You Should Take The McGill Personal Finance Essentials Course

Photo by Nick Chong on Unsplash

Here’s a quick summary of what I learned.

It is crucial to have a solid understanding of the financial world, and your personal situation. Especially today, when the future is displaying more volatility than ever (SVB 👀), I believe that everyone should have the privilege of a financially secure future. Unfortunately, that’s not how the world works. Maybe one day!

In the meantime, I can’t help but feel that I’m unprepared for what is to come. The world of finance is daunting; there are countless acronyms to scare you. Yet, it is for this reason that I have started focusing more seriously on learning about it.

I acknowledge that I still don’t know the intricacies and fine details that exist, but I will say that the McGill Personal Finance Essentials Course helped me gain a solid understanding of the basics.

No, this isn’t an ad, but rather a shoutout for a free resource that I think many people can benefit from. The course has 8 modules, each with 15–20 minutes of video content (with transcripts) and a quiz on their respective topics. The course serves as an apt introduction to the methods you can use to best manage your personal finances.

Below, I have provided some of the key points I learned from each topic:

Module 1: Introduction to Personal Finance

• Nearly half of Canadians live paycheque to paycheque, and one-third have no retirement plans
• Financial literacy is important for effective money management, including knowledge of budgeting, taxes, investments, and real estate
• Key ideas in personal finance include saving and budgeting, compounding, inflation, risk tolerance, and selecting a financial advisor

Module 2: Budgeting

• A budget can help you understand your money coming in and going out, which can help you set financial goals and make informed decisions about spending.
• To build a budget, gather information about your sources of income and spending, estimate your expenses, and sort your spending into categories.
• It is important to track your spending and adjust your budget as needed to ensure that you are living within your means and saving for the future.

Module 3: Time-value of Money

• Money is worth more the earlier it is obtained, provided that money can earn interest.
• The amount of interest earned is called the interest rate, and it is expressed as a percentage of the principal amount.
• The future value of an amount of money can be calculated using the formula FV = PV(1+r)^t, where FV is the future value, PV is the present value, r is the interest rate per period, and t is the number of time periods.

Module 4: Debt and Borrowing

• Common sources of debt include credit cards, lines of credit, long-term financing, and mortgages. Debt is not necessarily bad.
• Keep track of your spending, credit reports and credit score.
• Live within your means, always ensure you are using debt wisely, and have a solid plan.

Module 5: Investing

• Diversify your portfolio to minimize risk and fluctuations over time
• Avoid buying high and selling low; stick to your investment plan
• Minimize investment expenses to increase long-term returns

Module 6: Retirement Planning

• The Canadian Retirement Plan is designed to provide a social safety net and flexibility. It includes Old Age Security (OAS), Guaranteed Income Supplement (GIS), Canada Pension Plan (CPP) & QPP, and employer-sponsored pension plans.
• You can invest in personal savings and registered investment accounts like Tax-free Savings Accounts (TFSA) and Registered Retirement Savings Accounts (RRSP).
• Retirement planning should start early, and it’s important to understand the different tools and programs that exist within the Canadian retirement system and how to best use them together.

Module 7: Real Estate

• Reasons for buying real estate include property value appreciation, asset diversification, protection against inflation, and passive income.
• When considering the costs of real estate, both transaction costs and ongoing costs should be taken into account, including taxes, maintenance, and condo/HOA fees.
• Rent payments are unrecoverable costs, while mortgage payments have principal repayments and interest fees.
• Some options for real estate investment include rental properties and REITs.

Module 8: Behavioural Finance

• Behavioural finance studies how investor psychology affects investment decisions and financial markets.
• An investor’s level of risk aversion is an important factor to consider when investing.
• Emotions can negatively affect investment decisions and can lead to specific types of biases such as conservatism bias, representativeness bias, disposition effect, biased self-attribution, and fear/overreacting/intense emotions.

Those are just some of the takeaways of each module, but I believe the best way to learn is by taking the course on your own.

The course runs 4 times per year, and you can register here: https://www.mcgillpersonalfinance.com/

Thanks for reading!