Financial Planning for People Reaching their 40s - Time for Action

Financial Planning for People Reaching their 40s – Time for Action

Roboadviso     Financial Planning     Posted On, Mon 20th November, 2017     No comments

As one approaches 40 years of age, it is vital to check your finances. You will get all sorts of advice such as begin investing sensibly, move away from senseless competition, correct mistakes of the past, and get a hold of your debt and spending habits.

There is indeed something unique about turning forty. It can be compared to a mid-point of life, wherein there are sufficient habit patterns that can be acknowledged and accepted along with adequate space for improvement and new beginnings.

Presented below is a personal financial guide for those people who are going to turn 40.

  • Outgrow and move on from the need to compete with others. This is the first and most important aspect of life. Constant competition may eventually result in too little happiness and wealth. Competition begins during adolescence when comparisons with peers carry grave importance. It later passes onto early adulthood via comparisons of jobs, homes, cars, and vacations. The best time to knock off such unnecessary competition is the 40s.


  • Stop the obsession with timing the stock markets and gaining mastery over its unpredictability. If the skills of investing in equity has not been learnt by the time you hit the 40s, then it is best to give your money to the investment professionals. The wisest decision is to invest your money in mutual funds and index funds as well as use the services of professionals to make sure that you get all the chances to gain the earnings offered by the equity market. If the games of trading in stock, which you engaged in during graduate school and continued into adult life, did not help you create significant wealth by the forties, then it would be best for you to accept the fact that you do not have the skills or the time to make your money work wonders in the equity market. Also, those who have tethered on the verge of investing in equity but have refrained from doing so till you gain all the knowledge of investment, need to realize that time will not be on their side once they hit their 40s.


  • Ensure that you follow the right philosophy of investment. Purchase of insurance, IPOs, funds, and tax saving schemes at random will not help your money grow significantly. It is important for you to understand the why, where, how, and much of investment! If you do not have a specific investment philosophy and strategy by the time you hit 40, then you will continue to make low-returns earning ad-hoc financial choices with less discipline in investing and saving. Financing a strategy takes about 20 years and it will be just fine if you begin it in the 40s.


  • Do not keep brooding over errors and mistakes of the past. Turn your focus towards correcting them. If you are finding it difficult to pay the EMIs for the 2nd or 3rd piece of property that you purchased in the suburbs, then sell it off. If an insurance policy is offering no yields then close it. If at 40 years of age, you are still wondering about the reasons for not being able to consistently save, or are worrying about not knowing where all the money from income disappears to, then you should wake up to the fact that you may be living in poverty at old age. If 30 to 40 percent of your income is not already getting saved or invested, then you are either spending excessively or are making very less income. It is important to fix this before there is no way to fix it!


  • Get some kind of control over the expenses. The forties is the period when incomes shoot up as you attain your potential and become increasingly confident about being a success in the chosen career. The 40s however also carry the risk of lifestyle creep. It becomes much easier to splurge or spend money with an increase in income. If such expenditures on lifestyle products are equal to or more than the income, then it will eventually lead to financial disaster. It is important to save at least 50 percent of any increase in salary and then maybe spend the rest on lifestyle items.


  • Eliminate all debt by paying them off. You need to realize that you have to grow up if at 40 years of age you are still paying the minimum dues as payment for your credit card. It is hard to match the income with the expenditures during the initial years of earning. It is also easier to feel a sense of entitlement about spending more money than one has on hand. But as you grow older and move across the years of earning, one tends to realize that living within the means and making income-compatible choices are correct and sensible. Debt which is high-cost will not just drain the income but also steal the chance to achieve more and create additional assets. The big unexpected bonus should be a source of joy; it should not be a cause of relief that you will now be able to pay off another large debt. Do not take any personal loans and cut up the cards that you do not need.


  • Become serious about long-term life goals. In case you are yet to start saving for retirement, then begin now before it gets too late. A good option would be to create a detailed plan about your finances, make specific targets for savings, and the amount you will invest, etc., and then adhere to the plan every following year. As your income grows, your capacity to invest and save will become big enough for you to overcome the bad financial habits of the past 20 years of your life.


  • Make sure that you talk to your family about your finances and money. Forty is just about the right age for you to begin talking to your aged parents about their requirements. Know and understand their expectations and discuss how much can be done by you towards meeting those expectations. Also share all the details about your savings, income, and wealth with your spouse. It is vital for partners to make long-term joint goals and work together on achieving them. You may even ask your children to join the discussion of money management so as to inculcate a strong sense of money values in them.

A lot of us celebrate reaching the age of 50 years as a landmark feat. It may however be noted that the 40s is a much better benchmark when it comes to personal finance, as the forties allow a person the power to keep making decisions for a better future. 40s is the time when the outlook towards life and career is still brimming with optimistic possibilities. Ensure that you do not lose out on this opportunity!


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