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Retirement Planning: Your 30s?
Retirement Planning: Your 30s?
No, it’s not just you. When it comes to finances, your 30s can be overwhelming. Most people find themselves juggling mortgage payments, an expensive young family and growing demands at work. You’re still relatively early in your career, so the money is tight and the questions are many. How big a mortgage can we afford? How much should we be putting into our RRSPs? How do you set up an RESP anyway? To get it all done, you need to figure out what’s important and what can wait, then come up with a financial plan that automatically funnels your money where it’s needed most.
No, it’s not just you. When it comes to finances, your 30s can be overwhelming. Most people find themselves juggling mortgage payments, an expensive young family and growing demands at work. You’re still relatively early in your career, so the money is tight and the questions are many. How big a mortgage can we afford? How much should we be putting into our RRSPs? How do you set up an RESP anyway? To get it all done, you need to figure out what’s important and what can wait, then come up with a financial plan that automatically funnels your money where it’s needed most.
Embrace good debt (ONLY)
Embrace good debt (ONLY)
Given that your 30s are expensive years, you likely won’t be able to avoid debt entirely — the trick is to manage it wisely. That means knowing the difference between good and bad debt and feeling comfortable with the overall level of debt you take on. Bad debt means borrowing to buy consumable items, especially those whose initial sheen quickly wears off. It’s borrowing to buy a car you can’t really afford, or carrying a balance on a high-rate credit card. Good debt, on the other hand, helps you build your net worth. It’s used to buy investments that will increase in value over the long term, such as a home or blue-chip stocks.
Given that your 30s are expensive years, you likely won’t be able to avoid debt entirely — the trick is to manage it wisely. That means knowing the difference between good and bad debt and feeling comfortable with the overall level of debt you take on. Bad debt means borrowing to buy consumable items, especially those whose initial sheen quickly wears off. It’s borrowing to buy a car you can’t really afford, or carrying a balance on a high-rate credit card. Good debt, on the other hand, helps you build your net worth. It’s used to buy investments that will increase in value over the long term, such as a home or blue-chip stocks.
Pay down your mortgage
Pay down your mortgage
Buying a house often means a forced savings plan that helps you build up equity, which is great thing, as long as you pay off your mortgage quickly. Paying down your balance fast is especially important now, as mortgage rates are starting to inch up, so even if you’re locked in, when you renew, your monthly payments could jump. Some strategies to consider include opting for a shorter amortization (15 years, say, instead of 30 years), doubling up your mortgage payments, putting an extra 10% down on the principal of the mortgage every year, or getting a good mortgage broker to negotiate a better rate.
Buying a house often means a forced savings plan that helps you build up equity, which is great thing, as long as you pay off your mortgage quickly. Paying down your balance fast is especially important now, as mortgage rates are starting to inch up, so even if you’re locked in, when you renew, your monthly payments could jump. Some strategies to consider include opting for a shorter amortization (15 years, say, instead of 30 years), doubling up your mortgage payments, putting an extra 10% down on the principal of the mortgage every year, or getting a good mortgage broker to negotiate a better rate.
What about my RRSP?
What about my RRSP?
If you find your mortgage is devouring so much of your income you don’t have much left for RRSPs or TFSAs, don’t worry. You can wait a bit longer before you start saving in earnest. “I’m always asked whether paying down the mortgage or saving for retirement in an RRSP is a better financial strategy for your 30s if you own a home,” says Bernie Petkau a consultant for Advisor & Co. in Saskatoon, Sk. “My answer is to ask yourself what motivates you. If it’s getting rid of debt, then pay down your mortgage as quickly as possible. Once the house is paid off, the grass feels different under your feet. Imagine contributing you freed up money to your retirement now WOW! OR if you’re keen on having some retirement savings in the bank, then contribute a portion of your salary to RRSPs and use the tax rebate to put towards your mortgage.”
