MONEY TALKS
There are many Canadians who are well into midlife that have yet to start investing and saving for the future. If that’s you, know you’re not alone and that our tips can guide you.
How to start investing later in life
THE TRUE POWER OF COMPOUND INTEREST isn’t fully appreciated by everyone, and yet it’s a real workhorse when it comes to building your retirement nest egg and reaching other financial goals. What some fail to realize is that if you start saving and investing early in life, you don’t have to set aside as much money as those who start saving later. Though starting your savings plan later in life can present additional challenges, it’s certainly better late than never.
1 If you have access to an employer pension,
chat with your administrator to determine how much income you’ll receive when you retire. If your employer has a defined contribution retirement plan, ensure you are contributing enough money to receive the maximum contribution amount from your employer.
2 A budget is an important tool
to help you live within your means. You won’t have funds to invest each month if your expenses match or exceed your income.
3 Develop a plan to pay off consumer debt,
especially credit cards and high interest loans. The interest you’re paying on these high-cost products is higher than the returns you’ll earn on any investments, which means the sooner they are paid off the better financial shape you’ll be in. If you need some guidance, contact an accredited non-profit credit counselling agency in your area for assistance.
4 Seek out different opinions.
You can start with your current financial institution, as they have advisors to help their customers with financial planning. Also consider speaking with a fee-based financial planner about your future objectives. This kind of financial planner is focused on your situation and giving you advice and guidance to achieve your goals—they won’t sell you stocks, bonds or mutual funds. What’s important is to find a qualified advisor whose advice you trust and can act on.
5 Commit to your plan with your end goal in mind.
How much do you need to save to create a future retirement income that meets your needs? Now the hard part that trips up many people is getting started. Fit your monthly investment contribution into your budget and automate the transfer of the investment amount from your bank account into your RRSP each month. Don’t get wrapped up in the daily activities of the market—while markets go up and down, you’re in it for the long haul. A well-structured plan won’t overexpose you to market risk but will help you achieve your long-term savings goals. The majority of people who fail to succeed with their retirement savings are the ones who fail to plan.