Although turning 40 might seem scary and in some cases, upsetting, for some people – it can be an amazing turning point in your life.
For many Americans, this is the peak time for your salary heights, and it’s right in the middle of your working life between the start of your career and your retirement.
At such an essential time of your career and your life, your focus needs to start to turn towards building wealth, ready for your retirement and beyond.
What you choose to do for this decade will massively impact your future and possibly your children’s future. So, with this in mind – here are some things you should consider when building wealth in your 40s.
Work Towards A Debt-Free Future
It’s entirely possible that you will have debts in your 40s and this is fine. You might have something like student loans, car loans, a mortgage, credit card debt and personal loan debt.
Sometimes, this can seem overwhelming, and it’s easy to slip into further debt, but by doing some basic things – you can chip away at your debts and work towards a debt-free retirement with no worries for you or your children.
Remember, some debts can be carried on to your next of kin. You don’t want your children to be placed into a debt that was not theirs to begin with, so taking this step is very important.
Consider doing the following:
- Pay more each month towards your debts, but do not over-stretch your finances
- Understand that it may take a few years and do not worry
- Reduce your luxuries and other spending habits. You can enjoy more of these in your retirement!
- Renegotiate credit agreements or look at balance transfers to pay less interest
- Create a debt management plan and work towards your financial future
Build Your Emergency Fund
Life often throws up some real big set-backs and sometimes this can be costly. It can include any damage to your car, serious home repairs or a health concern.
Whatever it is, if you do not have the money – you’ll need to borrow it, and this ruins your debt-free future plans.
Therefore, it’s a good idea to put a few bucks every month away into an emergency fund. Remember, don’t overspend into this fund because you’ll still need some money for yourself, but it’s a good idea to put money into a “rainy day” or emergency fund.
Not only can you avoid taking further debts out, but it’s great practice for other financial plans and keeps your mind financially focused, so you’ll know what to do with your money.
Build Your Savings Fund
Along with an emergency fund, it’s important to be putting away regular payments into a savings account.
Having savings is great for your retirement and depending on where your savings are, you might be building a steady level of interest.
Savings rates are subject to change and vary from one financial institution to the next, so be sure you’ve done your research before setting one up.
If you have children, try to keep them in mind when it comes to certain savings funds. For example, a 529 plan which can be used to save up for their college education.
Education costs are rising year-on-year, and we’re not expecting any wild changes to this any time soon – so this is a very helpful step.
Saving for your retirement is critical and will shape how well off you’ll be when the time comes for you to leave your working life.
The more you save up and the better plans you choose will be the biggest factor to this.
When you began working, you more than likely started automatically putting something away for your retirement – perhaps in a 401k or an IRA.
If you haven’t or this is not possible, it’s not too late to start doing so. Most retirement plans have plenty of tax advantages.
It’s wise to speak with your employer’s HR department about these plans and to speak with your bank or financial institution about your options with your retirement plans.
Life Insurance And Disability Insurance
Some people often overlook things like life insurance as a part of wealth building and financial planning because they do not see anything back from them personally as such – but this is far from the case.
Life insurance can mean peace of mind for both you and your family for when the time comes, and you pass away.
However, some life insurance policies also cover similar things to what a health insurance plan will, including terminal illnesses such as cancer treatment.
Some life insurance policies will give you an early payout to cover the costs for some treatments that will extend your life to stay with your family for as long as possible, but also to ensure you’re not getting yourself into debt, in order to live a little longer.
Disability insurance covers for some costs when you are unable to work due to being incapacitated or when you are dealing with long term illness.
This can be worth a lot for you because you and your family will not need to worry about falling into debts or arrears if this happens to you.
Planning For When You’re Gone
Unfortunately, we don’t live forever, and we need to seriously think and plan for the future beyond our lives. If you have children or a spouse, you should consider what they will need, if you pass away.
Drafting a will and estate plan will ensure you have these things set out clearly for when this happens, so you don’t need to worry about your family’s finances.
Remember, funerals and other costs for this sad time are very expensive.
Speak With A Financial Advisor
A financial advisor will be able to assess your earnings and outgoings and work with you to create financial plans that are tailored to your spending habits in order to receive the best financial benefits.
They may also be able to find bank accounts, schemes or even stocks worth investing in. Search online for a financial advisor near you and book in for a consultation.
The Bottom Line
Your 40s can be a time of great change and a time to plan seriously for your future. Using these steps can help you out and ensure a smooth, financially stable retirement and beyond.