Life is filled with milestones, though achieving them can hinge on having the necessary financial resources. The good news is that it’s never too early, or too late, to use smart money management to improve your fiscal wellbeing. Whether you’re in your 20s, 30s, 40s, 50s or 60s, here are some smart money moves to help you make the most of your finances.
Your fabulous 20s
Our 20s can bring freedom, independence – and if you play it right, a financial head start for life.
1. Get in the groove of good money habits
Chances are you’re pretty footloose in your 20s. No mortgage, no children, and lots of money to spend on you. That’s exactly why our 20s are a time to lay strong financial foundations. It can be a lot easier to save now, rather than later on.
Get started by drawing up a budget, and aim to stick to it. Put your savings on autopilot by setting up a direct debit that automatically transfers 10% (maybe more) of each pay into a savings account. If possible, save each pay rise.
Importantly, steer clear of easy spending options, such as credit cards or buy now pay later (BNPL) products, which can derail healthy money habits and drain your finances.
2. Set financial goals
Have a plan to work towards by setting goals – make them clear, and develop an action plan to make them happen. For instance, open a dedicated account to save a first home deposit. Plenty of online calculators are available that can show how much you need to save each payday to reach your target deposit.
3. Invest little, invest often
In our 20s, we have time on our side to make the most of compounding returns. Consider investing in shares or exchange traded funds (ETFs), then make a habit of investing a little more on a regular basis, maybe $500 each quarter. Aim to hold onto your investments for the long term – about five to 10 years.
Part of investing involves selecting the KiwiSaver fund that’s right for you.
→ Related: A Guide To Investing When Young
The thoughtful 30s
Our 30s is the stage when life really starts to take shape, and good money management can make a great decade even better.
1. Step onto the property ladder
Buying a home is expensive, and if you can’t afford to buy where you want to live, becoming a rentvestor can be the next best option. As a rentvestor you keep renting in the area you want to live in and buy an investment property in a more affordable location. It will broaden the suburbs you can afford to buy in, and you’ll be getting a leg-up onto the property ladder, rather than risk being priced out by continually rising values.
2. Prepare for the cost of children
If kids are a part of your life plan, now’s the time to plan ahead. Small babies can generate surprisingly big bills, so aim to tuck away savings to manage the cost of raising a family.
Decide which schooling option you want for your children – public or private – and kickstart an investment plan to save for education expenses. The key is to start early. That way, investment returns will do more of the heavy lifting.
3. Show your KiwiSaver some love
As a 30-something, you and your KiwiSaver are likely to be long term acquaintances. Now’s the time to show your KiwiSaver some love by making small additional contributions of your own. Adding just a few extra dollars each week can make a valuable difference to the value of your final nest egg.
→ Related article: Keeping Track of Your KiwiSaver Balance & Contributions
Our flat-out 40s
Your 40s are likely to be among the busiest years of your life, but taking time to nail money matters can deliver worthwhile rewards.
1. Pay off the mortgage
Chances are you have a growing brood, a home of your own, and you’re juggling work with family needs. It’s a hectic life stage. This is also a time when extra home loan repayments – no matter how small – can pack a real punch, helping you become mortgage-free sooner, and potentially cutting tens of thousands of dollars off the long term interest cost.
→ Read more: How To Save on Home Loan Interest
Make a habit of reviewing your home loan at least annually, to be sure you continually have the best deal. Don’t be afraid to ask your current lender for a better rate, or consider refinancing if it helps you save. Just make sure to factor in any costs involved.
2. Ramp up your wealth
At this stage you may have a decent chunk of home equity to your name. It’s a powerful financial resource that can be put to work accelerating your wealth. Use home equity as a low-cost source of funds to renovate your home (improving its value and your lifestyle) or buy an investment property.
3. Protect yourself against curveballs
In our 40s, we begin to reap the benefits of hard work and careful planning – a comfy home, a decent lifestyle and healthy career prospects. All this is worth protecting.
If you don’t have life insurance or income protection insurance, it’s worthwhile considering if they are affordable options. While you’re looking at insurance, don’t forget to maintain an up-to-date will. This can further protect your family if the unexpected happens.
