Financial must haves as you approach 40

Each decade there are certain benchmarks you can use to see how you are tracking towards the ultimate goal of a comfortable stress free retirement. These can include mortgage status, debt levels, saving & investment levels etc. We don’t all start on the same playing field so having a gauge on how you are tracking is important – especially if there are any glaring holes with your personal finances.

Whilst we all may have a different idea on what a comfortable retirement is, common things to consider are: Owning a home, being debt free, insured, medical and money. Having these main areas covered will go a long way in providing a relatively stress free time in your golden years.

As you finish out your 30’s (yikes) and approach your 40’s (where they say life begins) here are some things you should have achieved or be thinking about. Don’t panic if you have neglected certain components over others, simply created a plan to start working on it – different people favour certain things more than others.

1. Planning – While you may have a generic idea of what you’re thinking for retirement, you also need to realize that time flies and as you enter your 40’s, it’s important to have a structured plan in place. That’s not to say that it can’t or won’t change, but having goals and targets is important. This plan needs to include all of the below in addition to things such as education for kids, weddings, vehicles, etc…

2. Property – Having a roof over your head is one of the biggest components of the “American Dream” and whether that’s a house, condo or unit, as you move into your 40’s you should be or be getting close to being mortgage free.

3. General Insurances – There are so many different types of insurance and depending on your situation, you may have a lot or little. Protecting your possessions is important for wealth creation and staying out of debt. In addition, if you have a family, life insurance is a must have.

4. Medical – As you get older things happen and can get expensive quickly. Having adequate medical insurance for yourself if you’re single or family is important. Being adequately covered is imperative as one medical emergency can whip out your savings and more.

5. Money – At this stage in your life hopefully you have minimal to no bad debt and a reliable source of income which can be used to pay off assets and bolster investments. If you are lucky enough to have minimal debt, this is the period where you can really accelerate your savings and investments. Alternatively, if you have a bit of bad debt, this is the time to really focus on eliminating debt and then start saving cash. The sooner you can start saving the better – especially if you want to take advantage of the 8th wonder of the world “compound interest”

6. Investments – This is where you decide how to get your money to work harder for you and hopefully provide you with the cash flow needed to fund your retirement. Ideally you would have a mixed portfolio which contributes to your monthly cash needs without eating into your principle. Examples include receiving rent from investment properties, fully franked dividends from shares or other cash flow providing investments.

7. Retirement fund – Depending on how you look at this can be viewed as an investment or massive savings account. Either way it can be extremely tax efficient and provide you with a source of cash flow for a set period. As with anything, the sooner you start the better.