Life & Money

Financial Fitness Part 3. Staying healthy in your mid-30s, 40s, and 50s

December 28, 2018


Financial Fitness Part 3. Staying healthy in your mid-30s, 40s, and 50s

Life & Money

In this edition of Financial Fitness, WealthBar speaks to up-and-comers who are in the prime of their earning years.

Throughout your mid-30s to early-50s, it’s time to bulk up your bank account. You need to prepare for career zig-zags, take care of your family, and finally, get ready to enjoy your retirement. It can be harder to stay physically fit as you hit middle-age, but lucky for you, the tables are turned when it comes to finances!

WealthBar gym-goers are more financially fit

  Investable assets
Age WealthBar client Canadians WealthBar clients are X% richer
35 to 44 $135,000 $103,200 30.81%
45 to 54 $314,600 $212,200 48.26%
55 to 64 $437,375 $317,600 37.71%

(How did we get these numbers? WealthBar numbers were derived using the average total investable assets as reported through client account applications. For Canadians’ investable assets, we took our numbers from Statistics Canada.)

How do these numbers compare to your situation? Hey, either way, you’re in the right place: let’s hit the financial gym.

Get your family off to a healthy financial start with an RESP

Got kids? First-time parents in their 30s are sweating about post-secondary tuition fees that have gone up in recent years. Fortunately, we’ve got the RESP (Registered Education Savings Plans). The best time to open one is as soon as your child is born.

If you can contribute $208.33 per month to your kid’s RESP, you’d be putting in $2,500 annually, and making the most of the government’s Canada Education Savings Grant (CESG). And if your kid decides not to go to post-secondary, you can withdraw your RESP contributions tax-free. That’s using your brain muscle to stay financially fit.

Prepare to knock over a few hurdles on the financial track (and keep going)

The best athletes train to prevent injury — and boy, is it easy to get hurt, moneywise. Taking parental leave? Caring for family members? Having to look for a new job? These kinds of financial hurdles can slow the pace of your investing progress.

Having an emergency fund can help you power through times like that. As a rule of thumb, it’s good to have 3 to 6 months’ worth of living expenses stored away. That’s when a high-interest savings account like a TFSA can come in especially handy. If you’ve never invested in one before, you could have a contribution room of up to $63,500 to help keep your family finances healthy.

In your 30s and beyond is also the time when people start chatting regularly with a financial adviser. Why? As you get older, you take on more responsibilities. A bigger role at work, a growing family… and down the line, more attention paid to leaving a legacy. A financial advisor can help you focus on your goals and how to get there, while taking steps to diversify your investments, ideally before markets go a bit wonky. Now’s the time to set up that call.

The couple that talks about money together stays financially fit together

Going to the gym with your significant other is a healthy habit. Stamping your name all over their athletic gear would be a bit weird, though… right?

The same goes for putting assets in one person’s name. If you have a home in your spouse’s name only, that can make things complicated down the line when it comes to taxes or your estate. As you start acquiring assets in your 30s and 40s, you need to take a longer-term projection. “Who gets what” if your marriage ends or one spouse passes on? These are grown-up issues, but you need to deal with them before it gets to the stage of a contested will.

More broadly, whatever your incomes, most couples start looking at wills and estate planning as they approach their 40s, certainly as they start having kids. (If you’re a swinging bachelor renting a bachelor pad into your 50s, you might not be so worried about this stuff).

No one likes to think about it, but eventually, the hamster wheel of life stops spinning. Do you know where your money will go then? If you don’t… well, the government gets to decide, in the form of taxes. Talk to your financial adviser to go through your options.

As you age, you might find that you or your spouse has a significantly higher income than the other? It’s a rare thing for it to be totally equal. If that’s the case, or you’re expecting a higher retirement income, contributing to a Spousal RRSP and using income splitting can help lower your taxes.

You’ve probably started hitting your prime earning years by your 40s and 50s, which is when that income mismatch can become large (particularly if one of you has taken time off to take care of the kids). Lower taxes means more money for you to use after the marathon of the rat race is done.

Are you pumped to hit the gym and get financially fit? Leave a comment below, and let us know how you plan on building up your financial muscles.

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