Turning 40 might make you feel like you’re under pressure to make all the right financial decisions as quickly as possible. But fear not! You don’t need to be Warren Buffet to make these right choices before you turn 40—all you need is a sprinkle of wisdom and a hearty dollop of determination. Whether you’re a savings superstar or a debt dodger, here are 15 smart financial decisions you should make before the big four-zero.
1. Embrace Budgeting
Forget what you know – budgeting isn’t just for accountants or Excel nerds. The right budget can be a lifesaver, as it can keep you from making unnecessary expenses and steer you toward your financial goals. You might be surprised at how much you’re actually spending or how much money you have left over!
2. Reduce Your High-Interest Debt
High-interest debt is one of the biggest obstacles to financial freedom, and there are some things you can do to stop it. Prioritize paying off these debts to reduce the amount of money you’re wasting on interest payments. This will free up more of your income for savings and investments, which can drastically help you on the way to financial freedom.
3. Build an Emergency Fund
If you follow anything on this list, make sure it’s this one! You won’t realize how important an emergency fund is until you have one. It’ll help you cover unexpected expenses without relying on credit cards or loans. You should aim to save three to six months’ worth of living expenses to give you a safety net for whatever the future may hold.
4. Start Saving for Retirement Now
Retirement might seem a while off, but the sooner you start saving for it, the better. Put some money into something like a 401(k) or IRA, especially if your employer offers matching contributions. These accounts benefit from compound interest over time, which will make your early contributions significantly more valuable. Start saving a small percentage of your income and gradually increase the amount as you make more money.
5. Begin Investing Wisely
Investing can be a powerful way to grow your wealth over the long term. We can’t tell you exactly where to invest your money, as that’s a completely personal decision. However, we do recommend speaking to a financial advisor to find out the best investments for your financial situation and personal goals.
6. Improve and Maintain Your Credit Score
A good credit score can save you thousands of dollars in interest over your lifetime. It’ll also help you get lower rates on mortgages, car loans, and other forms of credit. The best ways to get a good score are to pay your bills on time and keep your credit utilization low. You should also regularly check your report to make sure there are no mistakes.
7. Make Sure You Have Insurance
You might think that insurance is pointless. Sure, it’s more of a safety net than anything, but it’ll definitely help to protect your finances after unexpected accidents. Health insurance and auto insurance are legal necessities, and you should also consider life and homeowner’s insurance, too. Annually review your coverage to ensure it meets your current needs and doesn’t leave you exposed to any serious financial risks.
8. Think Carefully About Owning a Home
Owning a home can be a part of building wealth, but you should only do it when you’re financially ready. Is your job stable enough to cover the cost of one? How’s the local real estate market? Are you prepared (and willing) to handle any maintenance and unexpected repairs? There are a ton of questions to consider, and you should also be mindful of additional costs like taxes and insurance.
9. Practice Living Below Your Means
Another important thing to remember is to live below your means. Spend less than you earn and avoid unnecessary debt. In the short term, this might seem frustrating, but it’ll help you in the long term by allowing you to save and invest more. Focus on spending money on things that bring true value and happiness to your life.
10. Educate Yourself Financially
Nothing beats a strong understanding of personal finance.If you’ve got some extra time, invest it in learning on https://cangafltd.com/ about things like budgeting and investing. There are plenty of free resources, like online courses and podcasts, to help you make informed financial decisions. You can even visit your local library to see if they have any courses running.
11. Avoid Lifestyle Inflation
As your income increases, you might be tempted to increase your spending proportionally – but don’t do it. You can avoid lifestyle inflation by maintaining a relatively constant standard of living, which allows you to allocate more money toward savings and investments. This will help your finances grow long-term.
12. Use the Power of Compound Interest
Compound interest essentially means you can earn interest on interest, and it’s more helpful than you might think. It can turn modest savings into a lot of wealth over time! Start saving and investing as early as possible to maximize the benefits of compound interest, which will help you to secure your financial future.
13. Explore Side Hustles
A side hustle can help your income, providing extra money that can be used to pay down debt or save. Look for opportunities that match your skills and interests. There are plenty of freelancing sites that you can sign up for to show off your skills. It can help you make money and, who knows – it could even become a new career or business opportunity!
14. Automate Your Finances
One of the easiest things to do is automate your financial transactions. Whether you’re paying bills, putting money into savings, or making investments, automating your finances means you’ll never miss a payment. This set-and-forget approach simplifies money management and will also mean you avoid late fees and penalties.