If you find your mortgage is devouring so much of your income you don’t have much left for RRSPs or TFSAs, don’t worry. You can wait a bit longer before you start saving in earnest. “I’m always asked whether paying down the mortgage or saving for retirement in an RRSP is a better financial strategy for your 30s if you own a home,” says Bernie Petkau a consultant for Advisor & Co. in Saskatoon, Sk. “My answer is to ask yourself what motivates you. If it’s getting rid of debt, then pay down your mortgage as quickly as possible. Once the house is paid off, the grass feels different under your feet. Imagine contributing you freed up money to your retirement now WOW! OR if you’re keen on having some retirement savings in the bank, then contribute a portion of your salary to RRSPs and use the tax rebate to put towards your mortgage.”
Invest in your kids
Invest in your kids
If you recently had kids, it may be time to start a registered education savings plan (RESP) to help pay for their education. We recommend setting up an RESP account with your financial advisor, they can help you find high return RESPs complete with guarantees. As long as your portfolio is in an RESP account, for every dollar you contribute (up to $2,500 a year per child), the government gives you an immediate 20% top up. Max $500. per child
If you recently had kids, it may be time to start a registered education savings plan (RESP) to help pay for their education. We recommend setting up an RESP account with your financial advisor, they can help you find high return RESPs complete with guarantees. As long as your portfolio is in an RESP account, for every dollar you contribute (up to $2,500 a year per child), the government gives you an immediate 20% top up. Max $500. per child
Protect yourself from job loss
Protect yourself from job loss
Tough as it is, you should try to build up a cash cushion to live on should you find yourself out of work. Three to six months worth of living expenses in cash, GICs or money market funds is ideal. Failing that, you may want to have an unused line of credit lined up for emergencies — it’s much easier to get approved while you’re still employed. It’s also a good idea to keep upgrading your skills while you’re working. Part-time courses and certifications show that you’re actively investing in your career. “Because you have a university education doesn’t mean learning is over,” says Al Feth, a fee-for-service adviser in Waterloo, Ont. “You’ll be working for several employers over your lifetime. It’s up to you to make sure you have the skills to be employable at all times.” If you are laid off, don’t be afraid to approach former co-workers and associates for help. Keep in touch with valuable people at your last job, and if you can, convince your manager or supervisor to write a letter of recommendation before you leave. With a positive attitude and a bit of help from your friends, you’ll make much faster progress toward finding a new job.
Tough as it is, you should try to build up a cash cushion to live on should you find yourself out of work. Three to six months worth of living expenses in cash, GICs or money market funds is ideal. Failing that, you may want to have an unused line of credit lined up for emergencies — it’s much easier to get approved while you’re still employed. It’s also a good idea to keep upgrading your skills while you’re working. Part-time courses and certifications show that you’re actively investing in your career. “Because you have a university education doesn’t mean learning is over,” says Al Feth, a fee-for-service adviser in Waterloo, Ont. “You’ll be working for several employers over your lifetime. It’s up to you to make sure you have the skills to be employable at all times.” If you are laid off, don’t be afraid to approach former co-workers and associates for help. Keep in touch with valuable people at your last job, and if you can, convince your manager or supervisor to write a letter of recommendation before you leave. With a positive attitude and a bit of help from your friends, you’ll make much faster progress toward finding a new job.
The top financial lessons from our 30s
The top financial lessons from our 30s
— Andrew and Penny Gumley
The best thing Penny and I did in our 30s was to always keep a budget. In the early years of our marriage we budgeted $30 a day for food, transportation and incidentals and we made sure to live within our means. That allowed us to build our savings for a substantial down payment on our first home 11 years ago — that, as well as an automated savings plan that saw us deposit a set amount of money to our “savings for a house” account every month.
The best thing Penny and I did in our 30s was to always keep a budget. In the early years of our marriage we budgeted $30 a day for food, transportation and incidentals and we made sure to live within our means. That allowed us to build our savings for a substantial down payment on our first home 11 years ago — that, as well as an automated savings plan that saw us deposit a set amount of money to our “savings for a house” account every month.
