January 16th, 2021

Planning for retirement

By Submitted Article on May 16, 2020.

Dear Money Lady,

I am going stir crazy being isolated at home and have had lots of time to review my finances. I started using the Cash Tracker from your book – it is a good way to budget, especially nowadays. I am in my 40s, on my own, and have now finally decided it’s about time I start planning for my retirement but I have a lot of debt. Any ideas on how to start?


Thank you so much, Jamie!

It is good to hear that you are budgeting your income and expenses. This is the first step to building wealth. The coronavirus pandemic has given us all time to think, provided a forced slow-down and a “pre-retirement” wakeup call. It’s not hard to see why most of us have a lot of debt these days and it is good that you are reviewing your finances to plan to eliminate it. We have all become desensitized to taking on more and more when it comes to consumer debt. Look at all the advertising that we see day to day. We are constantly inundated with social media ads and the many home improvement shows on TV that entice us to want more, spend more and get into more debt.

You are right to start planning for your future and the Cash Tracker will get you thinking about budgeting your expenses. You could also consider using the current economic situation to capture a lower rate on a new loan or mortgage. If you plan to do this, always ensure you keep the amortization on a new mortgage the same as the years that you have left until retirement. Banks often default to putting a new mortgage at a 25- or 30-year amortization. This is only good for the bank, not the borrower. Your amortization should always match the number of years you have until retirement. So if you are 40 and you plan to retire at 60, then the amortization should not exceed 20 years. If that means you have to pay a little more and get a little uncomfortable, then so be it. Just think how uncomfortable it will be when you are retired and making a fraction of what you make now but still making a mortgage or debt payment.

You have the time to make things right and those who are in their 40s and 50s should be seriously planning for their inevitable hard stop to working. Remember, it is you who is going to get yourself to retirement debt-free and comfortable – not anyone else. If today you are living paycheque to paycheque and don’t have enough every month, then you know you have to make a change – whatever that is. Go back to school to get a better job, go in a different direction with your business, change your career, reduce your spending, review your budget, begin saving; whatever it is, you must do it now. Never underestimate your income potential and your ability to earn – some say it is the fastest way for you to create wealth.

Good luck and best wishes,

Money Lady

Written by Christine Ibbotson, author of the best-selling book “How to Retire Debt Free & Wealthy” and a new book, “Don’t Panic – How to Manage your Finances and Financial Anxieties During and After the Coronavirus,” available at all bookstores across Canada. If you have a money question, please email on the website http://www.askthemoneylady.ca.

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