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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.
Good advice.
I’d say have these things done before 30 – perhaps even before 25 if possible. 🙂
Brad – MaximizeYourMoney.com recently posted…6 Important Lessons For Starting a Business You Need To Know
Hahhaha…I definitely agree the earlier you can start the better off you will be in life 🙂
It blew my mind that most Americans can’t afford a $400 and have to resort to their credit cards as an emergency fund.
It’s mind-boggling to me so since America has one of the highest GDP per capita in the world. Budgeting is def important no matter how much we make!
Ms. Frugal Asian Finance recently posted…Is My Husband Frugal Or Cheap? I Can’t Decide.
It’s definitely crazy how much we consume in America, especially in light of how much money we make. There is definitely a lot of room to improve our savings 🙂
Agree with Brad. The sooner the better. It is a good checklist. As the good followers of this site will ultimately do….build wealth that is; don’t forget an umbrella policy under the insurance section. Once you have a little wealth, you can raise the deductibles on your base policies (auto, home, etc) and use the savings to purchase the umbrella policy. It provides extra coverage against a lawsuit or catastrophic event. It doesn’t cost that much and provides a little more peace of mind so you do not lose what you worked so hard to build. Have a great weekend! Tom
Tom recently posted…Why Your Investment Portfolio Is Like a Garden
Great points Tom!!! An umbrella policy is so incredibly important to have, especially when you have generated some wealth. Thanks for bringing it up 🙂
When it come to credit card debt, if you are carrying a balance, you are helping someone else getting rich and making yourself poor. To start building wealth for yourself, you can get a guarantee double digit return on your money just for paying off your debt.
Once you get rid of the credit card debt, start to have credit cards working for you by using cards that give you rewards. It may not make you rich, but you’ll get paid just to use it.
Leo T. Ly @ isaved5k.com recently posted…The Stepping Stone To Building Wealth
Great points Leo!!! Why work for someone else when you can get the credit card companies to work for you 🙂 And I know that you definitely hustle to make them work for you 🙂
As Brad wrote, I think the age for these goals should be 30. It is still a great accomplished, however, if these Goals are reached by age 40. Some of us start earlier than others. Better late then never.
I definitely agree Dave the earlier the better 🙂
This is a great checklist for those that need to get a handle on their finances. Unfortunately in the US their are too many that put it in the the back burner and continue to consume. With so much emphasis on spending, it’s no wonder a lot of Americans are drowning in debt. Hopefully a lot of people that are heading into their late 30s will start taking care of their finances because the road to retirement to fast approaching.
Kris recently posted…So We’re Looking for a Home
Thanks for sharing Kris!!! It’s really too bad how many Americans are struggling today. I do wonder if people weren’t worried about getting the latest iphone or newest car how the average American would be today 🙂
Great advice. I’d also add to the list to keep your expenses low. If you can avoid lifestyle inflation you’ll be in a much better spot financially than most of your peers. Too many people get out of college and go out and buy a new car or get a swanky downtown condo. If you can keep living like a poor college student and invest that money instead – the growth potential is huge! Plus – who doesn’t like futons, beer, and pizza?!?!
Freedom40Plan recently posted…The Cost of Kids – Months 1 and 2
Great point!!! Keeping your expenses low is a great way avoid lifestyle inflation as well as building wealth. I definitely had too many friends that bought the new car to show that they had become adults 🙂
Ashamed to say that I didn’t get a proper emergency fund of 6 months living expenses saved up until I was 39. Should’ve done it sooner, as it would’ve saved some stress in my younger years.
Robyn recently posted…Put The Best Home Water Softener For The Money In Your Home
No worries Robyn!!! I didn’t have a proper emergency fund until I was almost 31. Sometimes lessons sink in a bit later in life 🙂
Doesn’t the 16K in average credit card debt include current balances or amounts that are accumulating interest. How anybody can “afford” to pay interest on credit card debt is beyond me.
Jason@WinningPersonalFinance recently posted…Stop Giving Interest Free Loans
I am definitely not a fan of paying interest on credit cards. Especially when it feels like you pay an arm and a leg when it comes to interest rates…
Totally agree with all of them !
Chris @ Duke of Dollars recently posted…Health Insurance Wasteland – 2018 Individual Plans Suck
Glad you enjoyed them!!!
Agree with them all and also agree with the comment about the sooner the better. I think the first step is to start any or all of them instead of putting them off. It may take some people years, as mentioned in the comments, but it is a step in the right direction.
Thanks for stopping by!!! I definitely agree with you and the commenters. The earlier you start the better 🙂
Good advice here! (Comments as well)
Wes recently posted…September 2017 Blogging Numbers
Thanks Wes!!!
Insurance is one aspect many people overlook. Hopefully, by 40 you have a lot more to lose than when younger.Thus making it vitally important to carry adequate insurance. I’m getting a pretty good deal thru my work. 🙂
SMM recently posted…Make Personal Finance Great
Great reminder SMM!!! Insurance is incredibly vital and definitely one thing that I am happy to have sufficient coverage with 🙂
I’ve seen so many articles about what money moves to make before 30 it’s refreshing to see one about what money moves to make before 40.
Plus, if felt great that I’ve done each one! My debt’s not zero, yet, but it’s quickly heading that way!
Thanks Joe!!! Sounds like you are definitely well on your way. Keep up the awesome work!!!