Our first home was a $175,000 townhouse in Vancouver and after we bought it, we used every strategy we could to pay it off as quickly as possible. As our salaries increased, we doubled up our monthly payments and put lump sums of cash down on the principal as often as we could. Then, when we moved east seven years ago to be closer to family, the equity in our Vancouver home allowed us to make a substantial down payment on our current home in Ottawa. We paid that home off completely last year when I turned 40.
Our first home was a $175,000 townhouse in Vancouver and after we bought it, we used every strategy we could to pay it off as quickly as possible. As our salaries increased, we doubled up our monthly payments and put lump sums of cash down on the principal as often as we could. Then, when we moved east seven years ago to be closer to family, the equity in our Vancouver home allowed us to make a substantial down payment on our current home in Ottawa. We paid that home off completely last year when I turned 40.
Paying off our mortgage has given us options now. We have three kids — two seven-year-old twins and a newborn — but we know we’re in good enough financial shape that Penny can stay home with the kids for a few years if she wants to. Or, we may decide to both continue working so that we can save for a substantial down payment on a second property in British Columbia — a place we’d eventually like to retire to.
Paying off our mortgage has given us options now. We have three kids — two seven-year-old twins and a newborn — but we know we’re in good enough financial shape that Penny can stay home with the kids for a few years if she wants to. Or, we may decide to both continue working so that we can save for a substantial down payment on a second property in British Columbia — a place we’d eventually like to retire to.
Three Ways Managing Money Changes in Your 30s
Three Ways Managing Money Changes in Your 30s
If you’re a fan of the show Friends, you’ve probably seen the episode titled, “The One Where They All Turn 30.” Rachel is the last of the group to celebrate the big 3-0, and she has a major meltdown about the goals she hasn’t accomplished yet. But when it comes to facing our 30s in real life, we find ourselves agreeing with the (for once) level-headed Ross who tries to reassure them all that turning 30 “isn’t that bad.” In fact, there’s plenty to be pumped about in your 30s—like marriage, kids and career growth, just to name a few!
If you’re a fan of the show Friends, you’ve probably seen the episode titled, “The One Where They All Turn 30.” Rachel is the last of the group to celebrate the big 3-0, and she has a major meltdown about the goals she hasn’t accomplished yet. But when it comes to facing our 30s in real life, we find ourselves agreeing with the (for once) level-headed Ross who tries to reassure them all that turning 30 “isn’t that bad.” In fact, there’s plenty to be pumped about in your 30s—like marriage, kids and career growth, just to name a few!
With so many large, important changes in your life, handling money the right way becomes even more important. You’ll not only face these exciting changes and challenges with confidence, you will also set yourself up for a more secure future.
With so many large, important changes in your life, handling money the right way becomes even more important. You’ll not only face these exciting changes and challenges with confidence, you will also set yourself up for a more secure future.
1. Move past Basic Budgeting and Set Some Big Goals
1. Move past Basic Budgeting and Set Some Big Goals
Most folks in their 20s are on a rice-and-beans budget. Entry-level jobs and student loans mean there’s not much room for luxury. But as you enter your 30s and start earning more, you can start setting—and meeting —important money goals. Don’t fall for the trap that a higher income means you “deserve” a new car or an expensive new wardrobe. Use your income to pay off all loans and credit cards and get rid of debt for good. Next, save up an emergency fund of three to six months of expenses. Once you’re debtfree and have a cushion of savings, you’ll have a financial foundation most folks twice your age can only wish they had. Your next goal is to save a down payment for a home. When you’re ready to put down roots and stay in one place for at least five years, you’ll be in a great position to buy. Again, avoid the temptation to go for the big home—and the huge mortgage that comes with it. Keep it conservative so you can use your income to start building wealth for the future.
