Your 40s bring in a sense of urgency to your finances, but with these smart financial goals, financial independence is on the horizon.
40 Smart Financial Goals to Achieve Before Your 40th Birthday
Why Setting Financial Goals in Your 40s Is Important
Your 40s are the home stretch as you get closer to retirement. At this point in your life, your mistakes in your decisions can have a big impact on your financial future.
Now is the time to set goals to help you achieve financial success for retirement. Here are some smart financial goals to consider as you build your financial priorities list.
1. Pay off Your Credit Cards in Full
Credit cards can be a great tool if used properly. You can use rewards points to get free travel miles or rebates.
The most vital part of using a credit card is to pay off the full amount each month. If you just pay the minimum every month, you rack up interest and risk taking a hit on your credit score.
2. Pay off All Your High-Interest Consumer Debt
What is Consumer Debt? This refers to debts a consumer owes, as opposed to debts a business or government owes. Examples include credit card debt and fixed-payment loans like car loans.
One of the top short-term financial goals you should start with is to pay off all your consumer debt. Don’t let the debts you incur now keep you from your long-term financial goals.
3. Start a Side Hustle
Having a side gig on top of your regular job helps you save more money for retirement. With a lucrative side gig, you can be financially independent even after retiring from your day job.
It’s much better to start one while still employed so you’re not scrambling to start one later on.
4. Learn Something New
Make it a point to learn a new thing or two in your 40s. Learning new skills keeps your mind sharp, which sets the tone as you age.
Keeping an updated skillset improves your marketability for employers or clients and may earn you more money.
5. Ask for a Raise
If you’re a top performer in your company, now’s the perfect time to ask for a raise. Getting one and saving up for the next decade or two can help you reach your savings goal and increase your nest egg.
Also, do your research to ensure you’re really getting what you’re worth. If this isn’t the case, don’t hesitate to ask for a raise, a promotion, or another job.
Negotiating your salary takes a lot of work, but with the right strategy, anyone can get it.
6. Evaluate Your Investments
This is also a good time to evaluate your retirement accounts. Check if the investment fits your needs, the fees are reasonable, and what kind of match you’ll get.
You can then decide if you can stick with the company plan or to move them to a retirement account you have full control of.
7. Increase Your Retirement Contributions
Chances are, the last time you increased your retirement fund contributions was during your 30s. If you’re making more money since then, you can start increasing what you put in your retirement fund.
Put some of it towards your nest egg. You can put them in your 401k or open an IRA.
8. Evaluate Your Priorities
Your 40s is a good time to think about what matters to you and what you want to accomplish. What mattered when you were younger may not be as important now.
9. Have a Clear Vision of Your Retirement
A good benchmark for your priorities is your vision of what you want your retirement to be. Whether it’s pursuing a passion or starting a part-time job, make the necessary adjustments so you’ll be ready when the time comes.
10. Don’t Forget Your Emergency Fund
Saving for retirement doesn’t mean neglecting your emergency fund. In fact, you should consider allocating a bigger share for it as you age and replenish the funds once you use them.
As a rule of thumb, your emergency fund should cover at least six months’ worth of living expenses. Put them in a savings account and don’t touch it if you don’t have to.
If you have extra money in the bank, you can even consider allocating some of it into an investment fund. Not too much though, as you will need it for real emergencies.
11. Downsize Your Lifestyle
Being in your 40s probably means you’ve established yourself in your career and making a decent living. You may even have some room for extras once your needs are accounted for.
However, you should avoid the monster called lifestyle inflation, which happens when someone increases their spending because their income also increases. When you just let your lifestyle inflate itself, you don’t gain anything.
In fact, you should even consider downsizing your lifestyle. Thinking about this in your 40s, when your kids are probably taking their first steps towards independence, makes perfect sense.
Ask yourself if you really need a big house or multiple cars. Sticking to a budget and simplifying your lifestyle makes more room for your priorities.
12. Banish Unnecessary Fees
It’s common to build up fees without you noticing it. You might be paying some extras on your phone bill or investment brokerage.
If you’re not sure, there are sites to help you figure out what you’re really paying. Take a good look at all your billing statements and try to get rid of any unnecessary fees so you can save more each month.
13. Be Careful with Cash-Out Refinancing
As you do this, you may be tempted to cash out your mortgage. Cashing out increases your debt and can mean higher costs and longer loan periods.
14. Be on Top of Home Maintenance
Make sure your home is in good shape. Do the necessary repairs while they’re small so you don’t end up with a hefty maintenance bill close to retirement.
15. Take Care of Your Other Furniture
Take care of your other furniture too. The better you care for them, the longer they last.
16. Think Carefully About Home Improvement Costs
Home improvement costs are rarely an investment. You put some money in, but you won’t get the costs back.
Think carefully and weigh the pros and cons of each improvement before deciding on your next project.
17. Choose Your Debt Carefully
To make room for hitting smart financial goals, carefully think about the things you’re willing to go in debt for. A low-interest loan for a business venture may serve you well, but consumer debt can be a disaster in the making.
Always consider how what you owe will impact you in the long term.
18. Check Your Assets
Evaluate your investments and check if they still make sense in your stage of life. Make sure you’ve diversified them properly, there’s no overlap, and they fit your risk profile.
Make the necessary adjustments if needed.
