Reviewed and updated 20th February 2019
Having a plan is a sensible starting point for good money management, providing a sense of direction and a path to follow. No two people will have the same plan - your individual personality comes into it, and while some people have a very clear idea of where they want to be and how to get there, many others don't. But everyone has at least some goals or aspirations, dependent to a large extent on their life stage.
That's why you should think about your chief objectives when making financial decisions. Of course, life isn't certain, and your goals will almost certainly change throughout your life. But as we get older and our life becomes more settled, our plans and aspirations tend to firm up.
With this in mind, let's take a look at some typical goals for each life stage.
Our early years form the foundation on which we build financial security. Thanks to the benefit of compounding returns, aiming to start even a modest investment plan at this stage can leave you much better off financially in later life.
- Complete education and invest in my own skills and qualifications to earn a better income later on.
- Develop a budget that allows me to manage my income and put some savings away on a regular basis.
- Select a superannuation fund for my employer's super contributions, and take this fund with me when I change jobs. Consider adding a bit extra to super through contributions of my own.
- Make sure I have protected my biggest single asset – my ability to earn an income.
Partnered with children
Sensible money management is critical during our middle years. It's a time when plenty of demands are made on our wallets, but sensible budgeting makes it easier to kick multiple goals. Having the right plan in place will pay dividends later on – and remember, these busy years can fly past in the blink of an eye.
- Buy a home and aim to pay off the mortgage sooner through additional repayments.
- Use home equity to buy an investment property.
- Start an investment portfolio and steadily invest in shares and/or managed funds.
- Set some cash aside regularly to invest for our children's education.
- Monitor our super and top up employer contributions if our budget allows us to do so.
- Have sufficient insurance in place to protect myself and my family against financial hardship.
This can be a critical life phase when your income is at its peak and your children are less financially dependent, so you may have more cash to invest. In the run-up to retirement it pays to use your money wisely and as retirement draws closer, expert advice can make a valuable difference.
- Explore additional ways to grow super.
- Create and/or continue to grow an investment portfolio.
- Aim to reduce debt and be mortgage-free by retirement.
- Look at ways to wind down my working week without too much impact on household income.
Retired – and loving it!
Now's the time when your earlier efforts really pay off. It's a chance to indulge in hobbies, travel, spend more time with family and friends and generally unwind. Retirement also calls for careful management of your assets to ensure you can live your preferred lifestyle free from financial concerns – and still leave a legacy for your family….if you want to.
- Decide how much annual income we need to meet our living standards.
- Use super and other investments to fund income. Apply for any pension benefits available to us.
- Review investment options to put security first. Avoid high risk investments.
- Develop estate plans including a will to ensure our children will benefit from the assets we've built up.
- Remain in family home for as long as possible – consider downsizing to a more manageable property.
If any of these goals resonates or if you're ready to put a plan in place, call your local Mortgage Choice adviser to discuss how we might work together.