Turning 40? Key Financial Steps to Take

Turning 40

Are you turning 40? Many people claim that their 40s are the best decade of their lives. To make it the best decade of your life, here are some key financial tips you can implement today.

Why turning 40 is a huge milestone

Turning 40 is not just another excuse to throw a great party (whether it’s in person or over Zoom). It’s a huge milestone for so many reasons. By the time most people reach 40, they’ve settled into their lives and are comfortable with who they’ve become. It’s the decade where you’ve stopped caring so much about what others think about you. You can freely live your life on your own terms.

It’s also the decade where you are most likely to either make the most money in your career or the least (if you choose to leave the workforce for personal reasons, such as raising a family). Which means it’s the perfect time to get serious about your finances.

Key financial steps to take now that you are turning 40

For anyone turning 40, there are some key financial steps you can take now to set you up for the rest of your life. These are my go-to steps that anyone turning 40 should consider taking:

1. Re-evaluate your financial goals

Have you set financial goals in the past? If so, now is the perfect time to re-evaluate them and make sure they are still applicable to your life. Setting long-term goals (5+ years), mid-term goals (2 to 5 years), and short-term goals (1 to 2 years) is a great way to keep yourself on track.

2. Revisit your retirement plan

By 40, most people have some sort of retirement plan in place, whether it’s a 401(k) from work or another type of account. Now is the time to look at your finances and determine how much you really need to retire (and by when). Then, do the math on whether your current investment plan will get you to that goal. If not, come up with a plan to get yourself there.

3. Invest in your health

Forty might be the new 30, but we really need to invest more in our health as we age. Turning 40 is a great time to evaluate your overall health. Schedule annual check-ups, commit to healthy eating and a workout routine, and spend the money and time you need to get your health the best it’s ever been. The good news is that you don’t need to spend a fortune to live a healthy lifestyle.

If you take care of yourself in your 40s, you’ll be more likely to stay healthy in the many decades of your life to come. That not only improves the quality of your life, but it’s a wise financial choice, too. Medical expenses in older age can be financially crippling, so in addition to saving for your retirement, investing in your health now will hopefully help you avoid some of those expenses later on.

4. Get on the same financial page as your partner

If you aren’t already, get on the same financial page as your partner. If you’re wondering how to do that, these tips are a good place to start. My favorite piece of advice is to be honest. If you’ve been hiding anything about your finances or your dreams or goals (and how much they will cost), commit to sharing that information with your partner today. There is still plenty of time to get on the same page, but if you never talk about finances, it’s unlikely you’ll get there.

5. Plan for expenses related to children

If you have kids who haven’t reached college yet, there’s still time to decide on a strategy for paying for their college educations. If you decide you would like to, and can, contribute to their college educations, come up with a plan now. Look into how much you’ve set aside already, how much more you’d like to contribute, and how you plan to get there.

If you are turning 40 and are considering having a child in the near future, you’re in an even better position to save for their college educations. You still have plenty of years to save up in something like a 529 plan. Just remember that the cost of adding a new baby to your life is not minimal. Before you embark on that journey, consider if you are in a good position financially to do so.

6. Understand your parents’ financial situations

Turning 40 means getting older, and it also means other people in your life will be getting older, too. Now is the time to talk to your parents and other older relatives about their finances. Many adult children spend thousands of dollars a year on caregiving for their older family members. By having the discussion with your parents now about what their finances look like, you’ll be able to plan for how much, if any, you may be spending on their care in the future.

7. Think about, and plan for, your own death

Nobody likes to think about their own death, but it’s inevitable. By no means does turning 40 mean you are nearing death, but it is a good time to start to think about it. You probably have responsibilities now that you didn’t have a decade ago (like children or other dependents) who your death would have a huge financial impact on.

Instead of pretending as if your death will never happen, put your mind at ease by acknowledging that it might, and plan for it. Make sure you have adequate life insurance in place to support your family if something were to happen to you and prepare a will. These steps will ensure that those you love are protected financially even after you’re gone.

Starting over at 40? What to do now

Not everyone turns 40 with financial goals to re-evaluate or a well-funded retirement account to tweak. Many people reach 40 without much money to their name, and that’s ok.

If you are starting over at 40, with zero assets or even lots of debt, it’s not too late. In fact, it’s still possible to retire as a millionaire even if you are starting with zero at 40, and I agree.

Here are some steps you can take now if you are starting over at 40:

1. Educate yourself about personal finance

If you’re starting over at 40 and don’t know much about personal finance, it’s not your fault. We’re never taught this stuff in school, so we have to teach ourselves. Start small by learning one or two financial concepts and take it from there. You’ll then be in a great position to implement the tools you’ve learned in your own life and finances. And you’ve come to the right place since Clever Girl Finance has an abundance of information on every personal finance topic you can imagine! A great place to start? Our books!

2. Fund your retirement account – invest, invest, invest!

Start funding your retirement, now. If your employer offers a 401(k), that’s a great place to start. If not, there are plenty of retirement plans and vehicles out there for the self-employed or those who don’t have a workplace retirement plan option.

Just because you haven’t invested in retirement yet doesn’t mean you have to give up on it. Even if it’s just a tiny amount, pledge to yourself that you’ll put a portion of your income toward retirement every month.

3. Tackle your credit card debt

Once you’ve put aside some money for retirement, turn toward paying off any credit card debt. If you haven’t had success in paying off debt before, consider the debt snowball method. With this proven method, you prioritize paying off debt with the highest balance first and work your way through smaller balances until you’ve paid it all off.

4. Cut back on your expenses

This step is easy in name but more difficult in practice. Take a hard look at your spending and figure out where you can cut back. If you’re starting over at 40, you probably need to be more ruthless than others when it comes to budgeting. Think about where in your budget you can save. Is it car expenses? Groceries? Whatever the category (or categories) it is for you, pledge to eliminate excess spending and you’ll see how much your savings will increase.

5. Make more money

You can only cut back on your expenses so much. At a certain point, if you are starting over at 40 and in need of more money, you probably need to make more money.

One way to do this? Ask for a raise at your current job. While that is easier said than done, these are great tips on how to ask for one. It’s always good to remind yourself what you are worth and ask for that. The worst that can happen is that your boss says no, but what if she says yes?

Another alternative is to consider a career change. Yes, a career change after 40 is totally possible! These are some popular ones that others have started after 40, but don’t limit yourself. Almost any career change is possible at any point in life.

How do you plan on celebrating turning 40?

Lastly, I wanted to note that there are so many resources out there telling you what you “should” have accomplished by the time you turn 40. You “should” have X amount of money saved for retirement; you “should” have achieved career success; you “should” have 2.5 children and a house in the suburbs.

I don’t believe in dwelling on any of those “shoulds.” Whatever you should have done in the past, either you did or you didn’t! Now is not the time to obsess over what you should have accomplished by your age. Instead, now is the time to take action!

Whether you are turning 40 with thousands or millions of dollars to your name or credit card debt, it’s not too late to get your finances in order. So how do you plan on celebrating turning 40? Hopefully, by taking some of these financial steps!

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