Wednesday, November 14, 2018
The Top 3 Money Tasks for Every Decade
One of the hardest things about personal financial planning is knowing what to do and when. It is natural to feel like you aren’t doing enough, even when you are way ahead of the game. Let me put it this way, most of the people I have met that don’t worry about their money should be seriously worried about their money. I want to give you my Top 3 Money Tasks to Complete for each Decade of Your Life. Hopefully, it will give you some insight on whether you are on track.
Your Twenties
1) Eliminate debt and save whatever you can
Many people I meet in their early twenties have a hard time waking up before noon. Now I am not knocking you, I’ve been there. When you are this young, getting rid of costly student debt is huge. This is not a burden you want to bear in your thirties. Also, try your best to save whatever you can. Don’t be fooled by great investment strategies or fancy stock picks. Just save money, any money.
2) Focus on Career Building
You are super young, and your primary focus should be to lay the foundation for a successful career. Do the extra work, stand out and bust your butt. You will not have this level of energy again in life so go the extra mile to land the job you want. The steps you take now will pay off in spades in the coming years.
3) Put the financial foundation in place
Open a long-term savings account. While you might not be able to contribute much, any little bit helps. Get some super affordable term insurance while you are young and healthy. It will never be cheaper than it is right now so lock in that price. Develop strong money habits like debt avoidance, paying bills on time, saving a portion of your pay, and protecting yourself with insurance. These habits will determine your money success in life, so get them started young.
5 Savings Goals to Reach in Your 20’s – The Balance
Your Thirties
1) Build on the foundation
While you might not have been able to save much in your twenties, you should probably step up your game in your thirties. Hopefully, by now you have a job that at least pays you a livable wage, but if not, make that the focus. Money is extremely important, and you will start to see the difference in your friends that take it seriously and those that don’t. In my mind, this is the dividing line between those that will be perpetual children and those that will be successful. Strive to be the latter.
2) Think about housing
Hopefully, you have saved a little bit of money and you can now think about housing a little differently. Now there is nothing wrong with renting, but most people would like to own a home at some point. Think about what you would like, moving forward. A home is a huge responsibility so do not take this leap lightly. Buying a home incurs a lot of expenses so having an emergency fund is very important. You want to be ready for any eventuality.
3) Think about protection
You are still very young in the grand scheme of things, but it is at this age where illness or injury can cut you down in a serious way. Your greatest asset is your ability to work, so you need to protect that. At this point, insurance is still cheap because you are so young. Think about getting some disability and critical illness coverage on the cheap so you can recover without worry. Also, if you haven’t obtained life insurance by now, do it.
11 Excuses to Not Get Life Insurance, and Why They Are BS – Budget Boss
Your Forties
1) Get Serious About Saving
At this point in life, if you don’t have savings, you done messed up. On the positive side of things, it’s not too late. You do have to get aggressive though. I get it. Kids get in the way and life is expensive. No more excuses, it’s time to get rolling or enhance what you are already doing. Hopefully, by now you have an idea of what you will be doing for employment for the foreseeable future. Look into company matching programs for retirement savings. Always contribute up to the match. Focus on maxing out your Tax-Free Savings Account or Roth IRA for my American friends. If you do that this decade, you will be on track.
2) Think about your forever home
If you own your home, make sure you are paying it down as much as possible. Avoid refinancing at all costs, unless it is financially suitable. Also, think about where you would like to live for the rest of your life. The average Canadian has 4 homes in their lifetime. Understand that at this age you should be thinking about housing as part of your financial plan. You do not want to be carrying heavy mortgage debt into retirement, so it may be beneficial to transition your first home into your final home. That final home will be the housing asset that carries you throughout life, including possible long-term care.
3) Get the kids going
By now, if you have kids, you see how much they can be a burden on your wallet. Hopefully, by now you have instilled some financial fitness in their young minds. When they were super young the supreme focus was on them, and rightfully so. The focus should no shift to you and your needs, like a secure future. While young kids are expensive, each hit is relatively small. The older the kids get, the more expensive their problems get. When your kids are teenagers, they need to know that mom and dad will not always be there for them. Make them understand this by having them fend for themselves on certain things. Cell phones, nice clothes, a car, are all luxuries. Help them with the basics, but luxuries should be on them, ie. get a job young man/woman.
