Financial Fitness for the under 40s

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FINANCIAL FITNESS FOR THE UNDER 40s

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.

20s

You're young, independent and about to set spending habits that are likely to stick with you for the rest of your life. At this stage in life, retirement planning is understandably the furthest thing from your mind. It's all about having what you want and having it now.

Assuming you are single, have little or no debt and wish to one day own your own home, this is one of the most important periods in you life because it's about the only time when savings are discretionary. Many 20-somethings may think it's a dirty word, but this is the time you need to set a budget and stick to it.

There is a vast array of products and services specifically designed to help people who find saving difficult. Many managed funds and banks offer products with savings incentives and facilities for regular, small contributions. At this stage in your life you may be able afford to make aggressive, growth orientated investments . It's also the perfect time to start a relationship with a professional financial planner and use time to your advantage.

Top Tips

- Set a budget and stick to it

- Start saving a small amount each month for a home deposit

- Take out income protection

- Make minimum superannuation contributions

- Invest in an aggressive, growth-orientated managed fund

30s

This is the time we are supposed to get serious about our life and our finances. It's a high commitment decade with many of us paying off a mortgage, starting a family and stepping up the corporate ladder. Like it or not, it's time to start seriously planning for the future.

It's very important at this time in your life to avoid a high consumption lifestyle in an attempt to “keep up with the Joneses”. You can either use this period to set a solid foundation for future growth or start digging a financial hole that you may find very hard to climb out of later.

Important considerations at this time of life include life and income insurance, investing for growth, or possibly saving for children's education or upgrading the home. Earning capacity often increases considerably from that of your 20s. For people without children this can mean they are well equipped to invest aggressively.

Top Tips

- Focus on mortgage reduction

- Make sure you have adequate insurance and a will

- Diversify investments

- Consider salary packaging

- Set a savings plan in place for children's education

- Invest aggressively

- If you don't already have a financial planner, it's time to get one

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.