Each phase of our life has its own goal. In your 20’s and 30’s, you may be more focused on your career. These are the beginning phase when one strives to achieve financial stability with their hard-earned money. Financial goals are monetary targets that one must try to achieve by their 40’s. This financial goal may be quite different in your 20’s and 30’s. For instance, retirement planning may not be a priority in your 30s, but as you move towards your 40s, it is the time to secure your golden days with solid retirement planning.
Your 40 is the critical phase of your life when you are at the peak of your career. You might have a family to support, responsibilities of your children like savings for their education, a home to buy, and a home loan. It is not unlikely that you may have taken your financial goal lightly in your 20’s and 30’s but 40 is the time to take it seriously. Now you have large responsibilities while you are closing to your retirement. So, in a nutshell, you must plan ahead so that you can pass your 40’s comfortably.
Here are a few financial goals that you must achieve before you turn 40.
1. Be the owner of your home
There is a hot debate about whether you should rent a home or purchase your own home. However, owning a home remains India’s top inspiration. For Indians owning a home is the biggest life goal. It not only secures a shelter but is also considered as a permanent asset. It is an appreciation asset too. So, if you buy a home using a loan before you turn 40, you will get a longer timeframe to re-pay the loan before your retirement. It will not burden your finance also. Most of the Indians prefer budget size homes so that it becomes easy for their wallet and not tough to re-pay with the loan. You will also get tax benefits on your home loan.
2. Build An Emergency Fund
An emergency fund is something that we need at every stage of our life. At the beginning of your life, it is not easy to save funds for emergency purposes, but as you enter your 30’s, there is little time to lose. An emergency fund is not something equal to the current monthly income. Instead, it should be three to six times more than your current monthly income. This is a saving that is targeted to spend for unexpected events like a health emergency, job loss, etc. This fund is a boost to your financial confidence. You can start it with recurring deposits each month.
3. Life And Health Insurance
In your 40s, your family-related and financial obligations increase manifold. It is high time when you strive hard to provide your family a comfortable life. You must also provide them protection against death and disease. So, insurance is a must for your financial goal. The health and life insurance policies provide you and your family comfortable financial protection in an emergency.
Additionally, a term insurance plan will keep your family will keep going your financial roadmap even if you were to meet an unprecedented end. Health insurance helps you deal with the high medical cost that makes treatment and hospitalizations of critical illnesses challenging. Also, as the premium of medical insurance depends on age getting insurance covers before 40 means less premium as you are still young. So, getting coverage while everything is going good means less cost incurred. If you have already purchased the insurance covers, you should periodically take stock of the sum assured for ensuring it matches your most recent lifestyle and income needs.
4. Retirement Planning
Retirement planning is not something we do in our 20’s and 30’s. However, as you approach your 40’s you can’t ignore it. Time is the main essence in long-term investing. If you delay your long-term investment, it is harder to achieve the goal. So, to give you a strong start, begin your retirement savings in your 30’s. Here you must calculate the amount based on the inflammation so that you can sum up the amount that can manage your current lifestyle. In this context, some of the investment platforms are PPF, EPF, equity mutual funds, NPS, etc. These funds have high interest rates, and they grow quickly in your later years, giving you financial relief in your golden years.
5. Plan For Your Children’s Education
By 40’s you have a stable family life. So, you might have started thinking for your children’s future. In the current financial market, higher education isn’t cheap. So, to fund your children’s long-term needs, you need to plan ahead. As you approach near the mid-’40s, your children also get closer to college. Besides these are the years you are approaching towards your retirement life. This is a tough time indeed, and you need a balanced plan so that you can fulfill each of the goals. There are multiple ways to invest in your children’s education. For example, mutual fund SIPs or land as an appreciating asset.
6. Get free from all of Your Debts
The ’40s bring many additional financial burdens on you, so it is essential to clear up all financial debts like personal loans, car loans, consumer durables, etc., before entering your 40’s. The only loan you can carry forward is a home loan. Because except home loan remaining loans are unsecured, and you should not waste money to re-pay those unsecured loans.
7. Know how to save tax
With a newly started career in your 20’s tax savings was fun. Because it hardly earns hefty of income. But in your 30’s and ’40s, you have settled in your career and earning a handsome amount of money. Now maybe you are paying a large amount of income tax. So, you must have well plan to save tax. You should know the tax savings scheme. Interestingly, all the tax-saving investments are long-term, and you can use them for funding your children’s higher education or as your retirement fund. But you must be tricky enough to exploit saving schemes to its full.
The bottom line
When you’re in your 40s, you are probably at the mid of your career, that is, at the halfway point between the start of your career and reaching retirement age. As you approach 50’s that are close to retirement age, it gets problematic to undo any mistake you made in your financial goal. So, before you reach this critical age, look back and check the financial goals you achieve already. If you consider the points mentioned in this article, it is expected that you will be in good shape in the long run.