19. Don’t Use Retirement Funds for College
If you’re a parent, it’s hard to see your kids struggle in life, especially with student loans. Unless you’re 101% certain your kids will support you, don’t use your retirement fund to pay for their college education.
20. Don’t Use Retirement Funds for Kids’ Weddings
For the very same reason, don’t use retirement funds to pay for their wedding either. Wedding costs are always an expense.
21. Educate, Not Enable
On the flip side, it’s never too late to teach your kids to make good financial decisions. Encourage them to be financially independent so they can support themselves without relying on you.
22. Don’t Panic Sell
With retirement just around the corner, it’s easier to panic when the market swings from one direction to another. Now isn’t the time to panic sell your investments.
What is Panic Selling? Selling a large amount of something due to fears of a decline in demand or drop in its market value.
As long as you have a solid plan in place, there’s no need to be afraid of short-term swings. Selling now will just put you at a permanent loss.
You can remove the emotional charge that comes with investing through sites like AssetLock. Remember, selling based on the emotion of the day is an investor’s biggest downfall.
23. Get Financial Help
Chances are, you have more assets than you can handle on your own. Getting help from a financial planner is a good idea at this point as they can help you make a solid plan on how to manage your personal finances.
You don’t need someone to take over the work for you, but it’s a great help to sit down with a professional and plan out the next decade or so. They can help you form smart financial goals that are attainable and achievable at that point in your life.
24. Plan Your Will
One of the things you should plan for is your will. If you don’t have one, write one now.
If you already have one, review it again and ensure it still reflects your wishes. Make sure your assets are passed down the way you want.
A will helps the family adjust and keep your estate in order after your death. Having one means they won’t have to guess where the assets go and end up fighting over them.
25. Seek Estate Planning Help
You may also want to consider getting help from an estate planning specialist. They can help you investigate a trust or weigh the benefits of gifting the money.
A specialist can also help you work on a power of attorney and healthcare proxy in case you could no longer make decisions on your own. This can give your family members a clear direction if things happen.
26. Tax Planning Is a Smart Financial Goal
Tax planning isn’t something a lot of people think about, but it’s a goal to consider as you get older. A tax professional can help you figure out how to legally reduce your tax liabilities every year.
Fewer taxes means more money for you to keep. Now that’s a smart goal.
27. Iron out Your Insurance Coverage
Your 40s are a good time to get insurance policies on your plate. If you didn’t already get them when you were younger, now’s the best time as this is the last window before your premium payments shoot up.
Check if your car still needs the comprehensive insurance, or if your health insurance still fits your needs. Make it a point to look through all your policies and make the necessary changes when you need to.
28. Consider Getting Disability Insurance
Getting older means the chances of having health issues increases. Unlike life insurance, disability insurance gives you the money the moment you become disabled.
29. Consider Getting Long Term Care Insurance
You will likely spend some time in a care facility at some point in your life. This insurance staying in such a place more affordable.
30. Renew Your Life Insurance
If you’ve got life insurance in your younger years, chances are, it’s close to expiring. At this point, consider renewing your life insurance policy, especially if you have dependents who require extended care.
31. Review Your Beneficiary Lists
Review your insurance coverage and your beneficiary list. The beneficiary list supersedes what’s in your will so it’s best to go over it to ensure everything’s in order.
32. Take It Easy
Saving for retirement means you get to relax and take it easy for a while. You’ve spent your 20s and 30s working and living at a fast pace.
This is now the time to slow down and enjoy the fruits of your labor. A more relaxed pace is better for your health in the long run.
33. Stay Healthy
If you want to enjoy your future, take care of yourself. Eat nutritious meals and maintain your physical activity. The healthier you are, the more you can save.
34. Test-Drive with Mini-Retirements
If you have the means to do so, consider taking mini-retirements. Work on something, then take a few months off to rest and recuperate, then repeat the cycle.
This takes a bit more planning, but it’s a good way to relax after your kids move out and you’re still relatively young enough to make the most out of things.
35. Refinance Your Mortgage
Consider refinancing your home if mortgage rates have dropped since you bought it. Make sure, however, that you avoid saddling yourself with another long-term loan.
Just refinance a term that’s roughly like the one you’ve left so you can save on interest.
36. Keep an Open Mind
Being flexible by keeping an open mind is an important characteristic. Being flexible in whatever life throws at you can help improve your personal and professional life.
37. Try New Things Everyday
You can’t grow if you don’t try new things. Even seemingly small and simple steps accumulate over time, so don’t be afraid to go out of your comfort zone once in a while.
38. Stay on Top of Technology
As we live in an increasingly digital world, it’s especially important to keep up with technology. It helps your mind stays fresh and allows you to keep up with the times.
39. Stop Keeping up with the Joneses
Now’s the time to stop measuring your financial standing with others. Comparing yourself with others hinders you from enjoying your money and only breeds jealousy, which will only bring negativity into your life.
40. Enjoy the Fruits of Your Labor
Don’t forget to enjoy your money right now. You’ve worked hard to get to where you are and don’t be afraid to indulge yourself from time to time when you have the extra money to do so.
These are just some of the smart financial goals you can achieve in your 40s. Remember, even one small step can help you in achieving the long-term financial goals you’ll need to enjoy your golden years, so start incorporating these habits now.
Are you turning 40 this year? What smart financial goals do you aim to achieve by then? Let us know in the comments section below.
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