Most folks in their 20s are on a rice-and-beans budget. Entry-level jobs and student loans mean there’s not much room for luxury. But as you enter your 30s and start earning more, you can start setting—and meeting —important money goals. Don’t fall for the trap that a higher income means you “deserve” a new car or an expensive new wardrobe. Use your income to pay off all loans and credit cards and get rid of debt for good. Next, save up an emergency fund of three to six months of expenses. Once you’re debtfree and have a cushion of savings, you’ll have a financial foundation most folks twice your age can only wish they had. Your next goal is to save a down payment for a home. When you’re ready to put down roots and stay in one place for at least five years, you’ll be in a great position to buy. Again, avoid the temptation to go for the big home—and the huge mortgage that comes with it. Keep it conservative so you can use your income to start building wealth for the future.
2. Get on the Long (Long) Road to Retirement
2. Get on the Long (Long) Road to Retirement
As kids start to come into the picture, your budget may feel the strain—especially if one parent stays home to care for the kids. Whether yours is a one- or two-income family, it will take careful planning to meet your long-term goals like college savings and retirement. Just remember, your top priority is to save 15% of your income for retirement, starting with your RRSP's, enough to receive the full employer’s match. Then, you can each invest up to $5,500 a year in TFSAs. With 30 or more years until retirement, folks your age have time to let compound interest work its magic on your savings. By investing just $800 a month in good, growth stock mutual funds, you could have a nest egg worth $2.8 million–$4.6 million by the time you reach retirement age!
As kids start to come into the picture, your budget may feel the strain—especially if one parent stays home to care for the kids. Whether yours is a one- or two-income family, it will take careful planning to meet your long-term goals like college savings and retirement. Just remember, your top priority is to save 15% of your income for retirement, starting with your RRSP's, enough to receive the full employer’s match. Then, you can each invest up to $5,500 a year in TFSAs. With 30 or more years until retirement, folks your age have time to let compound interest work its magic on your savings. By investing just $800 a month in good, growth stock mutual funds, you could have a nest egg worth $2.8 million–$4.6 million by the time you reach retirement age!
3. Ask Questions and Get Answers You Can Trust
3. Ask Questions and Get Answers You Can Trust
Folks in their 30s really are at a great time in life. You have the potential to reach your goals, and you’re mature enough to know they won’t be handed to you on a silver platter —you’ve got to work hard and take action to reach them. You’ve also got enough life experience under your belt to know you don’t have all the answers about some things like long-term retirement investing. That’s why we recommend people of all ages work with an experienced investing advisor who can answer your questions and show you how to get your retirement savings started the right way.
Folks in their 30s really are at a great time in life. You have the potential to reach your goals, and you’re mature enough to know they won’t be handed to you on a silver platter —you’ve got to work hard and take action to reach them. You’ve also got enough life experience under your belt to know you don’t have all the answers about some things like long-term retirement investing. That’s why we recommend people of all ages work with an experienced investing advisor who can answer your questions and show you how to get your retirement savings started the right way.
You’ll want to work with an agent who’ll stick with you for the long haul, helping you stay on track even when times are tough. We can put you in touch with an experienced, trustworthy financial advisor in your area who has earned our recommendation for great advice and excellent service.
You’ll want to work with an agent who’ll stick with you for the long haul, helping you stay on track even when times are tough. We can put you in touch with an experienced, trustworthy financial advisor in your area who has earned our recommendation for great advice and excellent service.
The Truth About The Joneses
The Truth About The Joneses
You know the Joneses. (Or maybe for you it’s the Smiths, or the Millers.) They’re the people who have everything bigger and better than you do.
You know the Joneses. (Or maybe for you it’s the Smiths, or the Millers.) They’re the people who have everything bigger and better than you do.
