Nearing your 40s? Here is a checklist for you
It is never too late to inculcate new financial habits that amplify your savings and ensure that you retire rich.Updated: Nov 28, 2017 17:39 IST
Entering into the fourth decade of your life can be overwhelming and exhilarating at the same time. The age of 40 has traditionally been considered a significant milestone in an individual’s life. The young at heart consider 40 to be their official stepping stone into the middle age. But for some, this is a period marked by several achievements. For instance, you will be in a wealthier position than where you stood 10 years back, you would have progressed ahead in your career, and a big chunk of your family commitments would have been fulfilled.
But, what if you realise that the savings you have accumulated by the age of 40 are not going to suffice for a comfortable retired life? You may have reached this position through several means: procrastinating about creating the ideal financial strategy, paying for the education of several kids, spending big, or experiencing a lot of setbacks in life. Whatever your reason may be, now that you find yourself in the backseat as far as your retirement savings are concerned, you should think of ways in which you can make amends.
The late starter’s guide to saving big
You should be aware of the fact that it is never too late to start saving. However, for late starters, the path taken to accumulate a retirement security may be more challenging. But rest assured that it is not impossible as long as you employ some of the tactics mentioned below:
● Create a sound investment strategy - If you have been consistent in making investments, you would have a fair idea of the volatility of some investment options. You would have also learnt a lot from experience. In case you haven’t been all that disciplined in making investments, you should get in touch with a financial advisor and chalk out a plan. Individuals who do not have the financial acumen to make judicious investments in the market can also consider taking a life insurance policy that offers dual benefits of protection and savings.
● Clear off your debts - A common issue faced by people who live from paycheck to paycheck is high-cost debts. Be it in the form of credit card dues, car loan, educational loan, or personal loan, having a high-value debt can drain your monthly salary like no other. Vow to tackle the debt monster and throw away excessive cards. At this point of time, you should also refrain from taking too many personal loans.
● Plan for the long term - Retirement planning is something that every employed individual considers at around the age of 30 years. The first thing you should do here is to understand how much money you would require to live a comfortable life after retirement. This estimate will be the baseline for all your future financial planning. You can consider investing in life insurance plans with retirement benefits if you think that will be a hassle-free option to feather your nest egg.
● Control your expenses - This is one finance mantra that appears on the checklist of individuals in all age groups. With increase in disposable income, people often end up spending beyond their means. This could be attributed to the inherent desire in humans to flash their success in front of peers, resulting in lifestyle changes. Remember, the thumb rule is that you should look to save at least half of your income each month. If you are unable to do so, and you still wish to maintain your current lifestyle, it is time to think about supplementing your income through alternative employment options.
It is also seen that the expenses of a person increase after he/she gets a bonus/income rise. But keep in mind that smart savers actually control spending by moving the extra funds into the savings kitty. After all, what you never had will not be missed.
● Get your family involved - The 40s is a time when you should sit down with your aging parents, spouse, and children and discuss your long-term goals. Involving children in such discussions will help in inculcating good money management skills.
● Don’t mull over past errors - If you have made financial mistakes in the past, stop brooding and channelise your energy on making good decisions now. If you have a financed property that is not giving you any returns but still looms over your head as a debt, you should look to sell it off. Similarly, if there is an extra cover under your car insurance plan that is not all that necessary, you can opt out of it. Also, remember to review your insurance needs over a period of 5 years and take the necessary steps to amend your policies. This can help you save a considerable amount in the long run.
Although some of the strategies mentioned above may seem too small to improve your current financial condition, it is important to remember that small savings add up over time. Meanwhile, it is never too late to inculcate new financial habits that amplify your savings and ensure that you can retire rich.
First Published: Nov 28, 2017 17:37 IST