Forties are not the time to err in your financial matters as this is the age when one starts looking at a regular or an early retirement, and securing their family’s future financially. You may be at the peak of your career in the forties and also have a family to support. At this stage of your life, you should be looking at avenues to increase your income, and saving it for your future needs. But in this endeavor do not compromise on or disturb your stable income. It may not always be possible to negotiate a major salary increase at this point, so try transforming one of your hobbies into aside business. In short you have to make all those moves that boost your income and savings. Also, if you are married and both you and your spouse have an income, you should plan your finances in a way that it meets all your necessary expenses as well as investment needs.
Any financial mistake at this stage may prove disastrous and you no longer have the luxury of youth to recover from it. So it would be wise to equip yourself with knowledge about a few avoidable money mistakes:
Going Over Your Budget
If you are a salaried individual and have a family to support, it is important to stick to a budget to avoid overspending. Check your impulse spending; focus on your needs but not all your wants. While making a budget, segregate funds for investment and other necessary items. Any kind of hike in income should be used to step up your investments and contribute to your retirement saving. The temptation to buy new things like a bigger car, a membership to a swanky club or a giant state of the art television may be there. But you need to prioritise your future needs before your present day wants.
Not Maintaining An Emergency Fund
Ideally, an emergency fund should be in place as soon as you start earning. But if you haven’t made this provision till now, you are committing a big mistake. An emergency fund can bail you out from tough, unpredictable situations, like a job loss or a medical emergency. So this fund needs to be created on priority and topped up periodically. Work on an emergency fund after factoring in your loans, necessary expenses and increasing family commitments. Build a corpus that can take care of all your expenses for the next 6-12 months. You should also increase investment in this fund as and when your income increases.
Not Buying Sufficient Insurance Cover
Often, people at this age restrict their insurance shopping to securing tax benefits only. This results in buying inadequate cover or getting bad insurance deals. While reducing your tax liability to save your hard-earned money is sensible, buying insurance only for tax deductions is not a great idea. Group health insurance provided by the employer is beneficial, but don’t be ignorant about individual insurance policies that can ensure peace of mind for you. So when buying life insurance cover, secure a cover that is at least 10-20 times your current annual income for adequate protection. Also, go for an appropriate health cover that can cover your future medical costs. Assess your family’s needs before going for a life and health cover.
Not Understanding Your Investment Needs
Your investment plans and instrument choices depend on the financial goals you set in for yourself. A wrong choice has the potential to erode your savings while the right pick can make you rich. If you do not have enough understanding about creating and maintaining the ideal investment portfolio, seek help from a financial expert. You would be guided on how to invest and how much to invest by this financial expert at a nominal fees. Also, while choosing your investment option, have a mix of both debt and equity instruments as per your long-term goals and liquidity needs.
Not Planning For Children’s Education And Your Retirement
By the time your children will be ready for their higher education, your retirement will be closer. Taking a loan at this age would be an added financial burden. So do not be oblivious to your children’s needs and at this age invest in investment instruments like mutual funds to accumulate funds that can support their higher education. Likewise, planning your retirement would ensure peace of mind during your golden years. You still have around 20 years to create a good corpus so assess your retirement needs as per your daily expenses and medical requirements to work on a fund. Also, choose instruments that can generate a good income for your when retirements sets in.
Finally, do not commit the mistake of not informing your spouse about your financial moves. Preparing your partner for life’s uncertainties would ensure a financially stable future for your loved ones.
The writer is CEO, BankBazaar.com