10 Financial goals you need to achieve before 40 : The monetary targets which an individual strives to achieve with his/her hard-earned money are known as financial goals. Each stage of life brings different challenges and financial goals with it. For instance- Retirement Planning might not be a top priority in your 20s but holds value as soon as you cross 40.
The 40s is a phase in one’s life by which people-
- Are nearing the peak of their careers
- Have a family to support
- Need to fund their children’s education
- Need to clear off their home loan (if they have taken it), and
- Are closer to their retirement
Therefore, the 40s isn’t an age where you should take your finances as casually as you might have taken them in your 20s and 30s.
Advice- Work on your finances in your 30s to pass your 40s comfortably as responsibilities are large in this period.
Below are the top 10 financial goals that you must accomplish before you turn 40.
1. Plan for your Children Education
It would help if you were prepared to fund your children’s long-term needs as higher education doesn’t come cheap. As you will approach the mark of 40s, most probably, your children will be starting college, and you will be getting closer to retirement by then.
Thus, it would help if you balanced these complex goals and the loans/borrowings you will need to accomplish them. You can invest in theeducation of your children by-
- Either by investing in appreciating assets like land, or
- Investing through mutual funds SIP
2. Retirement Planning
People don’t usually think of retirement until their 40s. But one must understand that time is the essence of a long-term investment. Thus, the more one delays a long-term investment, the harder it becomes to accomplish the target.
Therefore, you should give yourself a strong start in your 30s to avoid financial anxiety in your 40s or 50s. You must ensure that by your 30s, you should have money locked in several long-term investments such as-
- Equity Mutual Funds
These will continue to grow quickly and provide you financial relief in your golden years.
Tip- Do talk to an investment advisor if you haven’t started investing yet as you have very little time to lose.
3. Get Yourself Health and Life Insurance
Financial and familial duties multiply manifold in your 40s. You might strive hard to give yourself a comfortable life and fortify your family members against diseases and death. Thus, you need to pay attention to insurance needs.
- Life and Health Insurance Policies provide you and your family with financial protection in an emergency or much-needed situation.
- A term insurance plan will keep your family going if you were to meet an unfortunate and untimely end.
- Health insurance is to get out of steep medical inflations that treat dangerous diseases and hospitalizations challenging.
Also, you can get these insurance covers at a comparatively lower cost before 40.
Tip- Get your insurance premium when the going is good and linked to your health and age.
4. Build an Emergency Fund
One might feel the need to have an emergency fund at every stage of life. Keep in mind that your emergency fund should be three to five times your current monthly salary/ income.
An emergency fund helps you tackle unexpected events like urgent travel, health emergency, job loss, etc. Therefore, start with a recurring deposit and add to it every month.
Target- To get your current take-home pay thrice. Once you have achieved it, keep contributing to the fund until you reach 6x.
Note- You might struggle to accomplish this goal in your 20s, but remember that you have little time to lose in your 30s.
5. Securing a home for yourself
Owning a home is an Indian’s top aspiration. Home ownership is the biggest life goal for Indian people as per the 2019 Aspiration Index Study as a home provides an appreciating asset.
Buying a house using a loan before the age of 40 provides you a longer timeframe to pay off your dues before your retirement period. Therefore, if you are already in your 30s, now is a good time to consider buying a home.
6. Keep up with your Credit Score
The higher score you have, the better are your chances of getting a loan with a favorable rate of interest.
Do you know?
The average credit score of an individual who is in his/her 40s is 685.
Tip- Be sure to check your credit score-matched and checked with a reliable and genuine credit scorecard. You can check your score in a few seconds for free from some services without even being their customer.
7. Pay off all of Your Debt
You might have heard the famous saying that debt is the enemy to wealth. Therefore, if you have debt, it’s best to knock it out as soon as possible. After that, you can continue with the business of creating financial freedom and increasing your net worth. Therefore, find your ways to keep getting out of the debt and make it a top priority.
The only debt that you should carry on your shoulders in your 40s is the home loan. Make sure that you clear up all the other loans, including-
- Vehicle loans
- Consumer durable loans
- Credit card dues
- Personal loans
before you enter your 40s as unsecured loans cost much more as compared to the secured home loans.
8. Automate your Savings
This is a fun financial goal to accomplish before you turn 40. You can set your savings on Autopilot and see your account grow healthily month after month.
Tip- Many online banks have amazing autopilot savings options. So, do compare each banking option before choosing the correct one.
This goal will help you relieve a lot of stress about managing your finances as people don’t have time to move money around in their busier lives.
9. Read multiple books on Finances.
Do this: Pick a subject like global markets, savings, or stocks- the subjects you want to learn about and start reading about it.
There are hundreds and thousands of books available on each topic to boost your financial IQ and to provide you the push needed to take control of your money.
You can be on the right way with the correct book as having financial gain is one thing and coming up with a proper planned plan to reach them is another.
10. Earn Extra Income
No matter how much you earn, there’s always room for some extra income.
Another meaning of financial goals is to look for supplement methods to increase your income by earning income through multiple sources.
Having multiple income sources reduces the window of facing unfortunate, unforeseen, and untimely events such as a job loss.
Tip- You can look for extra income through a side business sort of thing.
Turning 40 is a mature stage in one’s financial life, and there is the very little score for making errors as these mistakes can have major effects once you turn 60.
Takeaway Tip- Consult an investment advisor to help you figure out the perfect money management plan to ensure you achieve financial security.