The furnace goes out or the roof springs a leak. Do you borrow to pay for the repairs? The correct answer is no. In order to successfully meet your present and future financial goals, you need “insurance” for unexpected life snafus.
Financial emergencies will always arise when you least expect them, so being prepared is your best defense. You should have three to six months of your living expenses in an easy-to-access account for such occasions.
For example, without an emergency fund, if your roof needs a $2,000 repair, you would be forced to borrow money for the repair. If you use a credit card, which charges 18 percent interest to pay the repair, it will take you eight months to pay off that $2,000. And that’s with an added $124 tacked on for interest in addition to the $300 you’ll have to fork over every month. This can put your budget in disarray and cause you to neglect other financial commitments.
You should always keep your finances in order so you can meet your current and future financial needs — especially in your 40s. A cornerstone of sound financial management is financially preparing you and your family for the unexpected with an emergency fund.
If you’re looking to retire at the full retirement age of 67, now is the perfect time to maximize your human capital and subsequently your lifetime wealth. Human capital is similar to any capital; it’s all about investing in yourself, typically through education or training that will benefit you in the future.
Consider your career and working years as your human capital. If you earn $70,000 per year, then you’ll have earned $1,890,000 between the ages of 40 and 67. Think about how you can maximize your human capital so that it will be worth more over time. In fact, how you manage it over the next 26 years could be the difference between a comfortable retirement and a tough one.
Take courses or gain an advanced degree to boost your lifetime earnings and maximize your human capital. The well-respected Chronicle of Higher Education listed the median earnings for each of the following education levels. The data is sourced from its 2011 Current Population Survey.
Education Level
Median Annual Earnings
Less than 9th grade
$28,294
9th-12th grade without a diploma
$31,162
High School Graduate
$50,401
Some College With No Degree
$60,980
Associate Degree
$70,450
Bachelor’s Degree
$105,552
Master’s Degree
$124,341
Professional Degree
$154,333
Doctorate
$162,159
By devoting time to increasing your education, or skill level within your field, you have the opportunity to significantly grow your lifetime earnings. Your 40s are the ideal time to commit to additional education as you will have many years ahead to amplify your increased earnings.
3. Maximize Your 401k Contribution
Many experts recommend putting retirement savings first — even above children’s college education. No one else will save for your retirement, yet kids have other options to pay for college.
For 2023, the maximum contribution amount for 401(k) plans is $22,500. [3] This might sound like a lot, but consider the benefits. If you start with zero retirement savings at age 40, and invest $22,500 per period, you can end up with over $1.5 million at retirement age 67. [3a..used 32%, which is $22,400 and $70,000 annual salary] And that’s without considering any company-match contribution your employer may offer.
4. Invest in Your Health
Now is the time to make your health a priority for the present and the future. Julie Rains, RRCA-certified running coach and personal finance journalist, found that in her 40s her health had taken a back seat to kids, work and life commitments. She recommended joining a gym, YMCA, personal training, fitness classes, biking or finding an activity that works for you. After choosing your health path, take the time to practice and implement your healthy habits.
According to the Physical Activity Guidelines for Americans from the U.S. Department of Health and Human Services, adults should do at least 2 hours and 30 minutes to 5 hours per week of moderate-intensity exercises, or 1 hour and 15 minutes to 2 hours and 30 minutes per week of moderate- and vigorous-intensity aerobic activities. [5, p. 8] For additional health benefits, the U.S. Department of Health and Human Services recommends that adults also do strength-training activities of at least moderate intensity that involve all major muscle groups at least two days per week. [5, p. 8]
Staying healthy will not only be good for you physically, it will be great for your finances as you avoid unnecessary medical expenses.
5. Prioritize Your Mental Wellbeing
First, take some for yourself each day — even if it’s just for a few minutes — and breathe deeply. Think about the good things in your life. Also, strive to take a few hours each week to do something you enjoy, such as spending time with loved ones, taking a hike or working on a treasured hobby.
Next, make a vow to no longer push aside the way you feel and try to muscle through. Instead, acknowledge those feelings of anxiety, guilt, depression or stress.[5] Then, decide if you need to seek professional help to deal with them.[5]
Ask your employer’s human resources department if your employer offers an Employee Assistance Program, also known as an EAP. [5a] If so, you may be able to get mental health services for free. [5a]If you’re attending college, you may be able to get free mental health services there. [5a]Other options are online counseling, mobile apps, support groups and federally funded health centers. [5a]
If your mental wellbeing is suffering due to lack of boundaries, such as people demanding too much of your time or disrespectful coworkers, work on setting and enforcing appropriate boundaries. Once you decide what your boundaries are, you’ll need to communicate those boundaries to those around you. Additionally, always speak up when anyone fails to respect the boundaries you’ve put into place.
6. Build Your Net Worth With Dividends
In today’s uncertain employment climate, those workers with more than one source of income are more likely to prosper during a layoff and in retirement. An easy source of additional income is receiving dividends and capital gains from investing. Although investing for retirement is important, committing to stock and bond funds outside of a retirement account is also useful for building your net worth.
Since 1988, dividends represented 40 percent of total financial asset returns. Fund companies offer many high dividend funds. Consider these high dividend stocks to create an additional income stream for the future. Money invested in stocks and bonds isn’t for short-term goals, but is an investment for your future.
7. Do a Lifestyle Audit
A lifestyle audit is an overview of your own living standards in regards to your income. In addition to examining whether your lifestyle is consistent with your income, there are several other aspects to consider with a lifestyle audit.
It’s easy to let expenses creep up over time. A subscription here, a gadget there, and before you know it, you’re spending thousands of dollars more a year. By recouping unnecessary and superfluous expenses, you’ll free up cash for what really matters.
Start your audit by looking over your expenses for the last several months. Ask yourself three questions:
Is this expense consistent with my short- and long-term goals?
Is this expense consistent with my values?
Is this expense giving me both short- and long-term enjoyment?
If you answered no to any of those questions, consider eliminating the expense and diverting the money toward savings, investing or other activities that fit in with your current and future goals and values.
Investing in Yourself at 40 Will Pay Off Now and Later
By the time you’re in your 40s, you’ve got your career and family on track — make sure your finances and wellbeing are on track too. Make decisions that will support not only the lifestyle, health and mental clarity you want now, but also your future goals and aspirations.
Cynthia Measom contributed to the reporting of this article.
TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 103.40 points at 24,542.48.
In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.
The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.
The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.
The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.
This report by The Canadian Press was first published Oct. 16, 2024.
TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.
The S&P/TSX composite index was up 205.86 points at 24,508.12.
In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.
The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.
The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.
The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.
This report by The Canadian Press was first published Oct. 11, 2024.
TORONTO – Canada’s main stock index was little changed in late-morning trading as the financial sector fell, but energy and base metal stocks moved higher.
The S&P/TSX composite index was up 0.05 of a point at 24,224.95.
In New York, the Dow Jones industrial average was down 94.31 points at 42,417.69. The S&P 500 index was down 10.91 points at 5,781.13, while the Nasdaq composite was down 29.59 points at 18,262.03.
The Canadian dollar traded for 72.71 cents US compared with 73.05 cents US on Wednesday.
The November crude oil contract was up US$1.69 at US$74.93 per barrel and the November natural gas contract was up a penny at US$2.67 per mmBTU.
The December gold contract was up US$14.70 at US$2,640.70 an ounce and the December copper contract was up two cents at US$4.42 a pound.
This report by The Canadian Press was first published Oct. 10, 2024.
