5 financial mistakes to avoid in your 40s

By Jack Derwin

January 30 2017
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More often than not, it’s only when you enter your forties that retirement planning becomes a priority. How can you use these years to grow your nest egg?

To ensure you don’t spend your final working years desperately trying to catch up, here are five common mistakes to avoid in your forties.

1. Wasting money post-mortgage

Finally paying off the mortgage and owning your home outright is a huge achievement, but it is important not to get carried away.

“In your forties, the biggest mistake people make is paying off their mortgage and then blowing the excess,” Firefly Wealth managing director Adele Martin told nestegg.com.au.

“It’s all about a balance between fun and saving. Once you’ve paid off the mortgage, spending years wasting that extra money is a huge mistake.”

2. Forgetting the future

As you begin to move into the second part of your working life, it’s vital to remember that any financial commitments you make may postpone your retirement.

“I’ve seen so many people not understand that the decisions they make today impact them later,” Ms Martin said.

“If you decide to do something like upgrade or renovate the house, it could very well mean you need to work until your late sixties to sustain it.”

3. Not inspecting your insurance

While it’s tempting to ’set and forget’ an insurance policy, it’s essential you review your policy and cover at every life stage to ensure you’re not paying for something you don’t need.

“If you have just repaid or reduced your mortgage, you may need less insurance for example. There’s a mountain of savings to be made simply by checking your policy,” Ms Martin said.

4. Splitting your savings

“I say this tongue in cheek but getting divorced can be one of the most costly things you can do. Divorce can halve your assets and income while leaving your level of expenses very much whole,” Ms Martin said.

“When you get divorced, your electricity bill doesn’t halve. Making time for each other or investing in marriage counselling could save you many, many thousands.”

5. Shelving super contributions

Despite last year’s changes to the superannuation system, it remains a retirement savings tool you shouldn’t ignore.

“With the reduction in the concessional contribution cap from 1 July 2017 to the lowest amount ever, you can no longer wait until you are a few years out from retirement and then pour money into super,” Ms Martin said.

“The new rules mean you need to plan earlier.”

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Retirement