While I should have been crafting my next blog post, I became obsessed with the historical drama ‘Outlander’ instead.
The show centres around the character of Claire Randall, who inadvertently travels in time from 1945 post-war Scotland to 1743 where she meets and falls in love with the drool-worthy Jamie Fraser.
Watching Outlander got me thinking about time and life’s uncertainties. What are the goals we should be preparing for during each decade of our lives to secure a comfortable financial future? While this is not really a concern for time-travelling Claire, it should be for you.
Time is on your side
Pay off any credit card debt. The interest rates on these are absolutely huge (anywhere between 9-20 percent) and will only continue to grow exponentially the longer you are in debt.
If you can, pay off any student loans. While it may seem hard given you’re probably new to the workforce and not earning big dollars, as life gets more complicated in your 30s, saving will only get harder.
Start an emergency fund. Ideally, you should save a minimum of three months’ worth of take home pay in case you lose your job or face some kind of injury.
Start saving for retirement. This is easily done here in Australia with compulsory super contributions now at 9.5 percent. Invest in high growth funds, predominantly made up of shares. They are risky in the short term, but in the long term they will provide the best returns. The Australian Government offers co-contributions to super for low income earners which means If you earn less than $50,454 per year, the government can contribute up to $500 annually to your super account.
Money saved for retirement while you’re in your 20s has the huge advantage of compound interest – earning interest on interest – which only grows with time.
Time to solidify your foundation
Home buying and children come onto the scene here. If you want to own a home, you’ll need to save for a house deposit. If you have young children, or are planning a family, this will be a huge financial cost.
Continue to build your emergency savings. You may now have a family that depends on you financially, so you’ll need more money to keep you all afloat if you run into trouble.
Salary sacrifice into your superannuation account. At this stage of life, you need to contribute more to your super than the compulsory contributions in order to live comfortably in old age.
Consider putting a will together. This is essential to ensure your family is financially secure in the case of something bad or unexpected happening.
Time to think about others
Prepare for your children’s futures. Start a savings account when they are young to help them out should they wish to go to university. Compound interest will ensure that even small regular amounts saved now will blossom into a substantial lump sum 18 years down the track.
Start thinking about your parent’s futures. They’ll likely be retired and may need support as well as care as they get older.
Time to supercharge your superannuation
Now is the time to maximise your retirement contributions. Put as much into your superannuation as possible, bearing in mind that the Australian Government has capped the amount you can salary sacrifice before tax at $25,000 per year if you’re over 50 (prior to 50 the amount is $30,000). You’ll also need to rebalance the way your superannuation is invested, go for more stable options with minimal risk – start moving out of the share market. The last thing you need in your later years is a share market crash debilitating your retirement funds.
If you have a mortgage, pay it off. By doing this in your 50s you won’t have to delay your retirement due to worries about affording mortgage payments.
Time to enjoy it
Revise your will to ensure it is up to date and in line with your current financial and personal situation.
Create a retirement budget to determine exactly when you can retire and how much you’ll have to live on. Once you’ve done that, you’re free to enjoy what you’ve spent a lifetime working towards. Travel, drink wine in the afternoon, play with your grandchildren – then happily return them after a few hours.