“Forty is the old age of youth – Fifty is the youth of old age” – Victor Hugo
For many people, reaching their 40’s is a time where many financial burdens and responsibilities all come at once. If you have children, you’ll be saving for their senior school tuition and/or university fees, as well as paying off a mortgage, saving seriously for retirement and dealing with other ad-hoc expenses as they arise.
While the best time to have a financial plan in place is always right now, it is even more important for most in their 40’s, as not having a plan at all is just as bad as having a bad plan in place.
Here are my top 8 financial tips for those of you in your 40’s or fast approaching the milestone.
1. Take Advantage of Employee Benefits
Many employers, in both Singapore and globally, provide a range of employee benefits ranging from the basic benefits of health insurance and minimal life cover to more attractive benefits such as matching retirement contributions. Ask your Manager or HR Department if your company provides matching contributions for retirement. A typical example would be that for each dollar you contribute into your retirement fund, your employer will match you up to a certain level. If they do and you’re not already taking advantage of this opportunity, it’s time to start.
2. Stop Thinking Your Mandatory Pension Plan Will be Sufficient
Far too many people assume that their mandatory pension or retirement plan will be sufficient to sustain the lifestyle they want to lead in retirement. In most cases, this couldn’t be further from the truth. Many people should be setting up supplementary retirement savings vehicles to allow them to invest for retirement, allowing for regular as well as ad-hoc contributions. If you’re unsure how to calculate how much you’ll need for retirement, check out this series of retirement calculators by clicking here.
3. Automate Bill Payments
“Out of sight, Out of mind”- The easiest way to ensure that no bills are overdue is to simply automate as many bill payments as you can. This could be achieved with a regular funds transfer or other arrangement depending on the provider. By having your bill payment automated you can focus your financial decisions on your investments and long-term savings goals. Always remember to check on any fees that arise as a result of creating such a transfer as in most cases, you should be able to do this for very little, if not zero, cost at all.
4. Save for Tuition
Senior school and University costs have one of the highest inflation rates of any good or commodity across the world so it’s important that you start saving early. To illustrate, let’s consider that you would like your son/daughter to attend Harvard – The current cost per year with tuition, room, board and fees is $59.950. Assuming a 3 year degree, that equates to $179,850. Now if your child is 18 years away from attending University, we then have to factor in inflation. Using this example (and an inflation rate of 3%), this $179,850 becomes a whopping $306,182.59. This is a significant sum by any measure and the best way to deal with this is always to start saving early.
5. Give Back if You Don’t Already
Personally, I am passionate about giving back to a range of community projects and organisations for the inspiring work that is being achieved and I think you should too. It doesn’t have to be a lot, but by contributing a small amount on a regular basis to a charity or project that really strikes a chord with you, you will be making a difference. If you would prefer to donate your time, there are always plenty of organisations looking for new members and volunteers to help out with projects. As a Rotarian, it would be remiss of me not to recommend Rotary for anyone looking to get involved in their community. Check it out:
– Singapore – http://www.rotary.org.sg/
– Perth – http://www.rotaryperth.org.au/
6. Review Your Protection
It is very important that you review all areas of your insurance coverage in your 40’s to ensure that you are adequately protected. Our greatest asset is often ourselves and many people often overlook insuring their income. Could you survive if you had to stop working for 1, 2 or 3 years? Would your family be financially burdened if something were to happen to you?
Outside of insurance, you should also review your Will and ensure that it is up to date. If you have assets across multiple countries, consider whether you should have a Will for different countries if the laws differ.
7. Reduce Outstanding Debt
It’s time to make sure that your high-interest debt is cleared or at the very least, down to a manageable level. This includes credit cards, student loans, car loans, medical loans or other personal loans. Often, the interest rates are in the double-digits and can be very costly over time. By reducing and clearing these debts, you can start investing your funds rather than paying them out in interest.
8. “Never Ask a Barber if You Need a Haircut”- Warren Buffett
This one applies to all ages, however given that your 40’s will typically be the time where you are heading towards the peak of your career and income, you will be likely to meet many ‘Barbers’. ‘Barbers’ will come in all forms, from forex trading ‘experts’, CFD gurus and many others. It is critically important therefore that if you do plan to make investment decisions that will impact you and your family, speak with someone that you trust. If you are working with or looking to work with a Financial Adviser, make sure that they are truly independent and that their long-term interests are aligned with yours.
Feel free to share and comment below if you have a tip you’d like to see added to our top list of personal finance tips for your 40s. What are some of your top finance tips?
Jarrad Brown is an Australian-trained and qualified Fee-Based Financial Adviser with Australian Expatriate Group of Global Financial Consultants providing specialist financial advice and portfolio management services to international and local professionals in Singapore.
Book your complimentary consultation with me here.