Investing in your 40s will look quite different than it did in your 20s and 30s. This is because you probably have different objects now, and have already made some major financial decisions, such as the purchase of home.
Now, it is time to focus on the remaining portion of your career and your plans for retirement. Below is a look at some topics that may be included in your financial planning for your future.
Now that you are in your 40s, you shouldn’t wait any longer in actively working towards your retirement nest egg. You have likely settled into your chosen career and have a steady income. Working on a growth and income producing portfolio is important at this stage in your life. Be sure to balance risk, diversification and money management carefully as you start to ramp up your retirement strategy.
This is the age when you should start thinking about getting rid of any of your outstanding debt, including your home mortgage. If you are heavily in debt, do not panic, just set up a financial plan that will help you reduce or eliminate this debt over time by paying off one outstanding bill at a time. Save your mortgage for last, once all of the other high interest bills are paid off, apply the savings there to your mortgage repayments, this will help pay your home off sooner. Your ultimate goal should be to retire without any debt.
You are probably at a better place now financially then you were over the past two decades, so you may have more money available to invest with. You want to make sure that your finances are in order before you start to invest a lot of money. Once you look at your finances and determine how much money you have available to invest, you can start setting some practical goals. It is best to sit down with a financial planner and have them advice you on what investment opportunity would work best for your specific situation. This can help you avoid costly investment mistakes. Professional help can go a long way as the older you get the less time you have on your side to recover from any costly mistakes.
Superannuation will be a key piece to your retirement strategy as it is one of the most tax efficient investments if not the most efficient.
You probably already have life insurance, but now that you are in your 40s, it is time to re-evaluate these plans. A lot may have changed since you first took out your policy. For example, you may owe money on a home mortgage now, make more money, and be raising kids. With this in mind, it may be time to increase that amount of life insurance you have and make sure your beneficiaries are correct. In addition, it is also time to set up a will and do some estate planning to protect your family in case of something were to happen to you.
Spend Money Wisely
You are also likely to have more money available to spend on the things you want versus just the things you need. While this can be great, and you have certainly earned it through hard work, you must be careful that you do not end up overspending. Even though you have more money available does not mean that you should still stick to a strict household budget. Create a budget that allots plenty of money for savings and investing, while still leaving you enough money to purchase some of the things you want.
Sound financial planning done in your 40s may determine if you can retire early or if you have to continue working even after retirement age. You main focus now should be to bring down your overall debt level and to make sure you have taken the necessary steps to protect your family if something were to happen to you. After that is accomplished, you can start creating an investment plan that will help you live comfortably well into your retirement years.
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