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Personal Finance Goals for Your 40’s


Your 40’s are the most important decade of your life as you close in on retirement. Now more than ever, your focus should be on securing your future and your family’s wellbeing.

You need to ensure that you and your family will be able to pay for all the things you need, and live the life you want. So it’s time to get your finances in order.

This is the third part in a series of personal finance goals you should strive to achieve in each decade of your life. Here are the 10 financial goals for your 40’s.

1. Save and enjoy your money at the same time

You should have at least a year’s worth of expenses in savings just in case something unexpected happens; you get sick, lose your job or need to replace an appliance.

You can save money by making your own meals for work, eating out less, switching to a cheaper utilities provider, using discounts, cancelling unnecessary subscriptions, and so on. You can also consider doing things for free like borrowing books from the library, or going to the local park or a museum.

Don’t forget to set aside some money every month or so to spend on the things you want, whether it’s a book, new clothes, or even a short vacation. You deserve to enjoy your money too!

2. Finish paying off your debt

If you still have credit card debt, medical bills, student loan debt, a mortgage or other loans, you should continue paying them off on a regular basis to save on interest payments and to increase your future cash flow.

When it comes to your credit card debt, pay off the cards with high interest rates first. As for your medical bills, loans and mortgage, you can pay them off faster by setting up automatic payments and increasing the amount you pay each month.

If you’re debt-free by the time you retire, you’ll significantly reduce your cost of living in retirement. And without debt, you’ll be able to focus on and achieve your other financial goals.

3. Take out insurance or review and renew them

If you haven’t already taken out insurance, do so now. This includes health insurance, life insurance, long-term care insurance, income protection insurance, disability insurance, home and contents insurance, and car insurance.

Taking out these insurance policies will ensure that you don’t touch your retirement savings or emergency fund to pay off your expenses. Make sure to research different insurance providers, including their terms and conditions as well as fees, and then choose the insurance that best meets your needs.

If you already have these insurance policies, then consider reviewing and/or renewing them to ensure that the level of coverage is appropriate for your current situation and that you don’t pay more than you need to.

4. Get a side job or study again

Want to earn extra money and save more for retirement? You could consider getting a second job,
whether it’s running errands, doing mystery shopping, renting out your home or starting a business.

You can also take a short course and learn a new skill or two. Not only will this increase your earning power, it’ll also increase your marketability.

5. Consider different investment options and review your asset allocation

Having a diverse portfolio can protect your wealth from ups and downs in the market. The different investment options available to you are cash (high-interest savings account), fixed interest (term deposit and bonds), shares and property. Consider the benefits and risks of each option before choosing them.

Aside from investing in your super fund, you can also invest in an individual (tax-deferred) retirement account or in a taxable account (e.g. high-interest savings account) so you can still access your money.

Also review your asset allocation. When you’re in your 40’s, you can’t benefit from compound interest as much as when you were in your 20’s.

To ensure that your investments give you the long-term results you need to achieve your financial goals, your asset allocation mustn’t be too conservative or too risky. There should be a balance between low-risk and high-risk assets.

6. Take care of your house and your things

Make sure your house is in good condition by keeping up with maintenance and repairs. You don’t want to find yourself spending thousands of dollars more fixing the place many years later. So if you need to replace your roof, do it now.

Likewise, take care of your belongings and the other things in your home. When you take care of appliances, furniture, clothes, etc. properly, they’ll last longer and save you from having to replace them countless times.

7. Pay for your kids’ education

If you’ve got young kids, you can help pay for them to attend college or university by putting money in a savings account set up specifically for this purpose. If your income goes up, you can increase the amount you save.

If your children are near college/uni age and you can’t afford to pay for all the tuition fees or your retirement savings will be reduced because of this, then consider asking your own parents if they’d like to help pay for your children’s tertiary education.

8. Create a will and estate plan or review and update them

You should already have a will and estate plan by the time you’re 40, but if not then it’s time to start writing them up. Also think about who you’ll appoint as your power of attorney and health care proxy.

With a will and estate plan, you can guarantee that your kids will be taken care of by the people you designate in case you pass away, that your assets including your money and estate are given to the right people, and so on.

If you already have a will and estate plan, review and update them. Make sure the contents reflect your current wishes. Also review and update your beneficiaries, especially if you have more children now or you got a divorce or remarried.

9. Add to your super or individual retirement account

By the time you reach your 40’s, you should be able to contribute more money to your super fund or individual retirement account.

If your income has gone up, add the extra money to your super. Save as much in your super as your employer matches. Your money will increase twice as much because of the employer match. On the other hand, you could make the maximum allowable contributions to your individual retirement account.

If you plan to retire at 65 and want to live on $40,000 a year, you’ll need $1.4 million in retirement savings.

10. Plan your retirement

Whatever it is you want to do when you retire, make sure to plan and prepare for it now.

You might want to move to a smaller home and reduce the stuff you have. Or maybe you want to expand/renovate your home to include a swimming pool that your grandchildren can play in.

If you want to travel the world or pursue a new hobby, then you’ll need to save up money to make this possible.

Need financial help?

If you need help with managing your debt so you can increase your retirement savings and achieve your other financial goals,contact us today. The team at Credit Counsellors Australia can help you improve your financial situation and ensure a sound future for you and your family.

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