I often get the question “what should I be doing with my money.” This prompted me to write articles on the top money tips for your age across the decades. We just talked about actions to take in your 20s and 30s to increase financial fitness and do the best with your money. If you haven’t started or accomplished the steps from a previous decade now may be a great time to back track and increase your financial fitness. This article is about top money tips for your 40s.
Top Money Tips in Your 40s
1) Increase contributions to retirement accounts. You’re in your peak earning years and you want to put 20% of your money towards investments. It’s time to really start working towards saving and investing 20% of your income if you’re not there already. You may have started with contributing a small amount of your income to retirement accounts like your 401(k), increase that amount to max out your contributions to your 401(k) and IRA. Once you’re contributing the maximum to your retirement accounts then put money towards the rest of your investment portfolio.
2) Expand your investment portfolio. Now is the time to get real serious about your investments if you haven’t already. Work with your financial advisor to make sure your investment portfolio makes sense with your goals, e.g. if you have a goal that is coming up in 5-10 years, you’ll want investments accounts earmarked for that goal to be more conservative and less high risk. Also do a reality check to see if you’re on track to reach your golden number for retirement. If not then consider how to increase your income so you have more money to put towards your financial goals. (Check out this article on 23 side hustles.)
3) Get aggressive with debt. If you still have consumer debt, start aggressively paying off those accounts e.g. credit cards and car loans. Once the consumer debt is out of the way, now is the time to get aggressive with paying off the “good debt.” If you have student loans start throwing all the extra money in the budget to paying off the rest of these loans. There’s no other way to get rid of student loans except to pay them off. Once student loans are gone then target the mortgage. You’re moving towards increasing your assets and decreasing your liabilities. Your home is a liability until it’s completely paid off.
In essence, you want to make sure that you’re preparing financially for your future. You have to put the money to work now so you can use it later.
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