How do you set the stage for a more secure financial future? Here are eight smart money moves everyone should focus on before they turn 40.
Have a Clear Budget
This should arguably be something you do way before you’re 40. But if you’re approaching the big four-oh and still don’t have a budget, stop reading this and go make one. It’s virtually impossible to save for goals or live within your means without one. It doesn’t have to be anything fancy: even a spreadsheet will do just fine. But it does have to exist.
Have an Emergency Fund
Emergency funds are one of the most valuable things you can have. Yet so many Americans don’t have a dedicated emergency savings account for when things go awry. Make more informed, mature choices with your money — aim to set aside one to three month’s worth of living expenses in this account to help protect you against unexpected financial setbacks.
Invest in Retirement Accounts
Retirement might seem like a lifetime away, yet many would argue you’ll blink and be there, wondering why you didn’t set yourself up sooner. Take advantage of employer-sponsored retirement plans, like a 401(k), and consider opening an IRA to maximize your savings and benefit from compound interest.
Pay Off High-Interest Debts
There are many ways you can approach your debt, but one of the best is to pay off high-interest debt first. Focus your attention toward credit card debt and high-interest loans to free up your cash for more important things. This will also improve your credit score — something highly valuable as you start to make more financial moves, like buying a home.
Diversify Your Investments
Don’t put all your eggs in one basket: explore different investment vehicles, such as stocks, bonds, and real estate. This helps to spread risk and increase potential returns. It also gives you more flexibility to invest in growing industries while solidifying the majority of your portfolio in guaranteed returns.
Spend Time Learning About Personal Finance
Money isn’t the only thing you should use to invest. Don’t forget how valuable time and knowledge are; we highly recommend taking time out of your day to focus on financial education. It’s even better if you get more specific about where you are in life, honing in on things like investment strategies and market trends to set yourself up for a comfortable retirement.
Re-Evaluate Your Insurance Coverage
Double-check your rates for health and life insurance. Take a moment to consider costs and compare packages. You want the right amount of coverage to protect yourself and your loved ones in unforeseen circumstances, so this is an invaluable step as you move into the next chapters of your life.
Set (New) Financial Goals
Maybe you’ve already completed everything on this list. If so, congratulations — now what? Now it’s time to make a new plan for the future. Maybe you want to start a business or save for travel; whatever it is, start the planning process now so you can make it happen.
