Whether you’re starting out in your first job or moving on from your last one, it’s never too early or too late to think about how you’re managing your money.
Even though the way you may invest and the size of your income and bank balance will change at different stages, you can keep an eye on the long term and ensure you’re doing all you can to help your money grow.
The foundation years: your 20s
When you get your first job and throughout your 20s, make sure you have an understanding of the basics of superannuation. By starting early you can help your money compound into a substantial amount over your working life. Your employer contributions can go into a fund with a high proportion of growth assets but be sure not to look at your balance too often―super is a long-term investment.
With time on your side you can afford to weather short-term changes in your account balance for the chance to build solid wealth over the longer term. If you’d like to know just how much you could end up with, take a look at our super simulator.
In your 20s you have a chance to set up financial habits that can put you on the road to wealth. So think about how you’re spending your money and set up a budget from the get-go. Our budget planner can help you organise your spending so your income goes towards meeting day-to-day expenses and building a deposit for a house or another investment. With a budget in place, you can set up automatic deposits to make money management easier.
Growing your money in your 30s and 40s
It’s now time to relook at the investment strategy applied to your super money. As your balance increases make sure the proportion of money allocated to growth assets progressively reduces over time; that way you’ll be exposed to lowering levels of risk.
Some super funds automatically regulate risk according to your age, so find out whether you can be actively involved in managing your investment strategy. We recommend that you find a financial adviser when considering your investment strategy. It pays to evaluate your goals and attitude to risk with an adviser who’s considering your specific goals and needs.
Make sure you’re saving some of your income outside of super too, such as cash for a rainy day. Consider investing in assets like cash, fixed interest, bonds, shares, managed funds or property that you buy directly or through a managed fund―or a combination of assets. And if you have a home loan, consider using an offset account to reduce the amount you pay in interest.
Consolidating in your 50s and 60s
As you move beyond 50, it’s time to give detailed consideration to retirement: what your spending patterns are likely to be in retirement, how you’ll invest your savings and ensure your super assets can support your goals, whether you’ll vary your working patterns, and how to progressively align your current investment strategy with those in retirement.
The thought of losing hard-earned capital at this stage may cause sleepless nights and capital preservation becomes key. It’s vital not to leave this too late; protecting a portfolio from significant losses must be considered earlier than the date of retirement.
Major market falls are not a serious problem for those in the accumulation phase who are investing for the long term, as they have time to recover from the market falls. But a major market fall can be distressing for those approaching, or are in retirement as they do not have time to recuperate their losses.
Working with a financial adviser can help you plan for a comfortable retirement in a tax-efficient way and consider details like whether to pay money into your mortgage or super and how to manage super contributions, income and any government entitlements you may have.
The next phase: 65 and beyond
At this stage you’ll need to understand the difference between the essentials and non-essentials when it comes to spending. Your focus will be the reliability of any income streams you have and how your assets can best support your goals. You’ll need to consider your health and potential life span and work with a financial adviser to ensure your money lasts for the long-term.
Consider planning ahead and how best to invest assets that are intended to be passed onto your chosen beneficiaries as well.
See our Managing your money in retirement education module.
Help is at hand
The details you’ll need to consider at each life stage will depend on your own circumstances and personal preferences. It’s important to work with a good financial adviser so you can make sure your money is managed and invested according to your:
- Financial goals
- Attitude towards risk
- Your appetite for investing and the types of investments and strategies that suit you and can help you reach your goals―including opportunities to invest inside and outside of super
- Ability to manage and service a home loan and other types of debt―eg credit card debt may be something you’re better off avoiding.
If you don’t yet have a financial adviser, call us on 131 267 and we’ll put you in touch with someone who can help you―or find an adviser near you.