If you’re in your thirties, you’re old enough to remind Joey by asking this question in the Friends episode called “The One They’re All In Thirties”. It also means that you are old enough that it is time to start asking other questions like how you can afford to retire.
Even if you do not feel like an adult yet, your thirties are a good time to start investing. The weather is always on your side. And the same rule applies to money for everything that concerns you in your life: your thirties is the perfect time to take risks and make mistakes.
The best part is that it does not have to be difficult! You do not have to worry about how the Mikkei is doing? Me neither. You do not know what the Mikkei is? It is a stock market index in Japan. It does not matter. Investing in the thirties is not about tracking the markets or listening to the activity report. It’s just about making smart decisions that encourage your money to grow. Simple!
So, how do you make these smart decisions?
Start by thinking about your goals. What do you want from your investments? You do not always have to worry about percent benefits and amounts. I’m talking about things you want to do with your money. Do you want to buy your first house? Are you going on vacation? Get married? Retire? Knowing what your goals are can help you make decisions such as how much you need to save and how to invest your money.
Take charge of your investments
It’s time to get your hands dirty. Whether your savings are in the bank account you have since childhood or the pension your employer has given you by default, these investments are risky because they are not always geared towards all your goals. Now is the time to research and know how to invest your money to make sure you get what you want.
There are many resources, but one of the best options for this type of financial advice is a unique financial advisor. This is a person whose job is to review your financial situation with you and give you advice based on their expertise. Rather than collect commissions by selling you financial products, they charge you for their time and give you unbiased advice. Your advisor can recommend the types of investments you want to make and help you during the process.
If you prefer a more practical approach, consult a robo-advisor. These are online investment services that ask you questions about your goals and automate your investments based on what you want for your money. They take care of daily maintenance and make adjustments over time. It is an approach to define and forget.
Friends and family are great resources, but keep in mind that they will have different attitudes about money and different life experiences. The investment decisions that helped your parents increase their wealth may not be great ideas 30 years later.
Use tax shelters
Canadians have access to fantastic tax shelters. The most common are RRSPs and TFSAs.
When you invest in an RRSP, you do not pay tax on the money you deposit and any growth is protected from tax. Instead, you pay income tax when you withdraw money in retirement. You can keep various types of investments in an RRSP. Make sure you stay within your RRSP contribution limit and consider other rules about how you can and can not use an RRSP.
When you invest in a TFSA, you do not get a tax refund, but you never pay tax on the money your investments make, even when you make a withdrawal. TFSAs are not limited to money. You can keep different types of investments. There is a TFSA contribution limit and there are many rules.
You are in your thirties, and that means you have a long-term time horizon. The more wealth you accumulate, the more it will increase over time. So, your thirties (and twenties) are a good time to make high risk investments.
This does not mean you should head to Las Vegas and invest everything at the casino. It simply means that you can take more risks and make investments that offer the potential to produce higher returns. The more your goals are achieved, the more you can resist the ups and downs associated with investing. As you get closer to your goals, you can trade your riskier investments for more stable investments to preserve the wealth you have accumulated.
The riskiest investments are equities and mutual funds / exchange-traded funds (ETFs). The safest are bonds, GICs, bond / ETFs and cash in a high-rate savings account. If you are 30 years old and you are investing for retirement, you can choose to keep 80% to 100% of your portfolio in riskier investments based on your risk tolerance.
Taking risks can also contribute to the investment. You may want to take a nap and invest in something exciting or tangible. You can choose a few stocks or finance microcredit from companies using a service such as Lending Loop. You can even buy a gold bar or invest in collectibles. Make sure to keep this very small percentage of your overall wallet and be prepared to lose every penny you invest.