The fantastic 50s
You’ve come a long way, but it’s important to continue planning ahead.
1. Review your investment mix
At this stage, you’ve hopefully built up a reasonable portfolio of investments – a handy blend of shares, ETFs, maybe an investment property, and your KiwiSaver. The key is knowing whether that mix reflects how you feel about risk as you move through your 50s.
When we’re younger, we can afford to take on more risk. As we age, we tend to be more conservative. Remember though, you could live another 30-plus years, so it may still make sense for your portfolio to have exposure to growth assets such as shares, ETFs or property.
Set a date to review your portfolio annually to be sure it continues to be diversified across different asset classes. This can potentially protect you against the full brunt of falls in any one investment market.
2. Find your KiwiSaver sweet spot
In our 50s, many of us become empty-nesters, and major expenses, such as home loans and education costs, should be behind us. That means more spare cash to boost your KiwiSaver ahead of retirement.
Typically, if you are employed and enrolled in KiwiSaver, you have to contribute a minimum of 3% of your salary. However, you can choose to contribute more (either 4%, 6%, 8%, or 10%).
Adding to your KiwiSaver is especially important if you’ve been running your own business, as you could retire with a lot less than somebody enjoying employer-paid contributions.
→ Read more: How to Make Voluntary Contributions to KiwiSaver
3. Wind down debt
No matter whether you plan to retire at 60, 70 or later, winding down personal debt is a smart money move for your 50s. Entering retirement debt-free means more to spend on your lifestyle, without the cash drain of interest paid to lenders.
The challenge to winding down debt is that many parents are increasingly giving their grown-up children a financial helping hand. This cash splurge can make it difficult to pay off debt and, as a result, many older working Kiwis may retire with debt. Try not to let giving your kids a head start compromise your own financial wellbeing.
The super 60s
Our 60s look very different today than they did for past generations – 60 really is the new 50, and life is yours to enjoy.
1. Embrace your KiwiSaver
After growing your KiwiSaver throughout your working life, it can call for a complete change of mindset to start dipping into your nest egg at retirement. Coupled with this, retirees are often fearful about outliving their KiwiSaver. This can result in people ending up richer in death than in retirement.
Rather than cut your lifestyle short, consider tapping into professional financial advice. It can help you decide the best way to use your KiwiSaver, how to maximise retirement income – including accessing NZ Super – and let you minimise risks around exhausting your KiwiSaver at an early stage. Most KiwiSaver funds offer advice to help you make the right choices.
2. Consider downsizing
As a 60-something, it’s a fair bet you’ve owned the same home for some time. The trouble is, the features that were once must-haves may now be lifestyle millstones. Think: a pool that hardly ever gets used, several empty bedrooms, and a lawn that demands regular mowing.
The idea of downsizing can be an emotional wrench. But it can also offer plenty of pluses, including lower-maintenance living, reduced upkeep costs, and an opportunity to boost your savings.
It’s worth stressing that downsizing isn’t the beginning of the end. Look at it as right-sizing – an opportunity to embrace a new chapter that can resemble your 20s, where you’re free to focus on you.
3. Plan for your aged care
As we move through our 60s, aged care is something to plan for. Here, too, time may be on your side. The average age for people to move into aged residential care is around 84. This gives you time to discuss your care preferences with family members. That matters because it’s much easier to make good decisions when there’s no pressure to make on-the-spot choices.
Aged care is an area where you could benefit from professional advice. The system is complex, and you may need to make decisions around whether to sell your home or rent it out to cover the cost of care.
None of us can stop the clock at a particular life stage. That’s not a bad thing as each decade brings new and rewarding experiences. By managing your money wisely, you can make the most of every age. Start your plans today, no matter where you are in life, to chart a new course for your financial wellbeing.
Ultimately, the more informed you are as a KiwiSaver investor, the better the decisions you’ll be able to make, which should help you build more funds towards retirement. And this is where Canstar can help. Our KiwiSaver dynamic comparison tables put all the information you need at your fingertips, from average five-year returns to fees.
So if you want to discover if you’re getting true value from your KiwiSaver, start comparing providers today by hitting on the button below.