How to boost your financial health at different life stages

As you progress through different stages of your life, it’s a good idea to reflect on your financial health and see if there are any opportunities to find greater balance for the years to come. But because your financial aspirations in your 20s are far different from your financial goals in retirement, it’s important to regularly ‘check in’ and reassess what it is you really want.

Here are some helpful tips for conducting a financial health check at different stages of life.

Measuring progress

No matter how old you are, how many assets you’ve accumulated or whether you have even checked in on your financial health before, the first thing you’ll want to do is calculate your net worth. Don’t focus on the actual amount – instead, keep that figure somewhere accessible (such as a note on your phone) so you can measure your progress against it next year.

It’s also worth reviewing different providers in your financial portfolio – such as your mortgage lender, superannuation fund and insurance providers. Spend a couple of hours one weekend to see if you are still getting the best deal. Is now a good time to refinance your home loan and get a better rate? Would taking a more aggressive investment strategy reap bigger returns in your super?

There are lots of little things you can do to improve your financial position at any stage of life. But for now, let’s explore some things you should do according to your age group.

20s and 30s: Starting small for big future gains

·       A little becomes a lot: Compound interest is your best friend in your 20s and 30s. You have years – decades, even – to see a weekly contribution of just $20 expand by the time you hit retirement. Putting that amount under your mattress every week for 30 years will net you $31,200. But by investing that into a fund and if that fund returned on average 5% per year, you’ll end up with just under $70,000 over the same period of time.

·       Take risks while you are still young: Your younger years are the best time to take bigger risks when it comes to investments. High risk, high reward investments may not always be successful, but remember that you have several decades to ride out any market fluctuations and still hit your long-term financial goals.

·       Get insured: It may not seem like it’s worth the cost, especially if you haven’t accumulated a lot of wealth yet, but getting the right level of insurance cover is imperative. That goes for your car, your home and contents, and your life. Especially if you have a family who relies on you, make sure you are appropriately insured. This is a challenge – you are jugging finances to support a family paying a mortgage meaning much of your income is already earmarked. But that is the time when it is important to have adequate insurance in case something unexpected happened to your health or the health of your family or at worst, a death occurs.

40s, 50s and 60s: Good habits pay dividends

·       Make debt your enemy: At this stage of life you should be looking to reduce any debt you’ve accumulated in your younger years. For example, you might want to start using an offset account to help pay off your mortgage faster. This is also a good time to refine your investment strategy – if you’ve been highly aggressive in the market in your 20s and 30s, a slightly more conservative position may increase your wealth while reducing the impact of any market disruptions.

·       Maximise your contributions: Take a look at your superannuation and ask yourself whether now is a good time to make additional contributions. This can help you reach your financial goals faster, but be aware of contribution caps and potential taxes that may apply.

·       Find wealth in what you love: Is there anything you can do at work to improve your position – whether that’s working towards a higher-paying promotion, or expanding your business to reach new markets? You may even consider whether it’s worth spending time outside of work to take up a hobby that brings in some extra money.

Retirement: Enjoying your golden years

·       Set your goals early: Before you wrap up your career and enter retirement, make sure your plans for the coming years match your financial situation. Do you want to live a comfortable retirement or are you happy with a modest living? The type of lifestyle you are looking for will influence how much you need to save for retirement.

·       Protect your estate: It’s never nice to think about, but as a retiree you need to plan for what will happen to your estate once you pass. Make sure you have organised a will and have an enduring power of attorney. Nowadays estate planning also extends to writing down for your family your wishes about medical treatment if you are not able to make those decision yourself. .

·       Enjoy your money: You’ve worked hard to reach retirement, so make sure you have enough money to enjoy it. Living within your means is a smart strategy, but your mental health will thrive when you can put some money aside for a holiday or an interstate visit to see the grandkids. Even having enough for a night out to dinner once a month can make retirement that much more enjoyable.

Building your wealth over several decades takes commitment and mental fortitude. At Flying Change, we understand that business ownership comes with its own ups and downs, so speak to the experts or call 0418 676 977 to find out how we can provide business advice and put you on the path to financial wellness.

Advice given in this article is general in nature and is not intended to influence your decisions about investing or financial products. You should always seek your own professional advice that takes into account your own personal circumstances before making any financial decisions.