Each new generation of life gives us the opportunity to reflect on where we’ve come from, what we have accomplished, and what new goals we would like to set for ourselves in the future. 40 is one such significant age you can set as a life goal for making certain financial success.
Of course, everyone is on their own journey and their own schedule. So, you should not feel pressured to participate at a certain age or be labeled a “failure” if you miss a deadline. You can only do what you can do with what you have.
If it’s 40 years until your party, five, 10, or 20, here are some goals by the age of 40 you would do well to reach. We’ll also explore options for joining forces when your objectives are not met.
9 Financial goals by 40 to set for yourself
You may have already completed some of these tasks, so congratulations on your progress. The more you can accomplish in the coming years, the more confident you will feel about your financial future.
1. Free yourself from consumer debt
Forty is an excellent goal age to close the book on any previous debts you may owe. This can include credit cards and auto loans, so be sure to include student loans as well. Mortgages are an exception here, although you could certainly make it a personal goal to pay off your mortgage early.
These expenses do not drag down your finances or decrease your savings. By spending less on all these expenses, you can increase your progress on your other financial goals by 40 percent.
2. Have a well-stocked emergency fund
Endeavoring to stay prepared for any emergency puts a lot of stress on the body and mind. A good target for an emergency fund is to maintain six months’ worth of expenses and liquid funds in a savings account. In this way, you can distribute your remaining capital between different investments, while still having enough to hold up in an emergency situation.
The primary purpose of an emergency fund is to enable you to pay your bills each month if you lose your job or are unable to work for a period of time. Six months give you enough time to make a new financial plan without having to sell investments or take out loans. Funds from December’s 56th issue of *Unlisted are now available for emergency car repairs, medical bills, and other purposes.
3. Ramp up your retirement savings
If you’re in your 20s and want to retire in your 60s, your mid-40s are the ideal halfway point to prepare for your future needs.
Experts recommend that you save at least three times your yearly income in retirement accounts by middle age. If you earn $50,000 a year, you should have $150,000 set aside in tax-advantaged retirement accounts like a 401(k) and IRA.
That sounds intimidating, but if you start early, even a small amount can grow substantially. For example, if you put in just over $10 per day starting at age 22, you would have over $150,000 by age 40 if the stock market returned an average of 8% per year. That could merely be the distinction between dining in and making lunch at home.
Even if you waited until you were older to start saving money, you can still catch up. The payoff will be only $10 per day! Use this investment calculator to estimate how much you would need to save to reach your target number. These 14 tips for retirement planning can help you retire comfortably.
4. Build a great credit score
Your credit score can open doors for you, providing great interest rates on mortgages, business loans, and so on. Depending on your score, you could set increasing your score as one of your financial objectives for the coming year. Try to move up from “poor” or “fair” to “good” or “excellent.” A good credit score is usually over 720.
Credit scores describe how credit works and some strategies for improving your score. The most important tip is to pay your debts on time (such as credit card charges and automobile loans). It’s also a good idea to regularly check your older accounts to keep your credit rating low and your accounts active.
For example, if you maintain a credit card with a limit of $5,000, do not spend more than $500 on your credit card each month to keep your account at 10% utilization.
5. Re-evaluate your personal goals
Because we’re all one of a kind, our financial goals by 40 may be distinct from anyone else’s. It’s about exploring what is important to you and setting goals to achieve those goals.
Do you want to buy a house (or renovate, or upgrade to a better one)? Retire early? Take a sabbatical to travel the world? Stock a solid college fund for your kids?
Whatever your goals are, this is a great example of what sinking funds are good at. Sinking funds enable you to mentally distinguish your spending by allocating it to a certain purpose.
You can save money in a savings account or an investment account depending on what you plan to use it for. Of course, if you plan to retire at an early age, you’ll put more into your regular retirement accounts than into a separately operated savings account. And if it is a children’s college fund, investigate custodial accounts and 529 plans.
6. Write a will
40 is still too young to expect many happy decades ahead, but no one can predict the future with certainty. Having a mindset that allows you to trust for the well-being of your loved ones and the protection of your wealth will grant you the confidence to know that your money will be well spent if something happens.
Learn how to start estate planning in your 30s and then use this checklist to build your will.
