MANY by-40 milestones have become
debatable: Get married? Only if you really want to. Own a home? If it's
financially feasible. Know what you want to be when you grow up? Well,
if 40 is the new 30, you're certainly entitled to change your mind
1. The three basics of a solid financial foundation.
Credit card debt paid off. Emergency fund stocked up. Retirement
account(s) in existence and growing. Everything else (travel,
homeownership, investments) should come after.
2. How to create a budget. Because without one, you may not reach any of your goals, like buying a home, paying off your credit card debt or travelling the world. Learn how to build your budget with our step-by-step guide.
3. How much you should be saving. The answer: 20%. Not sure how we arrived at this number? Look no further than the 50/20/30 rule, which divvies up your monthly budget as follows: 50% is reserved for essentials (think mortgage, rent and groceries), 30% is allocated for your lifestyle choices and at least 20% goes to "financial priorities," which includes your debt payments, your retirement contributions and your savings.
4. Your net worth. Yes, you have one. This is the sum total of your assets (bank account balances, savings, investments, etc.) minus your debts (loans, mortgage, credit card debt, etc.). Your net worth is the easiest way to get a big-picture perspective on your finances.
5. How much you make and how much you spend each month. It sounds like a no-brainer, right? "But most people, regardless of their age, don't know how much money they have coming in and going out," says Natalie Taylor, a CFP with LearnVest Planning Services.
6. How to get out of debt. Now is the time to be saving
for your future, not paying off your past. Hopefully your debt
repayment efforts are already in full swing, but, if you're not there
yet, now's the time to make a plan.
7. Your credit score. Still not familiar with this number? Afraid to look? Here's why, by 40, you should know it cold. Your credit score determines not only what kind of credit cards you'll get approved for but also how expensive your mortgage and car loan would be.
8. How to pull a credit report.
9. It can take a long time to save up a down payment. When it comes to buying a house, "People always say, 'Get in as soon as you can,' and 'It's O.K. to be house poor.' But before buying a house, you should be financially stable. If that's not until your 30s or 40s, that's O.K. So many people have rushed in, and then they can't handle the payments," says Taylor.
10. What is a financial emergency and what's not. Sure,
it may have been cute to splurge on shoes and come up short on rent
when you were 22. By 40, you ought to know what it feels like to have a
fat six months of savings sitting pretty in your account and the only
five reasons you should be dipping into it. No, that out-of-state
wedding doesn't count. (It's actually optional, no matter what your
sister-in-law says.)
11. What your ideal retirement will cost. Have you ever really crunched the numbers? On the internet, there are practically as many retirement calculators as there are singing cats. But most people we know don't visit them. (The calculators, that is.) However, at 40, retirement - if you've planned right - may be a mere 25 years away, so you ought to know how much you need to save up. Here's a good place to calculate that. And here's why starting to save more right now, instead of a decade from now, will make getting there significantly easier.
12. How much you have saved for retirement. O.K., cool, you've been diligently contributing to your retirement. The important thing is to know how much you've saved and how much you still need to. So, go on. Dig up your passwords. Crunch the numbers.
13. How to manage budget-busting friends. If you were
duped by them in your 20s, shame on them. If you're still letting it
happen in your 30s, shame on you. By this age, you should know who they
are and how they operate. While you may love their sense of humour or
style, you may hate how empty your wallet is after you hang out with
them. It's about time you learned how to neutralise these culprits.
14. Your own money personality. Maybe you're the Budget-Buster. The Protector. Or the Pleaser. Discover how your Myers-Briggs quotient is affecting your finances.
15. That, the older you get, the more complex your money life becomes. "A lot of my younger clients say, 'I'll be able to save more for retirement when I make more money,' but the truth is, as they start to make more money, they have way more financial obligations," says Taylor. "They're not living in the shoebox apartment anymore. Then they get married, and they have a wedding to fund. Then they have kids, and they have college to save for." The bottom line? Today is the time to start, not tomorrow.
16. How your significant other handles money. By now, you probably know their favourite colour, first pet and worst habit, but do you know how they thought about money growing up? Or exactly where they stand - financially - today?
17. Where your parents stand financially. It's a rough role reversal, to be sure. After all, they were probably the ones who took care of you, but trust us, you'll be glad you had this conversation. Start by finding out how to access their account balances, health insurance and long-term care insurance.
