At a glance …
- Budgeting, paying down debt and changing your thinking are key when it comes to strategies to get out of a pay-to-pay pattern
- Editor of Money Matters, Effie Zahos, has provided a decade-by-decade guide to suit your super at every age
By your 40s, you’ve usually built the foundations – a steady income, a mortgage, super and maybe some investments.
The challenge now is deciding what to prioritise. Should you focus on paying down your mortgage, growing your super or building wealth through investments?
The decisions aren’t always straightforward, and putting more into one area can mean making trade-offs in another.
This is the decade where bringing everything together really starts to matter. The key is making sure your money is working in the most effective way to support your goals.
Look at the big picture
This might be as simple as listing your mortgage, any personal debts, super, savings and investments, along with repayments and regular contributions.
It gives you a clearer picture of how your money is actually working for you.
From there, it can also help to look at your net worth: Your assets (like super, savings and investments) minus your debts. This can be a useful way to get a good understanding of your overall financial position.
Once you have that view, it becomes easier to see if you need to make any tweaks to your strategy.
For example, some people focus on paying down their mortgage more aggressively before putting extra money into investments, while others prefer to build investments alongside it. There’s no single right approach – it really comes down to your goals, how comfortable you are with risk, and how you want to balance flexibility, growth and paying down debt.
Some people also start to think about whether they can use the equity in their home to invest. This can open up more opportunities, but it also adds complexity and risk, so it’s important to understand how it fits with your overall plan.
What matters is making sure your decisions are working together so you can get more out of your money overall.
Get on top of your mortgage
There’s a good chance that your mortgage will be one of the biggest financial commitments in your 40s, so it’s worth keeping a close eye on it.
It can help to know what rate you’re on and check it from time to time against what’s available elsewhere.
Lenders often offer sharper deals to new customers, so there may be opportunities to reduce your rate through refinancing.
Even if you don’t switch, it can be worth talking to your current lender if you find better offers elsewhere – they may be willing to adjust your rate.
Another option you may consider is making extra repayments, which can reduce the interest you pay over time.
If your loan has a redraw facility, you’ll usually still be able to access any extra repayments as well.
Stashing any savings in an offset account is another way you could reduce the interest charged on your loan while still keeping access to your money if you need it.
It’s a good idea to get a mortgage broker recommendation from friends or family. (Credit: (Image: Getty))
Get your super in shape
Super is one of those areas that needs your attention across every stage of life.
It’s worth taking a bit of time to review how everything is tracking. Start by checking if you have any lost super or multiple accounts. Bringing them together can make things easier to manage and may reduce fees – but make sure you won’t lose any insurance.
It can also help to check your balance, look at how your fund has performed over the long term compared with similar funds and review whether the fees you’re paying are competitive.
It’s also a good time to think about what investment option you’re in. Does it still suit your timeframe and comfort with risk?
The goal isn’t to constantly change things, but to make sure your super still reflects where you’re at now.
Add a bit extra to your super
Adding to your super in your 40s doesn’t have to be a big or permanent commitment. There are a few different ways to do it, and you can adjust your approach as your situation changes.
Salary sacrificing can be a good option from a tax perspective. Even a small amount from each pay can add up, and you can gradually increase it so you don’t feel a big hit to your take-home pay.
You can also make personal contributions when it suits you – whether that’s from spare cash flow, a work bonus or a tax refund.
If you’re part of a couple, where one partner is earning less or taking time out of the workforce, strategies like spouse contributions or contribution splitting may help keep things more balanced.
Check your cover
It’s worth taking the time to review what insurance you have in place, including life insurance, total and permanent disability (TPD) cover and income protection – both inside your super and any cover you hold outside of it – and checking whether the level of cover still fits your current situation.
You want to make sure it’s enough to support you and your family if something happens, but also that you’re not paying for cover you don’t really need.
It’s also a good idea to check who you’ve nominated to receive your super if something happens to you.
A binding nomination lets you formally direct your fund on who should receive your balance.
Without one in place, the trustee may decide how it’s paid out.
Binding nominations usually need to be renewed every few years, and you can generally only nominate certain dependants or your estate.
Consider expert advice
If you’re weighing up multiple priorities, like mortgage repayments, super contributions, investing and tax, it can be worth getting professional advice. Even a one-off conversation can give you more confidence in your next steps.
3 simple money wins:
- Map out your full financial picture (super, mortgage, savings and investments) in one place.
- Check your mortgage and see if you could save by refinancing or making extra repayments
- Review your binding nomination, so your super goes to the people you intend.
This article originally appeared in Money Matters by The Australian Women’s Weekly. Purchase here.
Information is correct at the time of writing. Any advice provided is general in nature and does not take your personal circumstances into consideration. Readers should seek their own financial advice.
