Time can fly when you’re having fun, so plan your financial goals and keep an eye on saving and reducing debt for a comfortable future.
“It’s not about denying yourself, it’s about understanding where your
money is going and making informed decisions” – Sean Cummins, financial adviser
The three key areas of paying off debt, saving for retirement and boosting emergency funds are the basics to financial health, say Mercer’s team of financial advisers. Knowing how to prioritise and approach these tasks will change through each decade.
In your 20s
Financial adviser Sean Cummins says ridding yourself of credit card debt and budgeting will help ensure you can meet life’s basics, save and have more fun, for longer.
“It’s not about denying yourself, it’s about understanding where your money is going and making informed decisions. Good budgeting now will carry you through the rest of your life,” he says.
Sean suggests having three accounts for personal banking to cover off the basics, good times and savings. Income goes into basics with automatic transfers to good times and savings.
In your 30s
Keep chipping away at credit card debt, says Sean, and focus on the home loan and saving for your kids’ education. Mortgage repayments provide a guaranteed investment return. When your home is debt free a large part of your after-tax income becomes available for new guilt-free pleasures.
In your 40s
Typically living expenses are at their highest now due to mortgages and school fees, so have a good handle on what you spend or save. Simon Rohead says seeing a financial adviser sooner rather than later will maximise value in the coming years. Continue with debt reduction. Simon says insurance is essential to protect on your ability to earn a living. If you can, build up assets outside of super.
In your 50s
Ramp up savings into super and get serious about engaging a financial adviser, say Mercer’s Shaun Cossart-Walsh and Allan Grant. Your super fund is getting bigger so maximise its growth potential while protecting the capital. As your investment assets grow and kids have less dependence it could be time to review and, potentially, reduce personal insurances to build more funds in your super. To help safeguard against legislative changes, consider building an investment portfolio outside of super. To maximise funding into super start higher pre-tax salary sacrifice contributions earlier.
In your 60s
Shaun and Allan also encourage people to embrace retirement. “The biggest change I’ve noticed in 25 years dealing with retirees is that many feel at a loose end, they don’t have a plan for what they will do with all that free time,” Shaun says. In lead up to retirement, review asset allocation of your investments to ensure comfort with the degree of volatility in the fund.