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 down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