They have nicer cars, fancier wardrobes and even cuter dogs. (Yorkie-Poos,anyone?) But the Joneses may not be who you think they are. They may be up to their eyeballs in debt. We’ll say that again: The Joneses are either drowning in payments or deserving of their wealth. So be happy for them or feel sorry for them. But don’t try to keep up with them! That only leads to discontentment. And you’re done with all that. You’re ready to be happy where you are and to work for what you want. You’re ready for contentment.
They have nicer cars, fancier wardrobes and even cuter dogs. (Yorkie-Poos,anyone?) But the Joneses may not be who you think they are. They may be up to their eyeballs in debt. We’ll say that again: The Joneses are either drowning in payments or deserving of their wealth. So be happy for them or feel sorry for them. But don’t try to keep up with them! That only leads to discontentment. And you’re done with all that. You’re ready to be happy where you are and to work for what you want. You’re ready for contentment.
Forget Status, Be Happy
Forget Status, Be Happy
Contentment is a choice. It’s having an attitude of joy when everyone else is attempting to buy happiness. And it’s your new state of mind. So who cares if Mrs. Jones drives a luxury SUV with heated seats and key less entry? Good for her. Your 10-year-old sedan gets you everywhere her sweet ride gets her. And at this point on your journey, you’re less worried about looking good and more focused on building a solid foundation for your family.
Contentment is a choice. It’s having an attitude of joy when everyone else is attempting to buy happiness. And it’s your new state of mind. So who cares if Mrs. Jones drives a luxury SUV with heated seats and key less entry? Good for her. Your 10-year-old sedan gets you everywhere her sweet ride gets her. And at this point on your journey, you’re less worried about looking good and more focused on building a solid foundation for your family.
Your Age, Your Money: How to Spend, Save and Invest Properly Now
Your Age, Your Money: How to Spend, Save and Invest Properly Now
We say it all the time around here: Anyone can retire a millionaire. It simply takes discipline and attention to a few common-sense concepts like living on a budget, paying down debt, and saving like crazy. But what does that specifically look like in your 20s, 40s or even 60s? Here’s our list of the best money moves to make at every age. And if you feel a little behind in the game, use it as fuel to work harder and smarter to get to where you want to be. It’s never too late.
We say it all the time around here: Anyone can retire a millionaire. It simply takes discipline and attention to a few common-sense concepts like living on a budget, paying down debt, and saving like crazy. But what does that specifically look like in your 20s, 40s or even 60s? Here’s our list of the best money moves to make at every age. And if you feel a little behind in the game, use it as fuel to work harder and smarter to get to where you want to be. It’s never too late.
20s — Build a Solid Foundation
20s — Build a Solid Foundation
•Newly married or about to be? Go ahead and get on the same page about money. Good communication now will pay off in spades later.
•Newly married or about to be? Go ahead and get on the same page about money. Good communication now will pay off in spades later.
•Avoid debt. That means no credit cards, car payments or shopping sprees you can’t afford.
•Avoid debt. That means no credit cards, car payments or shopping sprees you can’t afford.
•If you have student loans, pay them off ASAP! Loan are not your Bestie.
•If you have student loans, pay them off ASAP! Loan are not your Bestie.
•Buy good medical disability insurance. A single injury can bankrupt you in a heartbeat.
•Buy good medical disability insurance. A single injury can bankrupt you in a heartbeat.
30s — Shift to a Family Focus
30s — Shift to a Family Focus
•If you’re having kids soon, rework your budget for diapers, daycare, cribs and car seats. You’ll have a little less money, but you’ll have a whole lot more love.
•If you’re having kids soon, rework your budget for diapers, daycare, cribs and car seats. You’ll have a little less money, but you’ll have a whole lot more love.
•Buy enough term life insurance to cover your family should anything happen to you or your spouse. We recommend getting 10 times your income. Learn why and get a free instant quote.
•Buy enough term life insurance to cover your family should anything happen to you or your spouse. We recommend getting 10 times your income. Learn why and get a free instant quote.
•Build up your emergency fund to 3–6 months of expenses. Sooner or later, you’re gonna need it.
