Ah, the wonderful 40s – the years when you begin to experience the personal drama of dealing with teenage children, greying hair, weight gain and just about every symptom of “midlife crisis” known to science.
Yeah, there will be plenty of personal and professional distractions to deal with. But this isn’t the time to let your financial “guard” down so you could start cruising through life.
If you’re able to eliminate your credit card debt (or keep it to a very manageable level), build up a comfortable emergency fund (at least three, but preferably six months’ or more worth of your monthly salary) and pay great attention to the performance of your investment portfolio – you’re on the right track towards making the financial objectives in your 40s more achievable.
Here are the 3 biggest financial objectives you should aim for in your glorious 40s:
#1 Prioritising Your Nest Egg
Your 40s will be the “prime” period in your professional life. It’s the decade when you’re advancing to higher positions in your career, which equates to more income. In fact, your 40s will be the time when your (hopefully) increasing income will play a large role in accumulating wealth for the future.
I can’t stress this enough – this decade is extremely important when it comes to your career AND retirement future. If you’re stuck in a dead-end job or you’re not receiving the annual pay raise you deserve, it’s in your best interest to go to a company that will.
Remember – from this point on you only have a limited amount of working years left.
Seriously, your career (and growing income) is important because it will fuel your effort to put more cash into your retirement savings – and that should be your first financial priority!
If you have that squared away, you should then focus on freeing up as much cash as possible to put into savings.
So pay down any credit card/unsecured debts to free up more cash, build up additional revenue streams (ex. Freelance), downgrade certain aspects of your lifestyle and if you have the capacity – set aside some money for your kids’ future education expenses with an education savings account if you haven’t already.
#2 Ensuring Your Investment Portfolio Performs Well
If you jumped into the investment game during your 20s and took a more “hands off” approach to portfolio management in your 30s – you’ll definitely want to change that in your 40s! Well… unless you hire a highly competent fund manager with reasonable fees who can monitor, advise and adjust your portfolio for maximum returns.
If you haven’t been didn’t monitor your portfolio too closely during your 30s, it’s probably because it was performing reasonably well and there was no need to make any major adjustments (otherwise, you would have made them right?).
You’ll want to be more hands on with your investing during your 40s because these are your “high-income” years – that means you’ll have more money on the line as you pump more cash into growing your nest egg.
That also means you’ll need to re-evaluate your investment goals and appetite for risk.
For example, if your goal for retirement savings goal you set in your late 20s is less than half of the value of your portfolio in your 40s – you’re going to have to make a choice on whether you want to take more risk by having a stock-heavy portfolio that’ll hopefully generate more returns quicker.
#3 Maintaining Control Over Your Spending
Going into your 40s with fewer financial liabilities will leave you feeling like you’ve won the retirement “game” already. You might even begin to have thoughts of early retirement if you’re especially confident.
It’s great to be in a position where you have minimal or no credit card/unsecured debt to drag your finances down. However, keep in mind that celebrating “victory” too early by losing control of your spending in your 40s can really turn your retirement into a living hell.
The point is that you haven’t “won” the retirement game yet. Well… maybe if you’ve earned millions by your 40s because you invented some life changing product or got damn lucky with your investments – then you got me. But the reality for most of us is that we’ll still need to keep our ultimate retirement goal(s) in perspective.
It’s completely fine to want to take an expensive holiday in the Maldives, purchase a new car or renovate your home with a more modern look – as long as it doesn’t interfere with objectives #1 and #2 on this list.
So pamper yourself a bit. You certainly deserve it. But do it in moderation please?
Final Note: If you’re looking for a quick and simple way to “chart” the most important objectives you much achieve during the difference phases of your life, check out our infographic on the 4 Financial Life Phases.
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