People in their 20s can afford to be carefree, live life to its fullest, and make their own fair share of life’s inevitable mistakes and follies. In your 30s, you’ll most likely tone down your exuberance and focus more on your career or family. However, as you enter your 40s, the prospects of retirements start to become real and you’ll start to think about the possibilities that life holds for your in your senior years.
You can’t really afford to make financial mistakes as you grow older because the stakes are higher and the odds of a timely correction are lower. This piece provides insight into 5 important financial actions you must take before you clock the big 4 and 0.
- Pay off high interest consumer debt
Debt is a massive stumbling block on the way to financial independence—let’s not even get started on its ability to rob you of your mental and emotional peace. Your 40s are a great time (probably the last chance) to get rid of high-interest debt and release yourself from the vicious cycle of debts and living paycheck to paycheck. High-interest such as credit card debts and personal loans have the capacity to keep you perpetually in debt because you’ll spend a great deal of money on interest payments while your balance remains practically unchanged.
- Put a decisive end to lifestyle inflation
Lifestyle inflation is an unwitting increase in your expenses in response to an increase in your income; hence, you are not able to speed up your ability to create wealth even though you are earning more money. In your 40s, you’ll begin to inch closer to the peak of your career as promotions and higher pay come your way. However, you need to be disciplined enough to ensure that you don’t increase your expenses just so you can match up with your new status. The simplest way to become rich is to ensure that your expenses are lower than your income. If you get a raise and you don’t increase your expenses with lifestyle inflation, you’ll find yourself on a faster path to financial freedom.
- Review your retirement plan and make necessary adjustments
Ideally, you should have been contributing at least 10% of your income into a retirement account over the course of the last decade. You should also calculate how much money you need to have stashed away to have the type of retirement you desire. Now, calculate how much money you currently have in your retirement account to know how close (or far away) you are from reaching your get-out-of-the-rat race goal. Very few things could be more disheartening than seeing a senior struggling to go to work every day simply because they can’t afford to retire,
- Invest in something other than your retirement savings
Apart from your retirement savings, you should also strive to put your money to work in other assets. The portfolio managers handling your retirement funds have strict fiduciary orders not to lose your money; hence, they only make safe investment decisions. You can up the ante by learning how to trade stocks, ETFs, options, and other securities on Wall Street. Miguel Nichols, a trader on Wilkins Finance “market information, education, and knowledge is now readily available to any potential trader willing take bull by the horns.. all I know about trading, I learnt from free resources online.”
- Decide if you want to buy a house or continue renting
There’s always an ongoing argument on whether it makes more sense to buy a house or continue renting a house. There’s no right or wrong answer because both renting and buying have their advantages and disadvantages in different circumstances. Nonetheless, you’ll need to take the time to ponder on the renting VS buying debate so that you can decide on your housing goals in good time. If you plan to own your home, you may want to start saving up money for a down payment and move into the property as soon as you can so that you don’t have a massive mortgage when you head into retirement. If you plan to continue renting, you need to be sure that you’ll still be able to afford rent from your retirement checks or returns on your other investments.