Financial Choices and Questions in Your 50s - Pt. 2

Well, after running up the word count on the first section of this post, here’re another seven financial choices and questions you’re probably going to come up against in your 50s.

7.       Is Your Budget Still Accurate?

You have a budget, right?

I’m kidding – very few people have a formal budget! Most live within something near their net income and allocate funds as needed.

But now, as the kids are growing up and possibly even earning their own money, it can be a good chance to sit down and revisit the household budget.

Perhaps you can trim back on the groceries when one of them moves out (although grocery inflation makes this less and less likely).

Or maybe you can move them off the family phone plan and have them start paying for their own phone bills.

For older kids, maybe you don’t need to keep paying for the rego on their car.

It’s unlikely to lead to drastic changes, but this discipline of revisiting your budget regularly is good practice for people with busy lives that tend to consume their days, weeks, months and years.

8.       How To Teach Your Kids About Money?

And this discipline – plus all the other lessons you’ve learnt over the years – can be a wonderful thing to pass on to your kids now.

You can use this time – where they’re old enough to understand what you’re saying, but young enough to learn from little mistakes - to impart valuable financial lessons to your teenagers. Involving them in budget discussions and teaching them about money management as they prepare for their independence will help them avoid the big money mistakes and traps we’ve all seen.

Oh, and you can teach them how to cook – that’s the greatest money management tip I ever learnt from my parents!

9.       Should I Keep Building that Emergency Fund?

Yep, you should.

I like to see people with six months of their expenses put aside in a high-interest savings account. (While you have a mortgage, an offset account can be an even better alternative).

So if your household budget is $100,000, I’d love to see $50,000 put aside for emergencies.

But now that your net income is higher – because you don’t have those mortgage repayments hanging around necessarily – it can be a good chance to build that up to twelve months of expenses.

Some people argue that’s excessive and your money’s just sitting there not growing or contributing to your future. Which I can understand at an arithmetic level - $100,000 earning 2% a year is, at a mathematical level, pointless (especially after you pay tax on it).

But it’s also impossible to value just how good it feels knowing that, when the brown stuff hits the fan, you have an incredible safety buffer behind you.

10.   What Can I Do About My Tax Bill?

Your income has likely grown over your career – via promotions, annual increases or changing jobs.

So you’re likely paying a fair chunk of tax.

Don’t obsess over this, but make sure that your financial and investment decisions account for this.

What’s the best name to use for the investments, for instance. Are you maximising the tax benefits of superannuation? Can you package any of your salary?

Find yourself an excellent accountant and ask them – is there anything I could be doing to reduce my tax (without compromising my future)?

That last part is important, because I’ve seen people spend $20,000 a year to save $8,000 in tax – which just doesn’t make any sense to me.

(Yes, I know that you’re ‘probably’ going to make it back in capital growth – but at what cost?).   

11.   Should I Keep This Insurance?

Now, this series of posts is built on the idea that you’ve paid down most, or all, of your mortgage.

In that case, you should definitely review your life insurance arrangements.

Often a key component of an insurance portfolio is receiving ‘enough to clear my debts’. Therefore, as your debts fall over time, so should this component.

Another aspect can be how long you have left to retirement – particularly when it comes to disability insurance. As that period reduces, you could look to reduce your overall benefit as well.

The main reason you’d do this is to reduce how much your insurance is costing you each year.

Remember that the premium increases every year, so actively managing how much you’re covered for can help these costs under control.

12.   Travel and Enjoyment.

As I mentioned in the first point on this list – spending part of your newly-freed up cashflow should be a part of your plan.

Especially with your children growing up, this could be the perfect time to prioritize travel and personal enjoyment – with, and without, them!

Budget for memorable experiences together as a family, and also away with your spouse.

I’ve always found the count of ‘how many summers we have with the kids’ a wonderful, though bittersweet, reminder of the importance of these experiences.

They don’t need to be extravagant, in my opinion, because it’s the time together that matters more than the venue.

But they’re a worthy investment for (part of) your newly positive cashflow.

13.   How Much Attention Should I Pay to This Financial Stuff?

One not-quite-dilemma you’ve probably faced is how much interest to invest in your finances.

By which I mean – how much should you focus on reading, learning and keeping up to date with movements and news in the financial world?

It’s a fine balance, to tell the truth.

On the one hand, stuff happens that can really impact your financial situation – interest rates go up and down, investment markets gyrate, inflation erodes.

But we also rely on a news industry that relies on bad news to sell their product.

And, ultimately, the day-to-day movements of the various markets shouldn’t make any difference to your long-term planning, objectives and financial disciplines.

So, as a whole, I encourage people to spend time learning about financial fundamentals and their own capacity and propensities when it comes to money.

But try to ignore the news cycle and focus on what you can control.

Your 50s are an exciting time to fine-tune your financial plans, solidify your retirement strategy, and enjoy the fruits of your hard work.

Set your financial goals and keep them in sight, remain adaptable to life's changes, and continue seeking professional advice when needed.

This decade is a bridge to retirement, and with prudent financial management, you can feel in control of the life you’re leading today – while preparing for the one coming tomorrow.

This advice is general and does not take into account your objectives, financial situation or needs. You should consider whether the advice is suitable for you and your personal circumstances. Before you make any decision about whether to acquire a certain product, you should obtain and read the relevant product disclosure statement.