The forties can be a stressful time for individuals from greater personal and financial responsibilities in addition to existing goals. You will now have to take care of aging parents and kids ready to start college.
However, despite the stress, in your 40s you will have better pay than in your 20s or 30s and more disposable income to start investing and saving wisely for your retirement years.
Ideally, at present, you will want to go debt-free, save up enough for your child's education, parents' old age ailments, your own retirement as well as for emergencies. Besides the necessary requirements, you will also want to save up for family vacations and celebrations.
Here are some financial tips for you to be able to manage your money better in your 40s:
If you haven't already started on saving for your retirement years, it is high time you do. Your EPF (Employees' Provident Fund) and pension from the employer may not be enough to maintain your lifestyle. You need to consider inflation as well in the long run.
While making a retirement corpus, one has to consider the increase in expenses towards health care and other emergencies as well.
You can voluntarily increase your share of the EPF contribution from your salary or opt for private pension plans but make sure these are not risky ones like equity.
Education for your kids
Invest in some instruments exclusively for your child's education. Be it mutual funds or Sukanya Samriddhi Scheme, the deposits made should not be a compromise on your retirement savings.
This is because there are plenty of options to fund your child's education like scholarships and low-interest education loans.
Based on your child's educational interest, invest in high yielding fund options to be able to set aside more funds in a shorter amount of time and with less regular contributions.
In your 40s, you need to give serious thought to clear all your debts. As it is a time to maximize your savings for later years, it is best to make some wise choices like getting rid of extra credit cards. Use these only for emergencies and start limiting your spendings.
This is also a time when your family is the most dependent on your income. You could opt for a term life insurance policy as it comes with less investment and a large cover.
The large cover is necessary considering that your family will have to take care of the household expenses, mortgage and child's education in the unfortunate event of your death.
Apart from that, you will have to pick up suitable health insurance covers for yourself, spouse, children, and parents.
There could be leakage in your house, a dent in your car, your child might need a new computer.... the list of emergencies is endless. This is why you need to be prepared for such a situation by being well-stocked so that you do have to take another debt to pay for the emergency and stress yourself further.
With every raise, increase your savings set for emergencies as well and keep this money in liquid form for easy access.