Managing money in your 40s means clearing your personal debt and planning for well into your future.
First up, I’ve said it before and I’ll say it again because it doesn’t matter how old you are — get out and stay out of consumer debt. We’re talking credit cards, personal loans, financed couches and TVs. Pay it all off and get out of there! Consumer debt is like weeds in what could be healthy cash flow. Ongoing repayments like these also impact your ability to save and invest for your future.
So if you’re in your 40s, or preparing for them, here are my best tips for managing money in your 40s.
Review your financial goals
Wills and estate planning
You don’t need to have bucket loads of assets to warrant having a will made. They’re easy and quick to organise, and are an essential estate planning tool. While you’re at it, set up your Power of Attorney — another crucial legal document to have organised.
Your mortgage is most likely one of your biggest day-to-day expenses, so make sure it’s set up in the best way possible. Chat with a mortgage broker to get things sorted. Shop around for a better deal if you have to.
This will help: 5 ways to pay off your mortgage faster
See a financial adviser to chat specifics to you
Everyone’s situation is personal and unique, and managing money in your 40s means chatting with a financial adviser about your personal circumstances. This will include what your financial life has been until this point, and what you need to change or continue as you get closer to retirement. Ask every question and consider all of your options. Use your financial adviser’s expertise to nut out your concerns, goals and questions.
Joint goals as a couple if you have been stuck in ‘kid mode’
(I’ve heard) having kids is brutal and beautiful simultaneously. But, kids have an amazing way of swallowing up time, energy and headspace. Time to sit and think about goals is often eatenby daycare drop offs, signing forms for the next season of soccer and trying to feed your fussy eater. Make sure you carve out some time as a couple to reassess where you’re at, and adjust or re-angle to keep heading in the direction you want to go.
Read this too: Why you need to stick together as couple now more than ever
Keep planning for the future
Get started on retirement planning
There is no official retirement age in Australia. What the Australian Super system has is what’s called a preservation age, which is when you can access your superannuation (seek the support of your super fund around these details). Australia also has a set age when you are able to access the aged pension, pending their income and assets tests — currently age 67 for anyone in their 40s (although this has been known to change).
However you want your retirement to look, make a plan for how you will fund your lifestyle as you wrap up work and head into retirement. Seek the support of a financial adviser and your superannuation fund.
WATCH: More tips for estate planning with Kylie Macdonald:
Consider salary sacrificing super contributions for tax saving
The closer you are to retirement, the more your superannuation needs to be a focus. You might consider adding more into your superannuation on top of what is contributed by your employer.
Any additional contributions you make are tax deductible so remember to report whatever you add in yourself at tax time. Speak to your financial adviser about this.
Consider spouse contribution and government co-contribution for lower income spouse
If you or your partner took a break from the workplace for whatever reason, consider adding extra spousal or government co-contributions to help build up their superannuation. Have a read about more superannuation options like these and tailor to suit your situation.
Even a little bit can go a long way in preparing more funds for retirement. Speak to your financial adviser about this.
Think about aging parents — power of attorney and wills
There’s a good chance that around your 40s you’ll have aging parents to look after. Make sure you have a chat with them about their own plans, set up a will and Power of Attorney so everyone knows what’s happening in the future.
Tips to do this here: How to talk to your parents about their will (without sounding like a gold digger)
Managing money in your 40s when you have kids
Be present with your partner and kids
In our episode about money tips for your 40s on my millennial money, John shared his story about trying to keep a balance between maintaining a great career, but also being present with his family.
In your 40s you’re deep in both family and work. You’re often time poor and tired, so remind yourself as much as you can that although you are in a peak work time in your life, you also need to be around for your partner and kids. There’s no point working so hard to secure your family’s future that you’re risking your family in order to do so. Find the balance and make sure you set boundaries in place in order to keep it.
Teach your kids about money
As a parent you have an amazing opportunity to teach your kids some essential money skills. Even a few basic principles can set them up brilliantly, so teach them what you know.
Even the mistakes you’ve made along the way can be a learning experience.
Talk about things like knowing what your income and expenses are, spending less than what you are, and avoiding consumer debt. The conversations don’t have to be fancy, just start talking about it and make talking about money in your house a healthy and natural conversation.
More ideas here: Teaching kids to be money smart starts at home
Review and plan for education costs
The choice for what kind of schooling you want for your kids is personal to your family, but the expenses can rack up. Educate yourself about all the overall costs for whatever form of education you choose — public or private. Put in place an investment or savings plan that will help you support all costs when the time comes.
Know how you’ll finance big purchases
For big things like financing cars for your kids (and even houses if they’re keen on it), have a chat with your family. You can discuss how you’ll set them up, or encourage them to prepare.
You might set up a savings plan where you match what they save, or contribute a certain per cent towards their goals.
This is all very personal to you and your kids, so get the conversation started.
Consider your options if you have older kids
If you have older kids living at home who are working consider setting up a board arrangement with them. A suggestion is 10 per cent of any income they are earning. It makes sense for two reasons. Firstly, it helps cover some of the day-to-day expenses you have. Secondly, it also starts teaching them about rent and mortgage payments which are on their horizon. If you can afford it, you might consider investing any board money you receive on their behalf. Then you can gift it back to them as a share portfolio when you are ready.
It also pays to agree a flight plan/empty nest preparation plan. Is there an age you’d like to have your kids out in the world? Have the chat with your partner and kids about this. Like all decisions you will make when managing money in your 40s, you can put in place the monetary foundations needed to stick to the plan when the time comes.
More in this series:
- Top tips for managing money in your 20s
- Top tips for managing money in your 30s
- Top tips for managing money in your 50s
This is an edited version of an article that originally appeared on My Millennial Money. This article contains general information only. It should not be relied on as finance or tax advice. You should obtain specific, independent professional advice from a registered tax agent or financial adviser in relation to your particular circumstances and issues.