How to manage money in your 50s? We’ve already talked about managing money in your 20s, managing money in your 30s and managing money in your 40s. But being in your 50s still requires careful financial planning and paying attention to your budget. We have useful suggestions to help people in their 50s manage their income and plan ahead for retirement – whether single, in a couple or with family to care for. A future of financial independence is looming with significant debt paid off and receiving income from a variety of different sources.
Your 50s can be a period of significant life changes. Your children may be leaving home, you may pay off the mortgage freeing up cash flow, you may find yourself suddenly flying solo if you divorce or suffer the death of a partner. Your 50s is certainly a time to ensure you are financially resilient – that your income supports any debt commitments and increasing retirement savings, that you are looking ahead to secure other forms of future income such as rental property income, or interest and dividend payments from investments.
Some people in their 50s expect to reduce their financial burden as their children leave home, but today’s high cost of living can see adult children living at home for longer, and elderly parents needing to move in with their children for care or financial relief. You may also need to reduce your working hours or change the type of work you do due to health issues. How will you budget or plan for these unexpected events?
In your 50s, you’ll have a firm understanding of the type of saver and spender that you are. If you’re unsure, Sorted has a useful tool to understand your money personality and how you might approach your financial goals more effectively. It’s great to have this self-awareness as you enter a period of potentially earning more than ever before, and likely starting to think about when you’d like to retire.
How to Spend Less
Retirement is looming. In your 50s, your retirement goal could be less than 10 years away. If you’re counting down the years till you stop working, you should also have firm financial goals in place to ensure you have the income to support you in retirement. If you have paid your mortgage or will do shortly, how will you make use of those extra funds? Holiday or investment? New car or Kiwisaver top up?
Your 50s can be the perfect decade to dial back your day to day expenses – a smaller household or downsizing to a smaller house can mean grocery bills and utilities can be at similar budget levels to your 20s!
Having firm rules around expenditure control can ensure that any savings you make this decade can be used to improve your retirement income. Rather than frivolous spending, consider top up payments to investment funds, share portfolios or Kiwisaver funds. You can still budget for holidays and enjoy your ‘empty nest’ lifestyle, but not at the expense of your future retirement dreams.
How to Save More
Your need for savings can increase as you get older. If you lose your job, it could take you longer to find another one. If you’re ill or injured, your recovery time could be slower. Being realistic about your budget for healthcare can be useful to ensure you’re keeping on top of minor health concerns and investing in your health and wellness (a gym membership or personal training programme can be a great investment to maintain health and fitness). If you develop health conditions, your savings should cater for any long term care you may need in the future, or equipment that can make living with your condition easier.
If your current job involves lots of standing or physical fitness, you may need to save now in order to retrain or move into a less physically demanding job in the future.
Channelling money from debts you’ve now repaid or expenses you no longer have now the kids have left home, should be largely reallocated to your savings or investments. It’s also important to agree with your adult children on how you will and won’t support them. Cash handouts, or support with university fees or rent are fine if you can afford it, but you don’t want to risk your own retirement for the sake of children who can live independently.
A recent Financial Services Council Report stated that 28% of 40-59 year olds have savings of less than a month to cover their expenses, if they were to lose their job. 36% of 40-59 year olds have 1-6 months worth of savings.
Ways to increase your investing
If you’ve paid off your debts, have your budget under control and are slowly increasing your savings, you might want to boost your investments too. Diversification is key to a strong investment strategy. Ideally, you’ll want a mix of short term, accessible investments, such as a savings account, medium term investments such as term deposits, and longer term investments such as a freehold rental property, managed funds or a share portfolio.
If you’re pleased with your Kiwisaver fund, and would rather invest additional funds to that, do check the type of investment fund you have. As you get closer to wanting to withdraw funds, you’ll want to move away from Growth Fund products, and secure your investment with a Conservative Fund product. Your Kiwisaver provider can help you with this.
How do singles in their 50s manage their money?
If you’ve never sought professional financial advice this could be the decade to do just that. Give yourself peace of mind that your financial goals are on track and that you make the most of your remaining working years. You’ve got plenty of time to achieve your retirement dream, but you may need some guidance to get there – perhaps even sooner!
If you’re single now, you should plan on remaining single and leading a financially independent life. You need to know that you won’t need to rely on someone else for financial support. Focus on reducing or eliminating your debt, have tight budget control and slowly increase your savings in case of health needs or other unexpected situations. A range of investments will be helpful moving into retirement.
How do couples in their 50s manage their money?
It can be easy if you have two incomes coming in, to get a little lazy on budgeting and setting firm financial goals that you monitor regularly. The “she’ll be right” attitude is a good one to turn around in your 50s. Make sure you and your partner talk regularly about your short, medium and long term goals. When do you both want to retire? What investments do you need to start or grow between now and then? Is there any debt you need to repay and when do you want to repay that by? How much financial support do you want to give your adult children? Have a plan for long term health care too – will you support each other or would you prefer to have funds for at home care?
Unsure of how to manage your money? You can access free personal finance services or pay for professional personal finance advice.
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