Life stage financial planning

Understanding how much money you need at each stage of your life is the first step to reaching financial security. It’s never too late to start planning but the sooner you get a handle on your money the better.

Remember telling your children how important it was to save for a rainy day? Financial planning is exactly this, just on a larger scale. So no matter what stage of life you’re at, there are steps you can take to maximise your money or pass on your financial wisdom.

Age 20-35 – starting out
1. Avoid debt
This is when many people fall in to bad financial habits, falling foul of expensive debt such as car loans, credit cards and personal loans. Racking up large amounts of debt can make it impossible to succeed financially. At the risk on nagging, make sure children and grandchildren understand the need to live within their means – if they can’t afford it, they shouldn’t buy it.
2. Compound interest
Teach younger family members the benefit of investing early and reinvesting any earnings. Simply taking $10,000 and investing it for 41 years at a return on 10 per cent per annum will result in a staggering $500,000.
3. Income insurance
These days, there is no such thing as a job for life. Unemployment, illness or injury can, very quickly, have an adverse effect on a family’s income. Mitigate the risk by arranging income protection insurance.
4. Superannuation
This is where being young really pays offs. Keeping superannuation in one, low-fee fund for your working life will ensure maximum benefits when retirement comes knocking.

Age 35-40 – mortgages and families
1. Life insurance
Make sure your family is provided for with a reasonable income and any debts can be paid in the event that you can no longer work due to a disability or death.
2. Extra mortgage repayments
With lifetime mortgages becoming a likelihood for many Australians, just a few dollars extra each month can take years off the duration of your mortgage and save you thousands of dollars in interest. Remember, if your interest rate is 8 per cent, any extra repayments save you 8 per cent interest on these amounts.
3. Consider longterm investments
Longterm investments which are not linked to your superannuation and can be accessed if needed make sound financial sense.
4. School fee plans
If you have children you may wish to consider putting a little away for future school fees should they be academically gifted.

Age 50-65 – maximising your income
1. Re-evaluate your insurance cover. You may no longer need as much income protection or life insurance but there may be aspects such as house and contents insurance in which you are lacking sufficient cover
2. Salary sacrifice as much as you can into your superannuation to take advantage of tax concessions. Those over 50 can sacrifice up to $50,000 per annum.
3. Reduce debt now before you head into retirement. As your income is likely to decrease once you take a pension, servicing debt becomes more expensive.
4. Understand how your super is working for you. Talk to a financial planner to make sure that your money is in the fund and consider changing investment strategies to ensure maximum return.

Age 65+ – retirement and enjoying life
1. You could live for 30-40 years in retirement so don’t blow all your cash at once. Financial planning is just as important now as it was when you were just starting out.
2. Consider if your assets can work better for you. Perhaps a reverse mortgage or downsizing your home can release much needed capital.
3. Ensure your superannuation income is being provided tax free.
4. Know the ins and outs of the Age Pension rules and what you entitled to. Every penny counts.

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