18. The basics of investing. Before you put any money in the market, you should know how it works. But don't get ahead of yourself, either. Don't even think about investing until you have a fully funded emergency savings account, no high-interest debt and are on track for retirement.
19. A good tax accountant. Whether you D.I.Y. your taxes or hire someone to file your returns is up to you - and depends on your financial situation.
20. Your total compensation package.
We know: We've all been so grateful to get the job that we signed on
the dotted line without a backward glance, too. But that was then. By
this stage in your career, you should know more than the number that
makes up your base pay. "Does your employer offer disability insurance?
Life insurance? You should know that," Taylor says. The same for
matching retirement plans and health benefits.
21. How much is in your super
22. How to maximise your time. Binge-watching TV can be fun … until it's not. Here are the eight best time investments you can make.
23. Who your health care proxy is. We cannot overstate the importance of choosing someone to make medical decisions for you if you were incapacitated. Fun task? No. But you don't want to leave this to chance.
24. That it's possible to juggle a couple of money goals at once. Some of the most common questions Financial Planners get are what they call "This or that?" questions. In other words, you may want to build up your savings, pay down your debt, save up for retirement and make that dream vacation possible, but you only seem to have $200 left at the end of each month. First, know that many people feel like this. Second, know that a financial planner can help you prioritise.
25. That you will never have "enough" money. "In nine years of being a financial planner, I've never met a person who's had enough money," Taylor says. "Our lifestyles seem to be ever-expanding as our incomes expand." Case in point: Even the uber-wealthy feel poor. The takeaway? Stop feeling like tomorrow is the time to tackle your financial burdens and take control of your money today.
26. That you never know the truth about other people's finances. The co-worker with great clothes could be deep in debt or have family money. The neighbour could be close to foreclosure or have paid cash for her house. That's why it's never wise to compare yourself to other people.
27. What not to do when you buy a new home. We all love to renovate. But remember: You're not on an episode of one of those D.I.Y. extreme home makeover shows and, in real life, big projects cost big bucks. So don't let your aspirations do you in. Set a realistic renovation budget and stick to it.
28. How to find a financial planner you trust. It's your money, so you should have perfect confidence that the person who is helping you manage it is smart, capable and 100% on your side.
29. How to dress fabulously on your budget. Overspending
on the latest, slickest or coolest new apparel can be the downfall of
many. But it's possible to cut down your clothing budget, and still rock
head-turning style, on just about any salary.
30. What "rebalancing" means. When you were 10, it
meant climbing back up on the balance bar in gymnastics class. Now, it
may mean making sure your investment portfolio is primed to grow, while
also protecting yourself so your accounts won't be decimated if there's a
stock market downturn.
31. Why life insurance is so important. Even if you don't have kids, it could still be a lifesaving option. And "life insurance is cheap, as long as you get it early," says Taylor.
32. The big cost of your little splurges. By 40, you should clearly understand how your $5-a-day smoothie habit can add up, keeping you from making progress on your money goals. While you're out and about, keep track of your transactions.
33. A favourite under-$10 dinner. As a bona fide adult, you should have not only a signature dish you can wow with, but also five quick meals you can whip up that won't break the bank.
34. How to negotiate a better salary. Sure, spending less and saving more help, but there's no faster way to financial freedom than growing your income. Make sure that you're earning what you're worth.
35. What a will is - and why you need one. By this point in life you need one … or two. There are actually two kinds of wills: a last will and testament and a living will. Put simply, a last will and testament is a legal document that spells out what should happen to your possessions when you die. (And, yes, you have possessions.) A living will, on the other hand, is a health care directive for what should happen to you if you're unable to communicate your wishes. Guess what? You need both.
36. How taxes factor into your retirement plan. Some retirement savings vehicles have you pay taxes now and are tax-free later. Some are tax-free now but charge you tax when you withdraw funds. "It's not only important for your investment portfolio to diversify, it's also important to diversify your tax situation in retirement," Taylor says. "So make sure you have some tax-free sources of income in retirement, as well as some taxable sources, so you can control your tax bracket when you get there."
37. That cashing out your retirement savings may hurt you. Now and later. It also means you may have a huge tax bill and you're more likely to plunder you're account again.
38. The ins and outs of interest. Simple interest is a percentage multiplied by the amount and the length of time you promise to pay it back (if we're talking about a loan - or, if we're talking about a simple savings account, the length of the time that you leave the money there, untouched). Compound interest, on the other hand, is calculated more frequently so that it builds upon itself to make interest grow continually.