15. Network Effectively
Building a strong professional network can lead to new job opportunities and business opportunities you may never have dreamed of. Try taking part in online forums and community groups to widen your network. At the very least, you’ll meet some new people, and at best, you might form genuine relationships that could lead to financial opportunities.
In The Future
Clearly, if you’re trying to get financially stable before 40, there are several steps that you can take. But the most important thing to remember is that you need to plan proactively and be disciplined with your savings. None of these steps can guarantee you’ll get there on time, but they’re all steps in the right direction.
Tamila McDonald is a U.S. Army veteran with 20 years of service, including five years as a military financial advisor. After retiring from the Army, she spent eight years as an AFCPE-certified personal financial advisor for wounded warriors and their families. Now she writes about personal finance and benefits programs for numerous financial websites.
In a world where money talks, it’s crazy how many fairy tales we’ve come to believe about our finances. Myths about money management get passed down like cherished family recipes, sometimes with just as much spice but far less substance. Let’s take a look at 12 financial myths that have been quietly costing us and the truth behind this misinformation.
1. A Penny Saved is a Penny Earned… In a Low-Interest Savings Account
Sure, it’s always good to save money. But putting your dollars in a bank account with low interest rates does more harm than good! Yes, your money is safe, but it’s also snoozing on the job when it could be out there making more. Do your research and find a bank that’ll make saving bucks worth it.
2. Investing Is Only for the Rich
Despite what you might think, investing isn’t just for the rich. There are so many online platforms that can help you get into investing, no matter how much money you’re prepared to put in. You can start with a little and learn as you go. Instead of thinking you need to put a huge amount upfront, focus on making informed choices and gradually building a diverse portfolio.
3. The Stock Market Is Basically a Casino
Speaking of investing, some people think that it’s just like gambling. If you’re being smart with your money, it’s really not! Successful investing involves doing your research and being patient. Focus on market trends and individual companies to help you plan for the long term. Yes, there are risks, but smart investment choices can lead to substantial returns over time, unlike gambling.
4. Buying a House Is Always Better Than Renting
Homeownership isn’t the right choice for everyone. The decision to buy or rent depends on your financial stability and what you want from life. Owning a home involves so many additional costs, like property taxes and maintenance, which can add up over time. Renting can offer more flexibility and is much better for those who aren’t ready for the long-term commitment and costs of homeownership.
5. Credit Cards Are the Root of All Debt
People hate credit cards way too much. However, if you use them wisely, they can be powerful financial tools that give you benefits like rewards programs and a better credit score. The key to using credit cards effectively is to spend within your means and pay the full balance each month. As long as you’re sensible, they’re really great!
6. You Need a Huge Income to Save for Retirement
You don’t need to have loads of money to start saving for retirement. Even regular small contributions to a retirement savings plan can help you save, thanks to compound interest. The most important thing is to begin as early as possible so that your investments have more time to grow.
7. Keeping Money Under the Mattress Is Safe
It’s 2024, and this myth is still a thing – why?! Keeping money at home is hardly the safest option, given the risk of theft, loss, or even damage. Banks and credit unions offer much more security for your funds, including insurance protection up to a certain limit through organizations like the FDIC in the United States. Plus, you can’t gain interest if you keep it under a mattress!
8. All Debt Is Bad Debt
Not all debt is bad for your financial health. Yes, high-interest debt can be pretty harmful, but other types of debt, like student loans or mortgages, are investments in your future. These can increase your net worth or income potential over time. What you really need to think about is the reason for the debt and whether it actually helps your financial growth or stability.
9. You Can’t Save Money and Enjoy Life
Saving money doesn’t mean you have to stop enjoying yourself. Instead, make informed choices on how to use your funds to both save for the future and enjoy the present. Many fun activities and experiences don’t require you to spend loads of cash, so find joy in the simpler pleasures. Being mindful of your spending is a total win-win!
10. Financial Advisors Are Only for the Wealthy
Financial advice helps people at all income levels, not just the rich. A financial advisor can teach you about budgeting, investing, retirement planning, and more to optimize your finances. Try speaking with one to take a step towards achieving your financial goals and improving your financial literacy.
