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Financial Planning in your 30s, 40s and 50s

Gresham Wealth

Milestone birthdays are usually a time for a big celebration – looking back over the years gone by with friends and family and sharing in the excitement of what the future holds. With celebrations currently needing to be more subdued due to the Covid-19 pandemic, and many parties being put ‘on hold’ until a time when it is safe to get together in large groups again, big birthdays may allow more time for reflection.

2020 coincidentally saw three members of the Gresham team reach milestone birthdays. Lauren in our admin team turned 30 in January, Samantha was 40 in September and Morven reached the grand old age of 50 in December!

With these milestone birthdays in mind, we have put together some key financial planning tips for each decade.

Financial Planning in your 30s

Whilst in your 20s, you may have considered yourself to be young and carefree. However, turning 30 often brings the realisation that now is the time to take things a bit more seriously!

The average age of a first-time buyer in England is now 33, reaching 37 for those buying in London.  So the main goal for financial planning in your early 30s may be to accumulate a deposit for a house and secure your footing on the housing ladder. To get to this point, you may take advantage of the tax benefits of a Help to Buy ISA or other ISA accounts to help you build up enough of a deposit.

Depending on whether or not you are married or in a long-term relationship, having children may also be a significant event in your 30’s. The most recent statistics for England and Wales show that the average age of all fathers of babies born in 2017 was 33.4 years, with the average age of mothers being 30.5 years.

With both of these factors in mind, along with the possibility of still paying down student debt, the ability to set aside a significant amount towards long-term savings may be reduced compared to other periods in your life. That said, those that are employed should, wherever possible, opt in to their workplace pension scheme to benefit from employer pension contributions.

Careful budgeting and making some sacrifices may mean you are still able to set aside regular or lump sum amounts into an ISA or pension.

Financial Planning in your 40s

Having made your way through the often financially stretched 30s, you may be in a slightly more settled position come turning 40.

The financial choices you’ve made in your twenties and thirties will hopefully have paid dividends in the shape of home ownership, and you may have started to build up a pension pot or ISA savings.

40 is the point at which you may start to think about making longer-term plans; such as where you want to be living for the next 10 or 20 years, which may trigger the desire to move to a bigger home or a home in another, potentially more expensive, area.

If you have children, you may be paying for private school fees, or you may need to start planning the funding University tuition fees and the associated costs of higher education.

Despite these potentially increased costs, your 40s is often considered to be the time when you reach your peak earning potential. With careful planning and budgeting, it’s possible to be able to remain financially on track whilst still thinking about the future.

Investing appropriately is one way of helping to achieve this. Utilising stocks and shares ISAs can deliver better investment returns in the long run than leaving money in cash savings. So if a financial plan isn’t something you have explored to date, it is the time to consider how best your savings are being directed.

The forties can, unfortunately, also be a decade for the unexpected. Protecting yourself in the form of having a good emergency fund in place provides comfort should the worst happen.

Critical illness and life insurance that allows for the responsibilities you have, both as a parent or a child with elderly relatives, along with financial liabilities, could ensure financial stability in the event of anything unexpected happening.

Financial Planning in your 50s

Although 50 is the new 40, with many 50 year olds still being in great health and shape, the advent of the big 5-0 does signal somewhat of a shift in thinking about later life and retirement. With only 15 years until the traditional ‘retirement age’ of 65; an age that although no longer legally recognised, is still one many of us hope to have retired by; it really is the time to get serious about retirement planning.

If you’ve been prudent in your pension and ISA savings to date, it may just be a case of looking at whether current contributions are suitable, or whether you may have room to increase these with the aim of retiring sooner.

If retirement saving has so far fallen to the bottom of your agenda, you will need to put a plan in place. This begins by looking at what you’ve got, and importantly, where you hope to get to. The retirement dream of being mortgage-free and taking several holidays may not be within your achievable limits. Working out what is, and setting that goal, is the first step to getting there. Thereafter, you can work out what you need to be setting aside on a regular basis.

It is worth bearing in mind that life expectancy has been steadily increasing and we’re generally living longer and healthier lives. What may have been a suitable amount as a pension pot in years gone by may no longer be adequate. Deciding that you need or want to work for longer maintains a level of guaranteed income to allow you to continue saving into your pension fund.

As the above demonstrates, there are many factors to consider at each stage of life, meaning that making a financial plan can quickly become complicated. Seeking the advice of a financial adviser can help to put things into context, also informing you of the options you have available and helping you to put the best plan for your circumstances in place.

Our team of Chartered Financial advisers can help those with investable assets of £250 K and above to put a robust and diversified plan in place for any age or stage in life. Please get in touch with us to discuss how we can help.

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