Financial Fitness for the over 40s

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FINANCIAL FITNESS FOR THE OVER 40's

Keeping healthy – it's something most of us aspire to. We're constantly told how to keep a healthy body, a healthy mind, even how to maintain healthy relationships. But just how healthy are our finances? The Financial Planning Association has supplied this financial health checklist to help keep you fiscally fit through the different stages of your life.

Like our physical needs, our financial requirements change as we reach different stages in life. In our 20s it's all about socialising and having fun, our 30s are about creating a solid base and our 40s and 50s are about consolidating and planning for our retirement. The fact that a growing number of Australians are facing a retirement in which they are totally reliant on a government pension suggests this simple formula is not always so easy to put into practice.

Fortunately, it need not be all doom and gloom. Just like your physical health, it's never too late to put a financial plan in place that will give you a comfortable tomorrow, without missing out on today. Here's a financial health check list which will help keep you fiscally fit through the different stages of your life.

40s

Many 40-somethings have or are close to paying off their mortgage. This, coupled with the fact that many find their children are starting to leave the nest, can mean that your 40s are a period of greater financial freedom. For the first time in your life, retirement becomes a reality and the need to plan for it becomes more pressing. This is a significant earning period but it's important not to counter that by making it your peak spending period.

In this period it is important to take stock of your financial position and set a plan in place to rectify any shortfalls before you reach retirement age. Many find at this time that they need to top up or increase contributions to their superannuation fund. For wage earners, this is where salary sacrificing can come in handy.

Top Tips

- Increase life, disability and income insurance

- Increase super contributions

- Continue to build a diversified share portfolio

- Continue mortgage reduction strategies

- Consider using equity in your home to diversify into other investments

- Take care of your physical health

50s

For many this is a period of major lifestyle change. Possible career uncertainty and impending retirement can have major financial and emotional effects. Most people can expect to fund 15 to 20 years in retirement and, after working hard for years, you should be able to enjoy the fruits of your labour. Generally, this is a decade of low financial commitments, high earning capacity and a time when you should be able to commit the maximum available income to your investments.

Top Tips

- Add to your investment portfolio and continue to top up your super

- Maintain income insurance but focus less on life insurance

- Consider risk in relationship to your investment portfolio

- Make sure your will and power of attorney are up to date

60s

It's time to sit back and enjoy the pay-off from years of hard work and financial diligence. More than ever this is a time when financial decisions are heavily influenced by lifestyle aspirations – perhaps you want to start travelling the world or spend your days soaking up the sun. At this time of life many people also consider moving to a smaller home. It's important to start re-positioning investments and assets for income rather than financial growth. You've worked hard for your money long enough, so now you can enjoy the fact that it's working hard for you.

Ideally, debt should be eliminated at this point and all large purchases, such as a new car, should be financed debt free.

Top Tips

- Continue boosting super entitlements until you reach retirement

- Vary retirement income streams

- Ensure you have investigated all entitlements such as pension options

- Eliminate life and income insurance but maintain health insurance

- Enjoy life to its fullest

By the Financial Planning Association of Australia (FPA), http://www.fpa.asn.au

This article has been reproduced with the permission of the copyright holder, The Financial Planning Association of Australia Limited, and unauthorised reproduction is strictly prohibited.