3 Crucial Financial Goals to Achieve by 40- Guide to Invest, Save, and Manage Wealth

Picture this , you are 30 years old, you’re funding your child’s education, saving up for their marriage, or an extravagant event, and for medical emergencies where you need your finances to be strong. Once you hit your 40s, your responsibilities are quadrupled. Therefore, you should get to work on your finances by your late 20s so that your 40s go by smoothly.

Each phase of life is brimmed with different goals and aspirations and so are our financial goals. A person in their 20s might not be as focused as a person in their late 30s in being financially well-off. 

It becomes highly important that the lesson to achieving financial goals start at a tender age. 

Here are a few financial goals that you must achieve by you turn 40.

Defining financial goals

Each of us has a goal in mind according to the stage of life we are in, we dream of building a house, settling into a good job, admission to a Foreign University, a lavish wedding, etc., 

Just like the other life stages we go through, your 40s is when you are mature, yet relaxed in your life. This is normally the time by which people are at the peak of their careers becoming CTOs, CEOs, Managing Directors, or so. Along comes the huge responsibilities such as having a family to support, and need to balance duties like funding your children’s education and paying off a home/car loan. While you may have taken your finances casually through your 20s and 30s, might have credits due that you have put off paying, one guaranteed solution is to create a plan to pay off debt.

Not only does this help in avoiding any missed deadlines paying the credit but also will result in a good credit score.

In today’s world, you will see that every employed person has a credit card, we all love swiping our cards while shopping, eating out with our loved ones, and plenty of other activities. Little did we realize that slowly we are spiraling off into more and more debt.

Key points to remember about Debts/Loans/Credit :

• Pay off before the deadlines to avoid being charged a hefty amount
• Never exceed buying more than what you earn monthly, if you are earning 60k Per month and are using Credit Cards to use up 1 lac, then you will end up in a cash crunch
• Teach the same to your kids/spouse and always have limited usage of credit cards
• Pay off debts taken by the banks, home/ car loans as they tend to add on interest as you delay paying it off

Read also: What are the different types of loans in India?

Savings  – Figuring out how much you need to save

Let me break it down in simple steps: Write down How much you earn every single month. All income be it from primary, secondary, or a tertiary source.  Add all of them together and you will have a digit X.

If you get 30K salary and 5k from an additional source of income, your overall Income is calculated as 35K in total.

Take that amount X and subtract the monthly expenses Y from it. 

Earnings- Expenses= The wealth that you can create for yourself which will help you smoothly glide through your 40s, 50s, until retirement.

The gap between your earnings and the expenditure becomes your savings which you will deposit in a separate account that you will access only for urgencies.

A major catalyst in Wealth management is building new sources of income. Having a youtube channel, writing a blog, teaching, offering consultation, and other services just to name a few can bring in your second income. If you start as early as 20-25 age, you will have enough savings to go by when you hit the forties.

Read also: How to Conduct a Financial Check-up?

What is a Budget?

Budgeting is the term that refers to creating a money-tracker for ourselves and/or our family to minimize costs and ideally utilize our earnings while saving something for emergencies as life is unpredictable. Also, companies create a budget for all their costs like marketing, sales, resources, stationery, infrastructure, meetings, employee salaries, and alike.

The concept of reverse budgeting:

The concept is simple. You are allotting yourself a certain amount of money to spend according to your monthly income. This should ideally be 1/3rd of your income. 

Sounds simple, yet is difficult to follow by. Explained below is a way to cope to balance the ratio between your savings and expenses.

Reduce expenses

Reducing expenses become harder if you are a materialistic person who likes purchasing a lot of things. All assets or liabilities are hoarded yet are not gaining anything out of it.

How you can reduce some of the unnecessary expenses: 

• Try and avoid sales as they offer attractive discounts on things you might not even require.
• You will end up purchasing things in bulk and might not use them before they are tossed out.
• Always buy as much as you and your family may need. Maintain a notebook or use any app on your smartphone to keep track of expenses. 
• Living minimally is a guaranteed way to reduce your expenses
• Set a weekly and a monthly goal to reduce spending over the budget 

Read also: 9 Tips How to Manage Your Finances in a Systemic Way

A Health Insurance plan

As mentioned, everything is unpredictable which leaves no choice for us but to take insurance for our loved ones and ourselves. If you have not purchased one, rethink. You must cover medical insurance for all the family members including yourself. 

Read also: Insurance and Different Types of Insurance

Saving for Retirement

If you’ve waited until your 40s or waiting to hit your 50s to start saving for retirement, you may feel like it’s too late. But depending on your goal and ability to save, it may be possible that you can still save up efficiently.

With the buzz created in the world of trading, share markets, crypto, metaverse, people are strategically investing their hard-earned money now in various platforms expecting returns.

It is a guaranteed way to increase your assets lying stagnantly in your account, especially cash assets. Do read and research before investing in any market. These investments are alluring and do come with a risk factor one cannot overlook.

Invest in what you know; research, strategize and keep revising those strategies to build a strong portfolio.

As Quoted by the wealth magnet, himself Mr.Warren buffet : ” Don’t put all your eggs in one basket”

A wonderful guide you can read- The Psychology of Money – Morgan Housel to gain insights about financial goals, strategies, and planning and even though this is an informative book, kids too can understand the well-written book.

Conclusion

The key steps to achieving your financial milestones before 40 are Saving, Budgeting, and Investing which will not only help you in your earlier years but also after retirement. To know where you can invest, whether you want to invest in Crypto or Mutual Funds, check here for a clear demonstration –Bitcoin Vs Mutual Funds.