Outline for mid-life investors
The following outline is provided as an overview of and topical guide for mid-life investors.
Mid-life investors, for the purpose of this article, are perhaps about 30 to 55 years old. They are building their careers and their families. Mid-life investors are converting their human capital into financial capital by building portfolios and accumulating assets in pension plans, in preparation for retirement. Mid-life investors have to manage their expenses and liabilities, like a mortgage and other loans: it is a balancing act. Hopefully their net worth is growing over time, and they have embraced long-term financial planning.
This article is intended to help a reader learn about a subject quickly, by showing what topics it includes, and how those topics are related to each other.
The financial life cyle
Mid-live investors are in the second stage of the financial life cycle, within the accumulation phase.
Banking, budgeting and emergency fund
- Make sure you are not spending too much on banking fees
- Update your budget to stay on top of your spending
- Check that your emergency fund is sufficiently large
Credit and managing debt
- Manage your debt and continue to make smart credit choices
- Check your credit report regularly, maintain a good credit record and protect yourself from fraud
- Pay off any remaining student loans and car loans
- Manage your credit card(s) and perhaps your line of credit
Work-related financial choices
- Contribute to employer pension plans and group retirement plans
- Stay up to date on your employee benefits
Housing-related choices
- Review the pros and cons of owning versus renting a dwelling
- Possibly manage a mortgage
Insurance
- Review the types and general principles of insurance
- If becoming a home owner, look at home insurance, mortgage insurance and possibly title insurance
- If renting a house or an apartment, you need tenant insurance
- Evaluate if you now need life insurance and disability insurance
Investing: the basics
- Refresh your memory about compound interest and the importance of saving early
- If also paying back loans, consider paying down loans versus investing
- If not already done, create a financial plan and get started on investing
- Re-evaluate if you want to contribute to a Tax-Free Savings Account (TFSA) or a Registered Retirement Savings Plan (RRSP) (see also TFSAs versus RRSPs), or both
- If you are able to place your investments in several different kinds of accounts, see prioritizing investments
- Think about your savings rate: are you saving enough?
DIY investing
- Read about portfolio design and construction and see if you should revise your portfolio
- Review your asset allocation, taking into account risk and return
- Look at simple index portfolios or asset allocation ETFs for the simplest do-it-yourself (DIY) options
- Rebalance your portfolio regularly
- Write down your plan as an investment policy statement or a simplified investing plan for short term goals
- If you have determined that you won't succeed at DIY investing, or if you need help with planning, consult a financial advisor
You have a spouse or children
- Draft or update your will, your power of attorney documents(s), and designate guardians for minor children
- Contribute to Registered Education Savings Plans (RESPs) for children
- Revisit your insurance coverage (see the relevant section above)
What's next?
Some very motivated savers/investors may become financially independent during this stage of life. Most people will continue working another 5, 10 or 15 years, during a "pre-retirement" stage.
See also
References
External links
- RetireHappy.ca, Financial Stages of Life