Where to start my financial education?

I was wondering what sort of general advice you have to becoming more prepared for a big financial choice (investing, mortgage, etc). Is there research I can do, take agreements home before I sign them? What do you suggest for someone new to dealing with this stuff?

When dealing with something which is going to impact your life as much as large financial transactions, the more information you have the better. It’s good to do some research and get your feet under you before agreeing to any deals. The trouble, as this question highlights, is knowing where to start. I can offer five general tips for making better informed financial decisions.

1. My first suggestion is to try to go into any meeting that will involve big financial decisions prepared with background research. Whether you’re planning to get a mortgage, buy a car, make investments, or save for your child’s education it’s a good idea to have some general information before you meet with a banker, sales person, or financial advisor.

   What sort of research should you do? Go online and look up some basic tips for dealing with these situations. Go to your preferred search engine and type in something like: “5 tips for financing a car” or “basic tips for taking on a mortgage” or “5 easy steps to get started investing”. This will give you a starting point, some general knowledge about what you’re going into.

   Next, as you’re reading those basic tip articles, make note of any terms you don’t understand. Then look those up. If you see a bunch of cryptic terms like “RRSP”, “ROI”, “TFSA” then look those up. Most search engines will let you type the word “define: ” followed by the mysterious term to get an answer, such as “define: RRSP“.

   This basic research will at least give you a starting point of understanding and ideas of what to discuss with the sales person, agent, or advisor you’re meeting.

2. Consider what it is you want to achieve. Are you interested in investing so you can retire? Are you trying to help your kids save for university? Are you taking out a mortgage so you can fix up and rent out a house? Are you planning to buy your permanent home? Going into financial meetings with a clear idea of what you want to achieve helps both you and the person you’re meeting.

   This is also a good time to consider what you do not want. Are you trying to avoid going into debt? Are you hoping to avoid large monthly debt payments? Are you willing to buy a used car or does it need to be a new one? How do you feel about risk – do you want tried and true investments or are you willing to be risky, accepting a position where you might lose your money in exchange for a better payout? Knowing what you want to avoid – risk, debt, types of payments – helps narrow down the types of deals you will be making.

3. I also find it helpful to talk with friends or family who have been down the same road and done well for themselves. Ask them what they feel they did right in your situation. Also ask them if they made any wrong turns or had any “near misses” where things could have gone badly for them. Knowing what worked for someone else in a similar situation and what didn’t work for them can help you pick your own path.

   This is also a good opportunity to tell your friends, family, or peers about your research. Tell them what you learned, what you think your best course of action is and see if they agree. They may be able to help you fine-tune your plan.

4. In the original question there was a point about whether it was okay to take agreement paperwork (or a mortgage, lease, or investment contract) home and look it over prior to signing the document. The answer is definitely yes! Any sales person, advisor, or agent who has your best interests in mind will be happy to have you look over their paperwork carefully, discuss it with you, and answer your questions. You should absolutely take your time to read any agreements, make sure you understand them, and are comfortable with the terms.

   Any advisor or agent who objects to you taking their paperwork home to read or who tries to pressure you into signing immediately is trying to scam you and is hoping you’ll sign quickly before you have time to think about the situation. If they object to you taking your time and taking the contract home with you, then your best move is to leave and not do business with them.

5. You usually don’t need to meet with just one agent, sales person, or institution. You can visit multiple financial advisors, multiple car dealerships, multiple mortgage brokers, and multiple banks. You don’t need to take the first offer presented. One of the best things you can do for yourself is be willing to take your time and shop around.

   On multiple occasions I’ve received much better deals by walking across the street to another bank or dealership and telling them about their competition’s offer and asking if they can beat it. Often times you can get a better interest rate, better price, or better payment plan by comparing deals between businesses.

   These days you can do a lot of your comparisons on-line. Most banks and investment institutions publish their rates for savings accounts, loans, GICs, and other options. Take your time and browse before settling on one agreement.

These tips should get you started. Basically, read up on what you want to achieve, decide what you want and wish to avoid. Then shop around and compare opinions between various banks, dealers, and people in your life you trust. Best of luck!