Your financial responsibilities increase as you age. If you’re in your 40s, then you’ve just got to concentrate on these six vital things and you’re sorted.
In your 40s? How good are you financially?
Can’t seem to find a worthy answer to that question? Chill! If it makes you feel any good, let us tell you that most people, even those in their 50s, can’t seem to find an answer to that question. A recent HSBC report revealed that more than half of the working-age population are living paycheck to paycheck. The study was conducted across 16 countries, including India, and the sample size was 16,000 working-age adults. (Info courtesy: Economic Times)
So, let us tell you that if you’ve actually invested in a few Mutual Fund schemes, got adequate Life Insurance and Health Insurance cover, and saved up a decent sum in your Emergency Fund, you’re actually doing pretty well. However, now that you’re stepping into your 40s, you’ll need to focus on specific financial goals and habits to set the stage for your future years. You get the drift here, right?
Additional Reading: Why Build An Emergency Fund?
Here are six vital money-related moves that you’ve got to focus on in your 40s:
Your Retirement Corpus
According to the HSBC report, only 33% working Indians actually save for their retirement on a daily basis. Now that’s a pretty sad number, isn’t it?
If you aren’t one among the 33% and you’re hitting your 40s soon, then you’ve just got to prioritise retirement planning, dearie. Of course, we get it – this is the time you want to completely focus on your kids. And that’s good, but, at the same time, remember that one day they’ll go their way and you’ll have fend for yourself. No kidding! So, building your retirement corpus should be your top priority today. Yes, even above catering to your kids’ present and future needs (Hey, it’s perfectly normal to be a little selfish at times).
Make a detailed plan for your retirement. Do the math – how much money will you need then in order to lead the life that you’re leading today. Once you’re done with the math, you’ll know exactly how much you’ll need to put aside every month. Next, you got to decide where to put this money.
Additional Reading: 5 Ways To Make The Most Of Your Retirement Corpus
Ideally, the 40s aren’t when you would want to take much financial risks. So, we’d suggest that you put 50% in equities and 50% in debt funds. However, if you don’t mind taking a little risk, you could start with a 70 – 30 asset allocation, with 70% in equities and 30% in debts. But, as you grow older, remember to reduce your risk exposure by allocating more money into debt funds.
Yes, it’s time to get rid of them completely. Or if that’s too much to ask, then at least chart out a plan to clear all your dues within the next five years at the most.
A rather common financial blunder that most people have fessed up about is paying the minimum due on their Credit Cards, despite having sufficient income to pay their dues in full. Gosh, really? We get it that when you were in your late 20s, or mid 30s even, probably your monthly take-home wasn’t enough to cater to all your expenses. And you had to find a middle ground. But what’s your excuse now? Break that committed relationship you’ve been secretly having with debts, man!
Review Your Insurance Policies
We hope you already have a decent Term Insurance and Health Insurance cover in place. If you don’t, well it isn’t too late, you may want to explore your options. For those of you who’ve already got these, it’s time for you to check if you’re adequately insured or not.
Your Term Insurance cover should ideally be at least 10 to 15 times your current annual income. You may have taken your Term Insurance cover when your annual income was lower than what it is now. In such a case, you must increase your cover to match your current income.
As far as Health Insurance is concerned, you shouldn’t be dependent only on your employer’s health plan. Instead opt for a family floater plan. Or, if you’ve already taken a Health Insurance cover, then you can go for a top up or invest in riders such as the accidental disability/death rider or critical illness rider, etc.
Take Advantage Of Your Assets
We are talking about all the physical assets that you may possess but hardly use. For instance, your first car or a flat that is just collecting dust. Cars are depreciating assets. So, it is best that you sell it off at whatever decent price it can fetch today. If you have a flat or house that you don’t use/will ever use, you can either rent it out or probably sell it.
You can then invest the money you get in equities or direct it towards one of your ongoing financial goals such as your kids’ higher education or wedding, or your retirement fund.
Additional Reading: In Your 20s, 30s or 40s? Here’s A List Of Financial Goals For You
The Joneses Don’t Matter Anymore
We get it – it always used to be about being better than your friends, colleagues and neighbours. You are in your 40s and comparisons do NOT matter anymore. It’s time to focus solely on your future and your family’s future. Else you’re going to be the one who’ll end up with way too little wealth and peace of mind.
Involve Your Family
Have money talks with your spouse and kids. Involve them in all your financial decisions. Talk to your parents about their financial needs so you can be prepared to provide assistance if and when necessary.
Additional Reading: 5 Money Conversations You Need To Have With Your Spouse
Last but not the least, do live a little, pretty please! Travel, explore new cultures and cuisines, or spend time with your folks in your hometown. In short, spend a little from your savings to savour life’s little joys. Don’t worry, if you need financial assistance anytime, we’ve got your back.