39. How your money can affect change. Sure, you may like to give to charity here and there, but how you choose to invest your money can also make a statement and a difference.
40. A financial plan. Maybe you prefer to budget in envelopes. Maybe you have a 12-step plan for your retirement (by 40) all mapped out. Whatever you choose, studies have shown that people who think about the future are better able to make their money grow. And sometimes you need someone to help with that.
1. The three basics of a solid financial foundation.
Credit card debt paid off. Emergency fund stocked up. Retirement
account(s) in existence and growing. Everything else (travel,
homeownership, investments) should come after.2. How to create a budget. Because without one, you may not reach any of your goals, like buying a home, paying off your credit card debt or travelling the world. Learn how to build your budget with our step-by-step guide.
3. How much you should be saving. The answer: 20%. Not sure how we arrived at this number? Look no further than the 50/20/30 rule, which divvies up your monthly budget as follows: 50% is reserved for essentials (think mortgage, rent and groceries), 30% is allocated for your lifestyle choices and at least 20% goes to "financial priorities," which includes your debt payments, your retirement contributions and your savings.
4. Your net worth. Yes, you have one. This is the sum total of your assets (bank account balances, savings, investments, etc.) minus your debts (loans, mortgage, credit card debt, etc.). Your net worth is the easiest way to get a big-picture perspective on your finances.
5. How much you make and how much you spend each month. It sounds like a no-brainer, right? "But most people, regardless of their age, don't know how much money they have coming in and going out," says Natalie Taylor, a CFP with LearnVest Planning Services.
7. Your credit score. Still not familiar with this number? Afraid to look? Here's why, by 40, you should know it cold. Your credit score determines not only what kind of credit cards you'll get approved for but also how expensive your mortgage and car loan would be.
8. How to pull a credit report.
9. It can take a long time to save up a down payment. When it comes to buying a house, "People always say, 'Get in as soon as you can,' and 'It's O.K. to be house poor.' But before buying a house, you should be financially stable. If that's not until your 30s or 40s, that's O.K. So many people have rushed in, and then they can't handle the payments," says Taylor.
10. What is a financial emergency and what's not. Sure,
it may have been cute to splurge on shoes and come up short on rent
when you were 22. By 40, you ought to know what it feels like to have a
fat six months of savings sitting pretty in your account and the only
five reasons you should be dipping into it. No, that out-of-state
wedding doesn't count. (It's actually optional, no matter what your
sister-in-law says.)11. What your ideal retirement will cost. Have you ever really crunched the numbers? On the internet, there are practically as many retirement calculators as there are singing cats. But most people we know don't visit them. (The calculators, that is.) However, at 40, retirement - if you've planned right - may be a mere 25 years away, so you ought to know how much you need to save up. Here's a good place to calculate that. And here's why starting to save more right now, instead of a decade from now, will make getting there significantly easier.
12. How much you have saved for retirement. O.K., cool, you've been diligently contributing to your retirement. The important thing is to know how much you've saved and how much you still need to. So, go on. Dig up your passwords. Crunch the numbers.
14. Your own money personality. Maybe you're the Budget-Buster. The Protector. Or the Pleaser. Discover how your Myers-Briggs quotient is affecting your finances.
15. That, the older you get, the more complex your money life becomes. "A lot of my younger clients say, 'I'll be able to save more for retirement when I make more money,' but the truth is, as they start to make more money, they have way more financial obligations," says Taylor. "They're not living in the shoebox apartment anymore. Then they get married, and they have a wedding to fund. Then they have kids, and they have college to save for." The bottom line? Today is the time to start, not tomorrow.
16. How your significant other handles money. By now, you probably know their favourite colour, first pet and worst habit, but do you know how they thought about money growing up? Or exactly where they stand - financially - today?
17. Where your parents stand financially. It's a rough role reversal, to be sure. After all, they were probably the ones who took care of you, but trust us, you'll be glad you had this conversation. Start by finding out how to access their account balances, health insurance and long-term care insurance.
18. The basics of investing. Before you put any money in the market, you should know how it works. But don't get ahead of yourself, either. Don't even think about investing until you have a fully funded emergency savings account, no high-interest debt and are on track for retirement.
