By the time you blow out 40 candles on your birthday cake — you’ve been around the block a time or two. You’ve likely been working for at least 15 years, and your salary has hopefully doubled from your first offer as an entry-level newbie. Most people by this time in their life will be married and have a child (or two) they’re raising.
Plenty of life happens over the many experiences from our 20s and 30s — and when you enter this new decade, there are some financial wins you should have conquered. Especially if you have your eye on retirement one day, it’s essential to be strategic about your money: where it’s going, where it’s invested and how much you have.
From retirement to paying for college tuition for your rugrats, here are the financial milestone you should be aiming for by the age of 40.
Have at least six months of living expenses in savings
Career expert at EHE Health Joy Altimare says an astounding 40% of Americans do not have $400 to handle an emergency today. How come? Many are living at our means, or worse beyond them, sending us into crippling debt.
“With the rising costs of rent and mortgage, transportation and food, student loans and health care, many Americans can only afford the bare minimum,” she continues.
However, by the time you’re 40, you’ve likely established some cadance with your paychecks and are in a position to save thoughtfully. A great goal is to have at least six months — or better yet, a year! — of living expenses saved to help cover any unexpected situations. From job loss to a sick family member, expenses can pile up quickly.
“Beyond a safety net, this fund helps contribute to a greater piece of mind and lessens any overall stress, not just financial,” Altimare adds.
Have a detailed financial plan for your future
Think about the lifestyle you’d like in 20 years. Traveling around the world with your spouse since the kiddos will be grown? Sleeping in and spending your days relaxing by a beach? Maybe starting a venture in your silver fox years? Whatever the case, you need to take actionable steps to make it a reality, according to financial expert Ivy Slater.
If you aren’t tracking toward a specific goal, it makes it challenging to stay the course and focus on the daily requirements needed to meet it. If you want, create a vision board to help you think critically about your retirement days, so you aren’t tempted to overspend today.
Have money stowed away for your children’s future
Many couples (and singles) are delaying marriage until the tail-end of their 20s and early 30s. This, in turn, leads to therm delaying when they start their families, but by 40, you will likely be a parent if that’s your desire. Regardless if they’re 12 years old or a month, it’s time to start planning for their future … yesterday. As Altimore says, it’s recommended to have $20K per year for college and $25K total for primary education, if you don’t intend to put them in private school.
“I would think about ways to maximize your children’s college fund by investing in a 529 plan, which is how 30% of all money saved for college dollars are saved around the United States,” Altimare suggests. “Beyond financial, the fact that money grows federal-tax free and can be used across the board: on books, tuition, and other education-related expenses.”
Have an idea for where your career is heading
Though your hips may be tight and your headaches last a week instead of a day, 40 is still rather young. Most people will work until they’re 65 or 70, so it’s not time to think about throwing in the towel just yet. Slater says it’s important to have aspirations for your career — and your maximum earning potential. If you are not on track to make partner, become a president, or increase your income, how can you shift gears?
Or, if you want to start your own company, how can you go out on a ledge and remain financially secure? Have honest discussions with your manager and a mentor to figure out areas where you can double-down — and make more moo-lah.
Have a budget you actually stick to
By now, you shouldn’t be afraid of the ‘B’ word: Budget. If you’re still just glancing over your financial statements and hoping for the best, you’re way behind. Altimare says success in retirement is not a possibility if you don’t know what’s happening with your hard-earned cash. At the age of 40, you should be able to answer this question: What is my budget and what do I spend every month?
“You should know the exact amount you have every month for the essentials: rent or mortgage, commuting costs, utilities, bills, food, recreation — and most importantly, savings!” she continues. “This is the foundation of a financial strategy: you’ll be able to pay off debt, build an emergency fund, save for your kid’s education and even retirement.”
If you don’t know the in’s and out’s your money like 41% of Americans (yep) — don’t be embarrassed but dig in, ASAP. If in doubt, seek the expertise of a financial planner that can help guide you.