The Different Financial Life Stages: What Should I Be Thinking About?


As we and a number of our friends now swing by the big “40” age landmark, a few are looking at life’s bigger picture and thinking more about the future. Because life and money are so closely entwined, this has sparked some thoughts and conversation around how one’s financial priorities should change as the years pass.

Financial goals do change over time. Life is full of changes and with each new set of circumstances come new financial needs. Some of your concerns will be long term – for instance, saving for retirement takes place across decades – but that doesn’t override the shorter term goals such as saving for a deposit on a home or considering starting your own business. Knowing what financial milestones are ahead and planning in advance will help establish a greater level of security and enable more financial choice. We have put together a summary of what we think are the different financial life stages to help spark more thought and conversation.

Entering the Workforce

Now that you have attained financial independence, it is important to set up some good habits and financial goals for life.

Make a budget and track your expenses
Know what your after-tax income is and learn not to spend more than that. Utilise online resources to help track your spending and identify the areas you could better manage. Managing your spending to be able to have some free-cash flow (savings) is the first step to building wealth. Ironically those on lower incomes are often better savers as they need to be more careful with each dollar – there is always the ability to save something.

Pay down debt
If you have a credit card debt, this is your priority. Most credit card loans are 3-5 times higher in interest than other loans. If you can, it is better to avoid having a credit card at all. Most banks have debit cards that provide the features of a credit card without allowing you to go into more debt.

Established in Your Career

The middle working years are often characterized by getting married/establishing a long term relationship and having children. There can also be the unexpected such as illness, loss of relationship and job movement.

Be proactive in your tax planning
Seek advice from an experienced Accountant.  Since this is the time when you are likely to be paying the highest taxes, you want to make sure you maximise your deductions, make effective use of any tax concessions available to you and set up any new business or investment within the most appropriate and tax effective legal structure.

Buying a home
Don’t overextend yourself. Work with an investment advisor and a mortgage broker to make sure that when you purchase a home you are comfortable in meeting your mortgage repayments (including an allowance for interest rate rises). If your family helps with the deposit or becomes a guarantor to your home loan make sure that there are clear expectations between all of the family members concerned about what is expected with respect to the assistance provided.

Plan for the costs of educating children
Depending on your budget and views towards private school education this may be a factor to give considerable attention to during this stage of life. The earlier you start thinking and planning for these future costs, the better placed you will be to make decisions on your children’s education that provide more choice. This may involve diverting some of your savings towards an education fund which provides certain tax advantages if done well in advance of when the funds are required.

Prepare for the unexpected with health, life/disability and income protection insurance
During the early working years, the greatest financial risks are driven by the fact that you have a fairly long period of working years ahead of you, and that you also often have significant future expenses (e.g. mortgage and children’s education). The risk, then, is that if something happens to you to prevent you from working during that time, those who depend on your income will not have the income expected. Insurance can be taken out to cover you for a number of these unforeseen circumstances and it is also possible to fund some of the cost of this insurance using the funds you have within super.

Start saving for retirement
While the number of years to retirement is relatively long, the more you save during the early working years, the less pressure there will be to save and seek high (and more risky) investment returns in your later working years. Saving within super has some significant tax advantages, including tax saved at the time you make contributions and as your super balance grows with investment earnings. There may also be some government concessions you are able to access such as the spouse super contribution tax offset and the government super co-contribution.

Start your estate planning
Although this may sound premature, now is the time to employ the services of an estate planning lawyer to set up a will and the appropriate powers of attorney.  Obtaining a well-constructed will, protects and outlines in advance what actions you’d like to have taken with regards to both your health and your finances and who would care for your dependent children in the event of a tragedy.

Single again
Nobody plans for this to happen, but if this does occur, your financial situation can change dramatically. If you become single again either through loss or relationship breakdown, it is extremely beneficial to obtain trusted advice early to go through your investments, estate planning and asset protection needs. It may also be helpful to have a financial planner assist you to rethink your budget and retirement plans, help to change the beneficiaries associated with super balances and revisit your will.


This stage in life can mean more freedom, but one of the toughest aspects of retirement planning is to know how much money you’ll need to make a comfortable transition out of the workforce, enjoy your retirement years, and be able to support yourself for the rest of your life. You might also want to leave some funds behind for your children/grandchildren.

Decide when to stop working
The decision as to when to stop working is probably the most important decision in terms of influencing how long your retirement savings will last. Each year you work is a year you do not need to be supported by your savings, and possibly another year you can add to your savings. While it might seem like a right to retire by age 65, the notion of retirement at such an age is a relatively recent phenomenon, and it might well be better for you financially, emotionally and physically to work longer even if it is at reduced hours or even in a different area to where you have spent most of your career to date.

Know your budget
Even before you retire, know what your income and expenses will be. With your financial planner, review your plan for turning your assets into a steady income in the most tax-efficient way possible and how to best use super. Also discuss whether you are entitled to any social security benefits or health concessions.

Review your investments and sources of retirement income
Meet with a financial adviser to review your assets to ascertain whether they are appropriate for both your financial life stage and risk tolerance and to maximise your retirement next egg so that it is used wisely and has longevity.

Government Support
If your assets and any income you earn are below a certain threshold, you may be eligible to receive a full or part Age Pension from the government to supplement your retirement savings. The maximum amount you’re entitled to depends on your situation. In addition, depending on your circumstances, you may be eligible for different government benefits instead – like a Disability Support Pension, Carer Payment if you’re looking after someone else, or a Sickness or Widow Allowance. Aside from pensions and other payments, there’s also a whole range of other financial benefits available to seniors (subject to your situation) including seniors card, pensioner concession card and commonwealth seniors health card.

A smaller home could help reduce your rates, utilities and other home maintenance expenses.

Plan for health and long-term care costs
Another point of focus will be health care. A significant amount of retirement savings can be spent on health care costs not covered by the government so it is important to plan for this in advance. Discuss with trusted friends and your doctor how to best manage your health and complement this with healthy lifestyle choices to maximise your wellbeing.

Think about the transfer of wealth to the next generation
If you are fortunate to have wealth that exceeds your retirement needs and are intending on transferring some of this wealth to other members of your family, it is a good idea to think about doing this in a planned and effective way. Talk to trusted friends, family and your financial adviser on what your options are both now and later, and on how to do this in a fair, equitable and responsible way. You may have options that provider greater benefits to your family as a whole without undermining your own current financial situation. If you plan to assist adult children purchase a home ensure that you do not take on any unnecessary risk by doing so which jeopardises your own financial situation.

Following the Loss of Your Life Partner

Don’t make any immediate changes
Work with your family and a trusted adviser to make sure your retirement plan is still on track. If there are life insurance proceeds, invest based on your current goals and get advice to do so in the most tax-effective way.

Review your estate plan
You may have developed an estate plan years ago that hasn’t been updated. Work with an estate planning lawyer to revisit things so that if you’re incapacitated, loved ones can step in and make both medical and financial decisions for you. Also, make sure the assets can pass to your family or chosen recipients in way you intended at this point in your life.

Downsize and consider moving to a full retirement community
These types of homes have a range of activities and can accommodate independent living as well as offer some assistance and even full-time care.

The above stages are simplified. Each person is unique with their own story. Hopefully this provides some starting point to keep conversations going. Please feel free to contact us to make an appointment should you wish to discuss your personal situation.