This post is a kind contribution from Alex Coverdale
Ideally, at forty years old, you’ve pretty much got your finances in order. After much trial and error in your younger years, you’ve figured out how the dollar actually works, and which things are worth spending money on and which aren’t. If you’re approaching forty years old and still not sure where you should be financially, here are six money milestones to hit before age forty.
1. A Solidified Career
By forty, hopefully, you’re embedded in a career you not only enjoy but that you make a decent amount of money at. One of the biggest mistakes people make in their early years is settling for a job they hate. When you’re in your 20s, you have much more freedom to move around between jobs until you find something you like. Imagine trying to change careers at forty because you’re unhappy!
Work is going to fill up a large part of your life, and it should therefore be at least more than tolerable. You don’t want to wake up every day in a depressive mood because you have to go somewhere you despise.
The second part of your work fulfillment will be your salary. Do you feel you’re making enough at forty? How long have you been at your job? Your career should be able to pay your bills and then some. After all, if you’re only barely making ends meet, it becomes much more difficult to save for things like retirement or an emergency fund.
Finding a good balance between salary and happiness is the best approach. While you may have to compromise on one or both for the perfect job, small compromises work best. Don’t sacrifice all of your happiness for better pay and vice versa.
2. Begun Saving for Retirement
Whether you plan on retiring to San Francisco for some fun in the sun, or off the beaten path for some seclusion, by age forty, you’re pretty much hitting the halfway-ish mark to retirement. The average retirement age is somewhere between 59 and 65, meaning you’ve only got about twenty years left to save, give or take. While twenty years might seem like a long time, it’ll go by quick; and when you’re investing money, the more time you have, the better.
It’s suggested that you have somewhere around $100,000 saved up for retirement by the time you reach forty. Obviously, the more you have saved up by this time, the better off you’ll be later on. Your money grows each year, so the earlier you start saving, the more you can put away; and the more that amount will grow over time.
Start saving for retirement as early as possible, preferably when you’re in your 20s. This will give you about forty years to save up, and in that amount of time, you should be able to save up quite a bit. As long as you’re putting money into your retirement fund each year, you’re taking steps towards comfort and security in your Golden Years.
If you’re struggling to make the right plan for your retirement, you may want to seek out help in the form of an advisor. A qualified financial advisor will help you decide how to best invest your money for retirement, and act as your point-of-contact for all financial inquiries. You can compare financial advisors on Carefulcents.com.
3. Good Credit Score
By the time you hit forty, you should know how your credit score works and what you should and shouldn’t be doing. Missing payments, late payments, maximizing credit limits; these are all things for beginners. Those that are new to lines of credit don’t know any better, but after years of trial and error, your credit score should be pretty decent.
If you haven’t fixed your credit score yet, it’s high time you address it. You wouldn’t want to go into retirement with a bad credit score or mountains of debt.
4. Low Debt/No Debt
Speaking of debt, how much do you have at this current moment? A few hundred dollars’ worth? A few thousand? Tens of thousands? By age forty, most of your bad debt should be reduced or completely gone. It’s understandable to have a mortgage or student loans, but this is considered good debt.
Bad debt is things like high-interest credit cards or personal loans. By age forty, you should at least have a working plan in place and be actively reducing your overall debt each year. While a mortgage is considered good debt, it’s debt nonetheless; and the sooner you pay off your home, the less you’ll have to worry about during retirement.
5. Emergency Fund in Place
Financial experts agree that having an emergency fund of 3-6 months’ worth of living expenses is a smart move; and one that everyone should make long before they turn forty. You never know when you could be laid off, in an accident, or have unexpected expenses occur. You’ll want to protect your financial security by having an emergency fund handy to address these issues as they arise.
Put your savings into a high-yield savings account and do not touch it for any reason other than its intended purpose. Resist the temptation to dip into your emergency fund for personal spending. It’s there for a very specific reason, and you’ll regret spending it once you truly need it.
Conclusion
By age forty, you’re pretty much halfway to retirement. This means you should have a solid grip on your finances, a retirement plan in place, and be actively reducing and eliminating your debts. The less debt you have going into retirement, the better off you’ll be!
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