The list of things to do before 40 has changed a lot over time. Some want to go skydiving, others want to travel the world and a few get a motorcycle. However, there is one thing that will not change and is non negotiable: you can no longer be financially ignorant once you reach 40.
1. The 3 basics
Make sure you have no large debts. The next step is ensuring you maintain an emergency fund with enough money to get you out of a jam and lastly, your retirement savings account should be open and growing. The rest, including travel, owning a home and investments should come later.
2. How to structure a budget
Without a budget, you’re unlikely to achieve any of your financial goals. If you want to buy a home, pay off debts or travel, you will need to learn how to budget your money properly.
3. How much do you earn and spend each month?
This will tie into your budget planning. Calculate how much income you receive from your salary and other payments such as dividends, interest or side-jobs. Then work out what you spend so you can get your net income for each month.
4. Know what your prefect retirement will cost
When you reach 40, you will need to know what you want from your retirement, how much it will cost and if you can actually achieve your retirement goals.
5. Figure out how much you’ve saved for retirement
Check out your saving account balance and how well your other investments are performing. To get to know how to get where you want to go, you must first know where you are.
6. How does your significant other handle money?
Understand how your partner understands money and their thought process pertaining to finance. Set your priorities straight and ask if you will spend money on travelling or in purchasing/building a home.
Figure out who will keep track of your bank accounts. Are you natural “savers” or “spenders”? Or perhaps you want to invest your money into the market? Either way, you will have to figure all this out with your partner.
7. Are your parents financially stable?
Talk to your parents and find out where they stand financially so you can help them in their older years.
You might need to help them with health insurance and long-term care. It might be a tough job to do, but you’ll be glad you did it so you can help your parents out financially.
8. Learn how to invest
Before investing your money, learn the basics of the different types of investment vehicles and their risk-reward profile. You may need to try and seek professional help before investing.
You can do it by yourself but it’s a lot riskier if you don’t have a thorough knowledge of the market. Before you get started with your investments, make sure you have safe emergency funds so you can keep your retirement on track.
9. Take out life insurance
Life insurance is a monthly premium whereby your covered if you lose your spouse or another income earner. If you or your spouse dies, you or your children won’t need to worry about financial problems.
10. Tame your daily splurges
If you’re in a habit of buying a 300 bob or more smoothie everyday, you might be aware of how much that would rack up in the course of one year. This habit could be holding you back from achieving your financial goals. So try and cut down on unnecessary spending habits to help encourage your financial success.
11. Home-made dinners
By 40, you should be pretty adept at cooking for yourself or your significant other. Preparing meals for yourself is considerable cheaper than eating out. Of course, you deserve a treat once in a while – but, ordering out shouldn’t be your daily routine.
12. How to ask for a pay rise
The best way to financial freedom is growing your income. Saving more than you spend will help but you should try asking for more money. Make sure you’re earning what you’re worth.
13. Learn everything you can about interest
Simple interest is money that you can receive depending on the amount and time period you leave it at a bank (in terms of savings accounts). Compound interest is calculated more often so that it continually grows and gives you more money. Do some research on your bank and see what type and rates of interest it can offer for your accounts. For example, the Century Fixed Deposit account offers a guaranteed minimum interest of 10.5% on amounts from Kshs. 50,000.
Learn to maximize the power of interest and time!
14. A financial plan
Some people like budgets created in small stages – and that’s completely fine. However if you plan ahead, you’ll be in a better position for the future and will make your money grow faster. Those who fail to plan are planning to fail. Whatever you choose to do, creating a financial plan will always help get you where you want to go.
15. What is a will? Should I get one?
A last will and testament is a legal document which details what needs to happen to your belongings once you’ve passed away. You’ve spent your whole life working for what you have, it only makes sense to let others know how you would like it spent once you are no longer around.
Anything you think we missed? Let us know in the comments section.
This article was originally published in Finder.