11. Budgeting Is Restrictive and Time-Consuming
Budgeting gets a bad rep for being boring, but it can actually help you make your money work for you. There are plenty of modern tools and apps out there that not only make tracking your money easy but fun! Budgeting is less of a leash and more of a roadmap to financial freedom. It’ll help you get to your goals without getting lost in impulse buys.
12. More Money Means More Happiness
having enough to cover your needs and a few wants can give you a comfortable life, the idea that wealth will directly make you happy is a lie. Studies suggest that after reaching a certain income level, more money has diminishing returns on overall happiness. It’s how you use your resources that make you happy, not just the figure in your bank account.
Debunking the Myths
The biggest thing to remember is that it’s not about having a mountain of cash but about making informed, smart decisions with what you have. Whether you’re saving pennies or rolling in dough, the real trick is to stay curious and keep learning. After all, financial literacy can make us a little richer in knowledge – and, hopefully, in our wallets, too.
Tamila McDonald is a U.S. Army veteran with 20 years of service, including five years as a military financial advisor. After retiring from the Army, she spent eight years as an AFCPE-certified personal financial advisor for wounded warriors and their families. Now she writes about personal finance and benefits programs for numerous financial websites.
Let’s face it – personal finance is difficult. It’s not impossible, but boy, does it require some creativity! Like most generations, millennials are no strangers to making financial mistakes, whether it’s splurging on avocado toast or betting the farm on crypto. The struggle is real! Here are 13 money mistakes many millennials make (try saying that five times fast!) and how to avoid them.
1. Ignoring Retirement Savings
Many millennials think that retirement is way too far away to even care about, so they don’t bother saving for it. That’s a big mistake! By contributing early, even in small amounts, you’re allowing compound interest to work its magic. This will turn your pennies into dollars before you know it, so make sure you start it early.
2. Fear of Investing
It’s natural to feel hesitant about investing. After all, stocks and bonds can be confusing! But don’t let this fear stop you from earning some extra cash – instead, start overcoming this fear by educating yourself on the basics of investing. Speak to an investment adviser to help build your confidence and learn more about the financial market.
3. Living Beyond Means
A common millennial mistake is spending more money than they earn, which quickly leads to them dealing with debt and financial stress. The key to avoiding this is to create and follow a budget. Track your expenses and identify where you can reduce your spending to ensure that your outflow isn’t greater than your income.
4. Ignoring Emergency Funds
Many millennials don’t have an emergency fund, which is hurting them more than they realize. Without one, unexpected expenses can easily destabilize their finances. To prevent this, put around three to six months of living expenses in a savings account and leave it there. It’s a financial buffer for the unknown that will keep you afloat.
5. Falling for Fast Fashion
Sure, trendy and affordable clothing seems nice. However, the prices soon add up when you find yourself having to buy new ones because your clothes have worn out! A more sustainable approach is to invest in high-quality, timeless pieces that will last longer, which will save you money and help the environment. It’s a win-win situation!
6. Overusing Credit Cards
It’s very easy to misuse your credit card, and millennials know this all too well. Soon enough, they’ll have skyrocketing debt with high interest charges—ouch! To avoid this, use your credit wisely by spending only what you can pay off in full at the end of each billing cycle. This way, you can use any rewards or benefits from your card without the burden of debt.
7. Student Loans Mismanagement
Many millennials struggle with student debt simply because they don’t understand their repayment options. You’ve got to get familiar with the different plans available, whether it’s income-driven repayment or standard repayment plans, and reassess these options as your financial situation changes. You might even want to refinance your loan if it leads to lower interest rates.
8. Ignoring Health Insurance
For millennials, ignoring health insurance might seem like a cost-saving tactic, but it’s a risky move that can lead to huge financial problems. Health issues are unpredictable, and you might be surprised at how high medical care costs can be. Get good coverage to protect yourself and your loved ones. Don’t be afraid to speak to a broker or shop around to get the best deal.
9. Subscription Overload
It’s hard for millennials to resist the appeal of subscription services, whether it’s streaming platforms or meal kits. However, these can lead to monthly bills that can quickly rise without them realizing it. Check over your subscription services regularly to identify which ones you actually use and cancel anything that’s unnecessary. If you’re struggling to find anything to cancel, remember nothing is stopping you from canceling it now, and resubscribing in a few months if needed!
