If you have a question or need an opinion, chances are there’s a well-meaning friend out there who’s more than happy to give it. But what about your finances? That area is more taboo, and you may not be comfortable asking for advice. Here are some pieces of financial advice you should consider before turning 40.
Have an Emergency Fund
Most Americans wouldn’t be able to afford a $400 repair. If you don’t want to be someone who has to take out a loan to pay for a minor car or household repair, create and build up an emergency fund. You should strive to have at least 3-6 months worth of expenses put away. Don’t let the idea of creating an emergency fund intimidate you. You don’t have to have a $500 fund to start. Simply put away a little bit from each paycheck, and over time the money can really add up. To make it easier, have a portion of your paycheck automatically sent to your savings account each payday so you can set it and forget it.
Purchase the Right Insurance
Chances are that when you were first starting out, you only took out the basic insurance policies such as health, auto, and homeowners insurance. Once you’ve become established, however, you should reevaluate your policies to see where you can ramp up your coverage. You may also want to consider adding on new policies such as life or disability, long-term care, identity theft, or pet insurance. Talk to your local insurance agency about getting an insurance checkup to ensure you’re prepared for future expenses that may come up.
Get Your Credit in Order
You may have been a tad irresponsible with your expenses while you were in your 20s, but the time for racking up credit card debt for a night out with friends or a shopping spree should be behind you by the time you’re in your 30s. If your credit is less than stellar, make strides to get it where it needs to be. To start, you can pull a copy of your credit report to see which areas are lacking and where you can improve. If spending is a problem for you, you may want to consider cutting up excess credit cards and only keeping one around for dire emergencies. While it may have been ok to have a low credit score in your 20s, it’s less than cool in your 30s and beyond, so make a plan to get it back on track.
Prepare for Retirement
Nobody enjoys thinking about retirement, but neglecting to think about it won’t stop it from happening. Start preparing for retirement as soon as you get your first full time job. If your employer offers a company match, you should take advantage of that, since it’s essentially free money. You should strive to put away around 15% of your annual income to ensure you’re on track for retirement. An easy way to do this is to automate your savings and increase your contributions every time you get a raise.
Pay Down Debt
With the average American living with about $16,000 in credit card debt, it’s no wonder so many people have a hard time saving for the future. If this is you, make a plan to pay down your existing debt so you can get ahead. Some people tackle each debt one at a time until it’s paid off. Others would rather take all their debt on at once by consolidating it or spreading their payments out. Figure out a method that works for you and work to get your debt paid down as much as possible, so it doesn’t hold you back in the future.
These simple finance tips can help you get on track to where you need to be. Remember, financial success rarely happens overnight, so you’ll need to have patience and persistence. However, achieving financial freedom can be worth it in the end.