7. Consider insurance coverage
In addition, as you approach your 40th birthday, it’s an excellent time to enroll in some new kinds of insurance coverage (in addition to the usual health, automotive, and homeownerâ€™s insurance).
Here are some of the types of insurance coverage to look at:
If you have dependents or others who depend on your salary, this can help them while you’re gone. You may also obtain a policy if you don’t currently have dependents but anticipate to do so later. Life insurance is vital to your family’s finances if something were to happen to you. Compare Term and Whole Life insurance to figure out what is your best option.
If you become disabled and you lose the ability to work, disability insurance will help cover your living expenses. Long-term disability insurance can provide you with coverage for years after becoming disabled, unlike short-term disability insurance that only covers you for a short period of time. Thus, it is certainly something worth checking on.
We hope for a long life, but many people need help in old age. This insurance provides the types of assistance and care that regular health insurance typically doesn’t.
For example, it will provide you with service at home, a school, or a community facility.
8. Invest in your health
Invest in yourself and improve your health by 40! This is kind of a blend of a personal and financial goal! Health is one of your most important resources, and can affect your finances for better or worse. It’s worth spending more money now to ensure it will be saved for later.
Your wellbeing can save you money on health insurance costs in the future, as well as extend your life and the quality of your life as you age.
You don’t have to spend hundreds of dollars on organic golden apples pollinated with nectar from Mount Olympus or Instagrammable athleisure. Here are some tips for living healthy on a budget.
If you have a high-deductible health plan, you may be able to save tax-sheltered money in an HSA account for future medical expenses.
9. Understand personal finance & investing
Sometimes, it’s tempting to let just another person handle our finances instead of ourselves. And it’s perfectly fine to delegate the task to someone else and receive the help and guidance we need. You should understand these things for yourself, so you don’t wind up in a hazardous situation in the future.
Maybe your financial advisor is charging unfair fees or underperforming the market—how would you know if you aren’t keeping an eye on it? Widowing and divorce are two other situations that can suddenly disrupt a woman’s life and make things very confusing if you’re trying to sort out finances for the first time while dealing with other logistics and grief.
“Hope for the best, prepare for the worst” is a useful saying. Since you’re here reading this, it’s a good sign you’re already motivated and taking action.
How to catch up if you’re not on track for your financial goals by 40
If you’re not quite where you want to be by 40, don’t worry! Many people haven’t gotten as early of a head start as they would have liked, or have encountered setbacks along the way, but are still successful.
When you boil it down, there are two main ways to reach your financial goals.
Strategy 1: Boosting your income
Sometimes, there’s not enough money to cover all of the expenses and savings after the bills are paid. That’s why we increase our income as much as possible.
You’re well into your professional life at 40 years old. You’ve been paid unfairly for some time now and need to change that! Here are some tips on how to ask for a pay raise in a compelling way.
Your application may be denied if your previous position was rejected. New data show that job-changers make more cash than long-term workers awaiting raises. Nonetheless, this will depend on your location and current job market. Either way, it can’t hurt to keep abreast of the listings in your field.
This will allow you to max out your IRA for the year, pay down debts, stack your reserve fund, and more!
Strategy 2: Turbo-charging your savings
Increasing your income is half of the equation. The other half is taking advantage of your earnings! The plan is to budget your money so you know what you are spending right now and where you might make cuts. It might mean tightening the belt a little, but there are lots of great ways to save money that can help your budget.
For example, meal-prepping at home rather than buying lunch and dinner can save $10-20 or more per day. This can add up to thousands of dollars per year. Drink only water instead of soda or juice, buy used items rather than new, sell things you do not need anymore, and so on. Small changes make a big difference, and you may discover that you appreciate the frugal lifestyle as well.
Strategy 3: Create a debt reduction strategy
One way to go fast is to make a big wining debt reduction plan! By directing more resources toward building wealth, you can aim for longer-term objectives such as installing larger solar power farms.
With the avalanche method you pay down the highest-interest debt first, with the snowball method you pay off the least amount first and continue to pay off your debts until you pay off your entire debt. This will let you pay off your debts more quickly and work toward financial independence.
What Are Your Financial Goals by 40?
The suggestions listed above are not the only ones you should aim to reach. You can also set yearly goals that aren’t financial in nature. Some examples could include these example yearlong ideas.