Financial Planning and Tax Minimization Strategies for Mature Families
You are a middle-aged person at the peak of your career, and everything is going to plan. You just got promoted to a senior role, which comes with a handsome pay package and a wide range of benefits. Your children are either in college or employed and planning to start a family. This is the best time to devise an effective financial plan that will set you up for life.
Pay off Mortgage
Since you are at your peak earning years, you should use the extra income to fast-track your mortgage payments. Some of the strategies to paying off your mortgage faster include making biweekly payments, paying an additional amount against the principal every month, every year, or re-writing or refinancing the mortgage if you can improve the terms and avoid undue penalties. These strategies will reduce the number of years it takes to clear your mortgage and the total amount of interest you pay to the lender.
Take a review of all your debts, bills, and other financial obligations to see how much you owe. If you have loans, start by paying off all the high-interest loans. You can also request your bank to consolidate your debts and agree on a realistic, low-interest payment plan. Make sure you clear all your bills in time to avoid penalties. Reduce the number of credit cards you use and make sure you pay cash or use debit cards for most of your purchases.
Save for Retirement
If you are employed, make sure you participate in your employer’s retirement plan. Most employers will match your contribution or add a percentage of your salary to your retirement account. If you are self-employed you should open an RRSP if you don’t already have one. An RRSP is one of the most popular ways to save for retirement in Canada and your contributions are tax-deductible. In short, it will boost your retirement savings and reduce your tax bill.
Stay on Budget
With new perks, you may be tempted to upgrade your lifestyle. However, it is important to ensure that you are not spending more than you are making. Make a budget that accounts for all your recurrent expenses such as fuel costs, bills, and rent before deciding to buy a new car or make any other lifestyle changes. Make sure you are left with some savings after accounting for all expenses and staying on budget.