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  • MAGNIFY Wealth

The 5 financial life stages

Each stage of life holds unique financial opportunities and one of the keys to financial success is to adopt the right strategy at the right time. As you move through the stages of life here are some tried and tested ‘secrets’ that will help you build and protect your wealth.

Teens and young adults

Time is on your side so get saving! Through the magic of compound interest, a little bit invested now can grow into a big amount over time. If at 15 you start saving just $10 per week into an investment returning 5% per annum (after fees and tax), when you turn 65 the total outlay of $26,000 will have grown to over $116,000. Contributing those savings to a tax-favoured vehicle such as superannuation may provide an even higher final return.

Single life

Saving is still a key strategy as you establish your career but usually with a shorter timeframe and a specific purpose in mind like buying a home, for example. This is a time when savings strategies can be brought undone by the allure of desirable things and the ease with which one can go into debt. Take care not to indulge in too many luxuries, and avoid taking on any high interest debt, such as credit cards. Rather, commit to the boring, but highly effective ‘secret’ of working out a budget and sticking to it.

Family focus

The time of kids and mortgages is also the time of peak responsibility. It’s likely that your most valuable asset is your ability to earn an income. Illness, disability or death could deprive you and your family of that income. The financial consequences of each of these possibilities can be managed with a blend of income protection, total and permanent disability, trauma and life insurances. Read more about common financial mistakes people make during this stage of life.

Preparing for retirement

With offspring launched into the world and earning capacity often at a peak, a wealth of opportunities opens up for pre-retirees. Enjoy some lifestyle spending, but not at the risk of supercharging your super in anticipation of a long retirement. For additional tax benefits, look at making salary sacrifice contributions, perhaps combined with a transition to retirement strategy. In times of normal interest rates, using surplus income to pay off any outstanding home loan is often recommended. However, when interest rates are very low, investing spare income into super and leaving debt repayments until later may deliver a better outcome. One trap at this life stage is sacrificing your retirement for your adult children, find out more here.

Golden years

Australians are leaders when it comes to enjoying long and healthy retirements. That means retirement savings need to last! So don’t go too hard too fast in spending your hard-earned super… It is also important that you don’t invest too conservatively, particularly in times of ultra-low interest rates. On the plus side, if you’ve employed the above secrets in each phase of life, you should be in good shape to enjoy a long, financially comfortable retirement.

Whatever your stage of life, there are many things you could be doing to secure your financial future. To find out more, talk to your financial adviser. Contact the team today.


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