Money in your 40s

Have you given yourself a financial health check recently? If you’re an Australian in your 40s, there are some important things to consider.

Life begins at 40, the old saying goes. For many 40-something Australians juggling the demands of work and family, the fifth decade is one of life’s busiest. If you’re in or preparing to enter your 40s, it makes sense to evaluate how you’re travelling financially as you begin life’s ‘second half’. Here are some of the things that may be due for review, depending on your personal circumstances.

Maximising your income

Generally speaking, if your 20s are for learning and your 30s for earning, your 40s are the decade when, typically, your career becomes established and your salary or wage hits its peak. At this time it can be helpful to talk to a mentor or careers adviser to ascertain whether you’re doing all you can, or if there are further steps you can take to improve your prospects and position yourself more favourably for the next two decades of working life.

Building wealth

If you’re on the grown-up side of 40, you could be in the property market. Upgrading to your dream home may also be on the agenda this decade, as your family grows. Alternatively, you may be crunching your numbers and deciding if it’s preferable to stay put – focusing on paying debt down faster and beginning to build wealth outside the family home. If you’re not a homeowner or planning to become one, there may be other strategies for building long-term wealth. Depending on your circumstances, perhaps you’ll choose to invest in shares, rental property (either commercial or residential), managed funds or superannuation.

What’s important is asking yourself the right questions, determining your personal priorities, circumstances, needs and objectives and planning accordingly so you can ensure you’ll be able to take the best of your life today into the future.

Paying for education

Deciding on the type of education you want for your children may be a consideration as you travel through your 40s and they move into their high school years.

Education in Australia is nominally free for families that choose government schools but, in reality, the expense can be significant. Research conducted by the Australian Scholarships Group (ASG) in 2017 puts the cost of a secondary education in a government school – including fees, extracurricular activities, clothing, travel and computer equipment – at $4,780 a year. Parents with children in the private system may spend many times this amount – in excess of $25,000 a year.1

These are sizeable sums that can impose a significant burden on the household budget, regardless of the option you decide is right for your family. Budgeting and saving for schooling may become a priority as the primary school years draw to a close.

Sorting your superannuation

While retirement may not yet be imminent, taking steps to ensure your forthcoming retirement will be as secure as possible is important.

It may be a good time to review the contents of your retirement plan – both inside and outside the superannuation system, including assessing how much your retirement need and your personal objectives and circumstances.

For example, salary sacrificing up to the annual concessional contributions cap (currently $25,000 a year), if the household budget permits, could make a big difference to your retirement savings.2 It might also be helpful to review your superannuation investment profile to make sure your retirement savings are appropriate to your circumstances.

Protecting what matters

Life can be unexpected and can change quickly. Generally speaking, protecting yourself and your family is particularly important at this stage of life, when children (if you have any) are likely still dependent and your financial commitments substantial. Reviewing your insurance policies and making sure you’re appropriately covered in the event of an injury, serious illness or death can ensure these adverse events don’t have a devastating financial impact on your loved ones.

It’s also important to remember that your biggest asset isn’t necessarily your home, superannuation account or investment portfolio – it could be your income and earning potential. Generally speaking, weighing the benefits of income protection insurance – in the event you’re unable to work – can be a worthwhile exercise. You may wish to seek advice to be sure any policy is suitable for your personal circumstances.

Life is busy in your 40s and it’s easy to let your financial future take a back seat while you juggle your day-to-day responsibilities. Taking the time to evaluate how you’re travelling and make changes, if necessary, can put you in a better position to set up a comfortable retirement and keep enjoying the best of today.


Source: MLC

1 Source: Australian Scholarships Group  – ASG’s Education Costs Estimates – 2017

2 Source: Australian Tax Office – Contribution Caps – January 2018