Tips to Teach Your Kids about Smart Money Management – My Money Coach
Your Fifties
1) Get uber aggressive with saving
By now you are probably at your highest income that you will ever be. Take this time to get super aggressive with savings. You should, in my opinion, be saving at least 20% of your income towards retirement. The reason this number is so big is that your income should be at that level where you can live off the other 80%. Your expenses should be calming down a bit as well, as kids start to transition out on their own. It is this decade that often defines how you will retire, so get rocking.
2) Get serious about retirement
We know we need the money for retirement, but do we have the plan in place? Think about when and how you want to retire. You should have a good handle on what your job has to offer and when the best time to exit is. Pick a dry date for retirement and work towards that. Think about how much money you will need when you retire. Think about long-term expenses like health care. Think about the people you want cared for when you leave this earth. It’s a lot to think about, but you are ready to make that step.
3) Focus on debt freedom
You absolutely do not want to have debts in retirement. When you stop working, you are dependent on the government and savings to get you through life. You do not want to have a portion of your money every month go towards debt repayment. Interest should be making you money at this point in life, not costing you money. If you have debt, have a laser-like focus on paying it off. Having debt delays retirement or makes it so you can’t at all. Choose how you retire, or you will have no choice.
9 Keys to a Happy Retirement – Budget Boss
Your Sixties
1) Asset Allocation
Your investments have seen a lot by this point. The ups and downs of the market are fine when you are younger, but now you probably need to change your strategy. Hopefully, you have built up enough wealth where even a balanced profile will generate decent returns. Don’t be scared of fixed income as it can be your friend in a turbulent market and if you have the money, the returns aren’t too shabby. Also, don’t disappear from the equity market. While you probably don’t want to be fully vested in it, you will want at least some exposure to it as it will give you solid growth over time. Talk to your financial advisor about where you stand.
2) Side hustle?
By now you probably know when you will stop working. These days, many people never stop working. A solid side-hustle might be just the thing for you. It will bring extra income during retirement and keep you active. I know I will probably never stop working, but the goal is to slow down. Think about a small job you can continue doing that you enjoy. It might be just what you need to put you over the top.
3) Estate and tax planning
You’ve made it to your sixties, congrats. Unless you are Yoda, the finish line is closer than the starting blocks. Start thinking about what you need to do in terms of estate planning. At this point in life, your greatest burden will be the tax man. Our lovely government will take your money, even when you die, so a plan is necessary. Efficiently withdrawing funds over time and having them in suitable vehicles will lessen the burden.
Clients Need to Know These Benefits of Permanent Life Insurance – Investopedia
Your Seventies
1) Have your affairs in order
Hey, you’re old. But that’s okay. You’ve done well for yourself, but you need your affairs in order. You should have done it earlier in life, but make sure you have a will and power of attorney. If you have one, make sure you update it. Speak with the people who will inherit what you own. While it might not be a fun conversion, it is necessary. With proper communication, the transition for them will be as seamless as possible. If you leave a lot of unknowns for them, it will be a huge mess for them to untangle.
2) Tax Strategy
I touched on it before, but taxes will crush you at this point in your life. Let’s face it, you have made the government a small fortune by this age, so being efficient is extremely important. You will want permanent life insurance for several reasons. Firstly, it avoids all taxes upon death. This means your loved ones get all the money within it, not half like other investments. Secondly, it gets settled quickly, usually within a week or two, tops. Your estate might take months or years to wind down, all the while costing your children time and legal fees. Lastly, it is private, keeping the beneficiaries as the only ones who know about it. That can be important if you wish your affairs kept within the family.
3) Enjoy yourself
This one pertains to all ages within this list, but I wanted to save it for last. Financial planning is about being able to enjoy your money and the fruits of your labor. If you have made it to this age, make sure you take time to enjoy yourself, and your family. Stressing over money is a result of improper or lack of planning. When you plan, worries get eliminated. We do not know when we will die, or planning would be easy. Make sure you plan as if you will live forever, but live as if you could die tomorrow.
“Keep yourself motivated. You’ve got to be motivated, you’ve got to wake up every day and understand what that day is about; you’ve got to have personal goals – short-term goals, intermediate goals, and long-term goals. Be flexible in getting to those goals, but if you do not have goals, you will not achieve them.” – Gary Cohn
Email – joe@budgetboss.ca
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