Tutor profile: Mark G.
Subject: Personal Finance
How do I arrange my life so I will be much better off financially in ten years?
The first thing I would suggest is to begin looking at your debt more seriously. If the interest rate is beyond 8%, you will want to either pay that off aggressively or if you can not, try to consolidate it into a debt that is at a lower interest rate. Begin trying to pay that off as soon as possible. Next, you should begin saving money according to your goals. The first goal is to create an emergency fund to cover you in the event that you lose your job, get sick, etc. Secondly, you should begin investing for the near-term future in low-risk investments to help you provide a good financial cushion. Finally, you will want to maximize your retirement fund by investing in bonds, equities and different asset classes to achieve long-term returns. Of course, this should be tax-sheltered in either an RRSP or TFSA dependent on what your tax bracket and financial goals are. Finally, you should immediately begin looking at your spending and seeing where cuts can be made, savings created and so forth.
What is the best way to begin investing in the stock market and stay invested in the market?
Statistically speaking, the best time to begin investing in the stock market is to start investing today. Waiting for the moment where the market drops is typically waiting for a moment that may not happen for a very long time. Today we are living through history's longest bull market and as we are entering the COVID-19 recovery, we may be entering another leg of that bull market. That said, it's best to not "time the market" and start simply investing today for long-term appreciation. To stay invested, you will want to make regular contributions into the stock market through the process of dollar-cost averaging which means you will purchase more shares as the price goes down and benefit from that during the subsequent recovery. Other tips to remain invested include having proper diversification (which typically means at least 15 stocks in your portfolio to avoid non-systematic risk), investing across different asset classes and matching your portfolio to your risk tolerance and time horizon.
How would I calculate the break even point for an investment in my bicycle shop?
Firstly, I would calculate all the fixed costs - the set salaries of your management, the rent, insurance of the building, overhead and so forth to calculate your total fixed costs. Next, we are going to calculate the gross margin on each bicycle by taking the selling price per unit and subtracting all the variable costs associated with it including the cost of the materials, the direct labour and the incremental expenses created in scaling up the business. Finally, the final calculation is to divide the total fixed costs by the difference between the per-bicycle contribution margin (sales - variable expenses). This will provide your break even cost of running a bicycle shop each month.
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