19. A good tax accountant. Whether you D.I.Y. your taxes or hire someone to file your returns is up to you - and depends on your financial situation.
20. Your total compensation package.
We know: We've all been so grateful to get the job that we signed on
the dotted line without a backward glance, too. But that was then. By
this stage in your career, you should know more than the number that
makes up your base pay. "Does your employer offer disability insurance?
Life insurance? You should know that," Taylor says. The same for
matching retirement plans and health benefits.22. How to maximise your time. Binge-watching TV can be fun … until it's not. Here are the eight best time investments you can make.
23. Who your health care proxy is. We cannot overstate the importance of choosing someone to make medical decisions for you if you were incapacitated. Fun task? No. But you don't want to leave this to chance.
24. That it's possible to juggle a couple of money goals at once. Some of the most common questions Financial Planners get are what they call "This or that?" questions. In other words, you may want to build up your savings, pay down your debt, save up for retirement and make that dream vacation possible, but you only seem to have $200 left at the end of each month. First, know that many people feel like this. Second, know that a financial planner can help you prioritise.
25. That you will never have "enough" money. "In nine years of being a financial planner, I've never met a person who's had enough money," Taylor says. "Our lifestyles seem to be ever-expanding as our incomes expand." Case in point: Even the uber-wealthy feel poor. The takeaway? Stop feeling like tomorrow is the time to tackle your financial burdens and take control of your money today.
26. That you never know the truth about other people's finances. The co-worker with great clothes could be deep in debt or have family money. The neighbour could be close to foreclosure or have paid cash for her house. That's why it's never wise to compare yourself to other people.
27. What not to do when you buy a new home. We all love to renovate. But remember: You're not on an episode of one of those D.I.Y. extreme home makeover shows and, in real life, big projects cost big bucks. So don't let your aspirations do you in. Set a realistic renovation budget and stick to it.
28. How to find a financial planner you trust. It's your money, so you should have perfect confidence that the person who is helping you manage it is smart, capable and 100% on your side.
29. How to dress fabulously on your budget. Overspending
on the latest, slickest or coolest new apparel can be the downfall of
many. But it's possible to cut down your clothing budget, and still rock
head-turning style, on just about any salary.31. Why life insurance is so important. Even if you don't have kids, it could still be a lifesaving option. And "life insurance is cheap, as long as you get it early," says Taylor.
32. The big cost of your little splurges. By 40, you should clearly understand how your $5-a-day smoothie habit can add up, keeping you from making progress on your money goals. While you're out and about, keep track of your transactions.
33. A favourite under-$10 dinner. As a bona fide adult, you should have not only a signature dish you can wow with, but also five quick meals you can whip up that won't break the bank.
34. How to negotiate a better salary. Sure, spending less and saving more help, but there's no faster way to financial freedom than growing your income. Make sure that you're earning what you're worth.
35. What a will is - and why you need one. By this point in life you need one … or two. There are actually two kinds of wills: a last will and testament and a living will. Put simply, a last will and testament is a legal document that spells out what should happen to your possessions when you die. (And, yes, you have possessions.) A living will, on the other hand, is a health care directive for what should happen to you if you're unable to communicate your wishes. Guess what? You need both.
36. How taxes factor into your retirement plan. Some retirement savings vehicles have you pay taxes now and are tax-free later. Some are tax-free now but charge you tax when you withdraw funds. "It's not only important for your investment portfolio to diversify, it's also important to diversify your tax situation in retirement," Taylor says. "So make sure you have some tax-free sources of income in retirement, as well as some taxable sources, so you can control your tax bracket when you get there."
37. That cashing out your retirement savings may hurt you. Now and later. It also means you may have a huge tax bill and you're more likely to plunder you're account again.
38. The ins and outs of interest. Simple interest is a percentage multiplied by the amount and the length of time you promise to pay it back (if we're talking about a loan - or, if we're talking about a simple savings account, the length of the time that you leave the money there, untouched). Compound interest, on the other hand, is calculated more frequently so that it builds upon itself to make interest grow continually.
39. How your money can affect change. Sure, you may like to give to charity here and there, but how you choose to invest your money can also make a statement and a difference.
40. A financial plan. Maybe you prefer to budget in envelopes. Maybe you have a 12-step plan for your retirement (by 40) all mapped out. Whatever you choose, studies have shown that people who think about the future are better able to make their money grow. And sometimes you need someone to help with that.
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