How to accumulate capital early on

I had this bang-on question from a military friend of mine.

"Hey Alex, how do I accumulate capital early on?"

I'll tell ya, I wish I'd asked someone that question early on, as it's not as simple as it sounds. Here are some points - I'll try not to write a novel this time.

1. Capital is just a sum of small amounts of saved expenditures. Stupid but true. Live below your means, save it.

2. Pay off credit card bills first. Pay off consumer debt in the order of highest interest rate. You'd be amazed how quickly this adds up.

3. Live as far below your means for as long as you can. Tip: A CAR SHOULD NOT BE THE FIRST DAMN THING YOU BUY.

4. If you are saving to build capital, invest in lower risk assets. Stocks are great, but not if you are intending on buying a house. Consider this: average stock return over the last 10 years (given the recent market correction) is 1%. That sucks. Now is likely the time to buy, but technically the market could still go down. I'm not entirely sure why everyone is wondering where the bottom of the market is; I'm pretty sure it's 0.

4.a. all that to say: invest it in laddered GIC's in an RRSP. This is because the RRSP's return is your marginal tax rate. it's a tax savings. If your tax rate is 45%, your rate of return on your RRSP investment is automatcially 45%. Beat that Dow Jones.

4.b. In Canada, your RRSPs can now be used to put on your first downpayment for a house, and you have 10 years to 'pay yourself' back. That's a pretty fantastic deal: 30-50% tax savings when you put it in, AND you can use it to buy a property, that will ALSO appreciate over time.

5. When you buy your house, suck it up and get room mates. As long as they are paying off the mortgage interest, taxes, and some of the utilities, you are living for free. I STILL have room mates, and I own 5 properties.

I will refine some of these ideas later, but I hope this helps anyone wishing to save some capital for a house.

AIML