There are five key times in a person’s life that are financially crucial.

Purchasing a property

For most Australians, purchasing their home is the largest financial transaction they will do in their lifetime, and careful consideration of how much debt should be taken on is needed.

It’s in the bank’s best interest to lend the borrower as much as they can possibly afford over the next 25 or 30 years. But what if you don’t want to repay a mortgage for the next 25 years? A financial adviser can help you carefully consider how much debt should be taken on against other lifestyle and investment expectations.

Issues to consider include the best way to save the deposit for a property, and how much risk you should take with your savings considering the expected timeframe to purchase.

Mortgage reduction

When the value of the mortgage is reduced to 50 percent of the home value, this is the point when funds that have previously been directed towards swift repayment of the mortgage, can now be put towards other investment options as well.

With the changes to the deductible super contributions to allow personal contributions in addition to employer contributions provided the total does not exceed $25,000, many PAYG earners should now be considering additional super contributions for the tax benefits received.

Withdrawing $10,000 from the mortgage offset account will cost 4-5 percent in interest cost but could provide a net tax benefit of 32 percent for those in the top tax bracket.

Building up investment wealth outside of superannuation is also an important consideration and could involve the purchase of shares or an additional investment property.

Five years to retirement

Ideally, to maximise superannuation savings, planning needs to start 20 years from retirement, with consideration of how much you think you would like to retire on and how you will get there. As a minimum, a five-year retirement strategy focused on building superannuation will provide a few years to maximise the concessional super contributions.

If you’re able to also take advantage of the non-concessional contributions, in particular the three-year bring forward rule, careful planning is needed around the age in which the contributions will be made, to maximise the total amount that goes into super.

Once income hits $100,000

The largest financial risk that we face is the loss of future income. We have no problem with insuring our home, car and assets at whatever cost the annual premiums are, yet we question the value of insuring our future income earning ability.

Personal insurances have an important role to play at different times in our lives, particularly when debt levels are high and dependent children are young.

Intergenerational transfer

With longer life expectancy, inheritance for many people is not occurring until well into retirement. While this may still be a very welcome boost to retirement savings, it may also be a point where parents may wish to help their children. And while receiving inheritance via a testamentary trust can provide significant asset protection and tax advantages, more people are starting to consider some type of assistance to children prior to death.

If it is a large sum of money, say $50,000 or more, careful consideration should be given as to whether it is simply a gift or whether it should take the form of a loan, with a signed loan document in place, and typically some type of repayment required. In the event of any relationship breakdown for the child, this money is then better protected than what it would have been as a gift.