lifetime economic value through time and learn how this can empower you to live the life you want, both now and in the future!

Key Points From This Episode:

(0:01:03) How we typically progress through debt, saving, and investing in our lives.

(0:05:54) The drawbacks and benefits of using mental accounting.

(0:06:49) Financial wealth over one's life cycle and how it can differ between individuals.

(0:08:45) The distinction between good and bad debt, psychologically and economically.

(0:10:32) Practical tips for how to think about debt and spending constructively.

(0:16:07) The importance of dealing with the emotional weight of debt.

(0:21:33) How to ensure financial resilience and cash flow security, different sources of liquidity, and the risks of relying on lines of credit.

(0:28:26) The psychological considerations you should take into account with debt and the benefit of having funds designated for certain purposes.

(0:31:23) An overview of the relationship between savings, investments, and risk.

(0:35:48) What it means to put your money into savings and a breakdown of the different account types to consider.

(0:42:11) Our recommendations regarding concerns about CDIC coverage and limits.

(0:47:04) Matching the financial instrument and financial product that you use with the account type.

(0:50:30) The concept of time horizons and how to balance inflation risks and investment risks.

(0:54:10) A rundown of how taxes factor in when assessing debt.

(0:59:41) Dealing with the psychological stress of seeing your investment value fluctuate and why most people find a compromise between repaying debt and investing.

Links From Today’s Episode: Rational Reminder Episode 141: Hal Hershfield — https://rationalreminder.ca/podcast/141 Rational Reminder Episode 256: Prof. Hal Hershfield — https://rationalreminder.ca/podcast/256

Dr. Mark Soth (The Loonie Doctor) — https://www.looniedoctor.ca/

Dr. Mark on X — https://twitter.com/LoonieDoctor

Benjamin Felix — https://www.pwlcapital.com/author/benjamin-felix/

Benjamin on X — https://twitter.com/benjaminwfelix

Benjamin on LinkedIn — https://www.linkedin.com/in/benjaminwfelix/