•Build up your emergency fund to 3–6 months of expenses. Sooner or later, you’re gonna need it.
•With children in the picture, you may be thinking about home ownership. Just make sure you can put 10–20% down at a 15-year fixed interest rate. (And keep your house payment to less than 25% of your take-home pay.)
•With children in the picture, you may be thinking about home ownership. Just make sure you can put 10–20% down at a 15-year fixed interest rate. (And keep your house payment to less than 25% of your take-home pay.)
40s — Shovel the Savings
40s — Shovel the Savings
•You’re at the top of your career, and your kids are finally out of daycare (or at least out of diapers). That means a little more money in the bank to invest. Go with a good growth guaranteed investment fund and be sure you’re contributing 15% of your household income toward retirement.
•You’re at the top of your career, and your kids are finally out of daycare (or at least out of diapers). That means a little more money in the bank to invest. Go with a good growth guaranteed investment fund and be sure you’re contributing 15% of your household income toward retirement.
•Ramp up the kids’ college funds only after you’ve secured your own future. There are no merit scholarships for retirement.
•Ramp up the kids’ college funds only after you’ve secured your own future. There are no merit scholarships for retirement.
•Keep your home well-maintained or you’ll be paying huge repair bills down the road.
•Keep your home well-maintained or you’ll be paying huge repair bills down the road.
50s — Look Forward But Stay Focused
50s — Look Forward But Stay Focused
•You’re starting to look forward to a life without that daily commute. It’s okay to be excited. But don’t cash in your retirement savings just yet—keep investing a full 15%.
•You’re starting to look forward to a life without that daily commute. It’s okay to be excited. But don’t cash in your retirement savings just yet—keep investing a full 15%.
•Now’s the time to pay off your mortgage. With the kids out of the house, maybe you can even downsize and pay cash for your next place.
•Now’s the time to pay off your mortgage. With the kids out of the house, maybe you can even downsize and pay cash for your next place.
•If you have some spare change, you may want to invest in rental real estate for some extra income.
•If you have some spare change, you may want to invest in rental real estate for some extra income.
•The day you turn 59,check out the cost of Long-term Care Insurance. A few years of long-term care can deplete your entire life savings. So prepare for this possibility now.
•The day you turn 59,check out the cost of Long-term Care Insurance. A few years of long-term care can deplete your entire life savings. So prepare for this possibility now.
60+ — Enjoy the Fruits of Your Labour
60+ — Enjoy the Fruits of Your Labour
•It’s time to retire. But that doesn’t mean sitting on your couch all day watching Everybody Loves Raymond. Be proactive and tweak your budget. And find ways to stay active!
•It’s time to retire. But that doesn’t mean sitting on your couch all day watching Everybody Loves Raymond. Be proactive and tweak your budget. And find ways to stay active!
•Enjoy yourself! Without a house payment or a growing family to support, you can focus on fun: Travel abroad, visit the grandkids, and give generously to your community.
•Enjoy yourself! Without a house payment or a growing family to support, you can focus on fun: Travel abroad, visit the grandkids, and give generously to your community.
Winning with money is a marathon, not a sprint. It takes hard work over the course of a lifetime. So pace yourself and keep on keeping on. Your million-dollar payday awaits.
Winning with money is a marathon, not a sprint. It takes hard work over the course of a lifetime. So pace yourself and keep on keeping on. Your million-dollar payday awaits.
Build a Solid Foundation
Build a Solid Foundation
It’s never too late. Need Help Contact
"Advisor & Co."
"Advisor & Co."
Financial Horizons Group
Financial Horizons Group
217-3501 8th Street East
217-3501 8th Street East
Saskatoon, SK
Saskatoon, SK
S7H 0W5
S7H 0W5
Phone: 306-292-3734
Phone: 306-292-3734
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Toll Free: 1-877-888-9403
Toll Free: 1-877-888-9403
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