10 Things to accomplish with money before you turn 40
Money matters a lot in our life. Arguably money is the biggest facilitator in this world for a comfortable life.
When we touch the magical number of 40 years in our life, we can safely consider ourselves as quite mature. Mature in handling personal life, professional commitments and to a certain extent our finances.
Here is the list of 10 milestones or financial accomplishments we should aim to achieve by the time we touch 40. These milestones are also important as 40s are considered as peak performing years in one’s professional life.
- You should have a dedicated folio for your retirement savings with at least 10%-15% of your monthly net income going into it. If you are looking at 60 years as your retirement age then by the time you cross 40, you must have 10%-15% of net monthly income going into retirement corpus and that too with a raise in amount every year.
This ensures that you are not stressed with your finances once you approach retirement age.
6 Sins people commit when planning retirement
- Your investment folio should not have retirement as the only goal. By the time you cross 40, you should have identified financial goals in life and should have started goal based investing.
A goal could be kids higher education, kids wedding, buying a vehicle 10 years down the line, upgrading your house from 2 bedroom to a 3 bedroom etc. A proper planning makes the execution easy.
- Try and finish paying up your home loan / mortgage by the time you hit 40. At 40, you would already have completed a professional stint of about 15 years. 15 years are good enough to pay off the home loan and free up the property.
If your home loan is still around, take immediate steps to pay it off ASAP as by doing this you can free up a lot of investable income which can be safely redirected to your retirement corpus.
- Clearly establish money and life goals for your later life. Plan your finances around your goals and make them happen. Life goals could be – at what age you wish to retire? Where would you like to settle? How do you look at post retirement life? How to tackle day to day finances when you are at the fag end of your life?
It’s better to roughly identify such goals and start working on them. This will give you enough time to plan financially for these goals.
- Cover yourself adequately with life as well as health insurance.
Note that more you delay, more premium you have to shell out. Do I need to say that the healthcare costs are skyrocketing. By the time you reach 40, you and your dependents must be adequately insured to tackle any emergency situation.
Why you need insurance ?
- You must try and have a side hustle by the time you touch 40. It can simply be a freelance consulting in the field of your expertise or it can be your hobby which you can monetize. The idea is to have some alternate source of income. This extra income can do wonders to your investment portfolio.
- By the time you hit 40, you should have the list of all investments made, all financial details of bank accounts, insurance, nominee details etc handy with you and with your spouse. You should also have regular discussions on investment and money matters with your spouse. This will keep both the spouse on the same page with respect to money.
- By the time you hit 40, make it a habit to revisit your investments periodically. Not only revisit, but do readjust the investment from asset allocation perspective keeping in mind your life and financial goals. Also you may require to tweak your investments from the perspective of external factors like sudden change in government policies, global cues. Note that these external factors can quickly eat up your gains in your investments so make sure that you periodically revisit your investments.
In addition to external factors, as you age, you have to tweak asset allocation too in order to align your folio with your life goals.
Delaying investments can cost you dearly
- By the time you hit 40, you must learn the art of staying fit and follow a fitness regime. When you are young, you play a lot, you move a lot. Some of the young lads work out a lot. Once you cross 30, due to professional and personal commitments in life, the exposure to physical activity gets curtailed.
Ensure that you create a fitness regime and follow it religiously before you hit 40. Now how does fitness is related to finances? It’s an old saying – HEALTH is WEALTH. More fit you are, longer you can enjoy healthy life.
Stay fit and be WEALTHY
- Last but not the least – Make a will and have a proper inheritance plan before you touch 40. Life is quite unpredictable. We don’t know the future and can not even predict what will happen tomorrow. However with a will and an inheritance plan of our financial assets we can streamline the things a lot for our dependents. By 40 you must finish this task so that you can be assured of a smooth transition of your financial assets in case of any eventuality.
Bottomline is that if you plan things well in advance, you won’t get surprises on the course. This is specially true with the financial planning. Since 40s are considered as peak performance years in your professional life, it is advisable to set few things right before you reach 40.
Happy Investing !!!