Thu 29 Mar, 2018
5 Financial Changes To Make In Your 40s
Your forties can be a strange time. You might be settled down and married with kids, you might be starting over on your own, or you might be jet-setting around the world. Whatever your lifestyle, your fifth decade should be taken seriously when it comes to your finances. In this article, Squirrel Super shares 5 changes to make in your 40s that’ll set you on the path to financial security. If you haven’t quite reached the big four-zero, we chat about financial changes to make in your 30s here.
Start Thinking About Retirement
You’ve probably been contributing to your super for years – but for many of us, that’s where our retirement plans end. While 40 is still a long way off retirement (sadly!), it’s a great time to start thinking about what you’d like your later years to look like. Do you have any goals or aspirations for your golden years? Do you want to travel, downsize or move? Thinking about what you want out of your retirement can help you plan for it financially and work out how much super you’ll need to realise those dreams.
Reduce Your Debt (Or Plan To)
If you’re still lugging around credit card debt from your 20s and 30s, this is the time to ditch it – or at least plan to. Work out how much you need to pay down to kick the debt in the next two years, and you could always move it to an interest free card while you pay it down. You’ll save cash on interest, and feel much better about your financial position.?
The same goes for your mortgage or student debt. While these aren’t bad debts to have, think about when and how you’ll eventually reach the end of your lending term. Can you get there sooner? Think about paying a little extra off your home loan each month, or pay off your next Christmas bonus or commission payment off of your principal balance. The sooner you pay, the less interest you’re lumped with.
Protecting yourself and your loved ones should be a financial focus in your 40s. Health insurance, life insurance, funeral insurance and income protection can assist with the financial challenges you may face as you age. We know it’s boring, but it’s super important.
Look Into Passive Income
Your income may have grown steadily year-on-year in your 20s and 30s, you may notice that your 40s bring with them smaller pay-rises. You’ve likely had a few promotions in your career, and you’ve probably established your strengths and climbed the ladder in your field. Great stuff! But by this age and stage of life, your taste will probably have advanced in line with your income growth. The best thing you can do in your 40s is look into how you can generate extra income. Whether that’s selling something you create yourself – perhaps that beer you’ve been brewing, or those children’s clothes you’ve been making at the weekends. If that’s not an option, look to investments. Buying a property can generate rental income that can almost pay for itself – and once the mortgage is paid off, you can enjoy a neat monthly income to supplement your salary or superannuation. If you can’t afford an investment property yourself, consider buying property with your superfund.?
Save For Your Kids
…even if you don’t have any yet. By the time you reach your forties, you may well have heard the pitter-patter of tiny feet. Unfortunately, with such pitter-patters, come jingle-jingles from your wallet. Raising a family can be costly, so whether you’ve got children already or not, think about putting away a little extra money into a high-yield savings account. Think long term saving, here. This money will be set aside for big milestones in your child’s life, like getting a car, buying their first home, studying or taking an overseas trip. The earlier you start saving for things like this, the easier it will be in the long run. You’ve got several years up your sleeve before you’ll need the money, so work backwards. For example: if you plan to have two kids who will be 18 and 21 by the time you’re 57, that’s 17 years worth of saving. Say you want to buy those kids a car each – lucky kids! – and gift them each $5k on their 21st birthday to travel, you’ll need around $50k. Depositing just $50 per week into a 3% interest rate account will see you rack up $57,637.35 in those 17 years. Easy!
Oh, and if you’re not self-managing your superfund, perhaps you should! Squirrel Super makes it easier than ever to take control of your super investments, so you can align your retirement plans with a financial future to match. Click here to find out more.
Have you read our eBook on SMSF Tax Benefits?