Use this guide to identify potential financial obligations based on where you are in your financial life and understand key considerations to prioritize and accomplish your financial objectives. It can also be used as a roadmap to indicate where your financial intentions might take you in the future.
STAGE 1: Getting Started
When you’re young and have just joined the workforce, it’s time to establish financial priorities. You’ll have plenty of decisions to make but at this age you’ll be faced with the balance between spending your income on life’s essentials and saving for future financial intentions.
Your major financial obligations may include:
- Rental accommodation
- Purchasing household furnishings and other necessities
- Transportation
- Repaying student loans
- Income taxes
Your financial priorities may include:
- Getting started on basic budgeting
- Establishing a relationship with your financial institution
- Applying for credit cards
- Saving for a house
- Contributing a Registered Retirement Savings Plan (RRSP)
- Contributing to a Tax-Free Savings Account (TFSA)
- Taking out appropriate insurance
STAGE 2: The Family Years
In your thirties and forties, you may face the costs of raising a family and moving up in the housing market. But your income will likely be higher, so your planning can start to shift with greater focus on saving and investing.
Your major financial obligations may include:
- Mortgage payments
- Home renovations
- Income taxes
- Raising children (including child care)
- Vehicle and/or transportation
Your financial priorities may include:
- Budgeting for maximum savings
- Getting optimal investment growth
- Life insurance
- Maximizing retirement savings regularly
- Establishing good credit for lower borrowing costs
- Saving for your children’s education
- Family and/or personal experiences
- Estate planning, starting with your will and power(s) of attorney
STAGE 3: The peak earning years
You can focus on maximizing your savings and investments, as your income will likely be close to its peak
Your major financial obligations may include:
- Reduced or eliminated mortgage payments
- A vacation or retirement property
- Repaying home equity loans
- Costs associated with a more affluent lifestyle (travel, leisure, etc,)
- Financial care of aging parents
- Income taxes
- Automobile(s) and transportation
Your financial priorities may include:
- Reducing income taxes
- RRSP contributions
- Planning your retirement
- Reducing investment risk to preserve retirement savings
- Estate planning
- Downsizing in the housing market to free up capital
- Income splitting (present and future)
STAGE 4: Retirement
At this stage of life, chances are that you’ll be relying on your retirement savings and pension(s) for income. At the same time, your lifestyle will change significantly and your spending patters will be altered.
Your major financial obligations may include:
- Converting RRSP assets into retirement income
- A retirement property
- Increased travel and leisure expenses
- Increased health care costs (including medical insurance)
Your financial priorities may include:
- Reducing the risk level of your investment portfolio
- Budgeting to preserve capital and retirement income
- Tax planning
- Estate planning and reviewing your will
Special Circumstances:
There are a number of events that can take place at any time during your life for which you should revisit your financial objectives and strategy. These may include:
- Marriage
- Birth of children
- A new job or career
- Relocation
- Major change in taxation rules
- Divorce
- Death of a spouse
- Job loss
- Major illness