10. Not Negotiating Salary
Many millennials miss out on potential earnings by accepting an initial offer without discussion. Before entering salary negotiations, research the typical pay for the role and industry to get a realistic expectation. If you do this well, you’ll get more money immediately and also set a higher baseline for future raises and benefits.
11. Not Being Financially Literate
A lot of millennials completely underestimate the importance of financial literacy, but understanding the basics will help you to become more financially stable. You don’t have to just read stuffy old books or do online courses – why not speak to people who are in the know? That way, you can make more informed decisions.
12. Not Using Technology to Your Advantage
Technology can solve almost anything in life, so it’s pretty strange that so many millennials seem to forget to use it to help with finances. There are so many budgeting apps and automated savings programs out there that can help with finances. Every single one of them can make financial planning far easier!
13. Impulse Buying
Impulse buying is an absolute killer for millennials. Sure, a little spending here and there is okay, but soon enough, it adds up! To avoid this, try waiting 48 hours or even 30 days before buying something. Waiting this long might make you realize that you don’t actually need it. But if you still want it, don’t feel any shame in buying it!
Many Challenges
Although millennials face quite a few financial challenges, there are tons of resources at their disposal to help them avoid these issues. And you can do it too! Try to address some of these common mistakes to put yourself on the road to financial freedom. After all, it’s your future – don’t you want it to be good?
Tamila McDonald is a U.S. Army veteran with 20 years of service, including five years as a military financial advisor. After retiring from the Army, she spent eight years as an AFCPE-certified personal financial advisor for wounded warriors and their families. Now she writes about personal finance and benefits programs for numerous financial websites.
Managing money has its own set of hieroglyphics, and let’s be honest, not everyone is fluent in financial gibberish! You’re probably making some money mistakes that could easily be avoided. And today, we’re going to rescue those precious dollars from the dark corners of mismanagement. Here are 20 of the most common yet overlooked money mishaps that are silently sabotaging your bank account.
1. Ignoring Your Subscriptions
Remember that app you downloaded for that one specific thing last year? Yeah, it’s still quietly eating into your funds. You need to regularly check your subscriptions and see if you’re still using them. If not – delete them! You might be surprised at how much you can actually save by cutting back.
2. Brand Loyalty Overkill
Sure, your favorite brand’s logo might make you feel good, but your bank account? Not so much. Going for store brands can save you a bundle, and usually, the difference in quality is hardly noticeable. You’ll definitely see improvements in your wallet, although your heart might take a little longer to get over the breakup!
3. The Daily Coffee Caper
Spending $5 daily on coffee might seem like no biggie. However, do the math, and you’ll realize you’re pouring a small fortune into your caffeine habit. Investing in a decent coffee maker pays off in just a month, which could save you enough to fund a mini-vacation. Wouldn’t you rather that than wait in line at Dunkin’?
4. Sale Frenzy Fiascos
Sales can be deceptive. Buying something you don’t need just because it’s on sale isn’t the saving you might think it is. Resist the temptation, and buy only what you truly need or will use. Retailers are very smart at making you feel like you’re saving money when you’re actually spending it!
5. Eating Out Excessively
Cooking at home is far cheaper than eating out, and it’s also much healthier. Plus, the internet is full of recipes that can turn even the most kitchen-phobic person into a home chef! Take the challenge to recreate your favorite restaurant dish at home. It might become your new favorite party trick!
6. Skipping Budget Meetings with Yourself
Not having a budget is a surefire way to end up an economic disaster. Set up a monthly budget meeting with yourself. Focus lessons on the restriction and more on making sure your spending aligns with your goals. It’s like a date night with your finances – make it fun with your favorite snack and some good music.
7. The Minimum Payment Trap
Paying only the minimum on your credit cards certainly isn’t going to help you. You’ll get nowhere fast, and the interest will sink you. Try to pay more than the minimum, or better yet, the full balance. If you treat your credit card like a debit card, paying off what you spend each month, you’ll never face interest issues.
8. Impulse Shopping Online
With the whole internet at your fingertips, impulse buys are just a click away. Before you know it, you’ve ordered a life-size cardboard cutout of your favorite TV character! Ask yourself if you really need an item before hitting that purchase button. If you’re guilty of late-night shopping sprees, maybe it’s time to hide your credit card.
9. Wasting Food
Americans throw away a shocking amount of food each year. Plan your meals and buy only what you need. If you’re not sure what to do, there are plenty of meal-planning guides and apps out there to help you. You could even turn into a challenge, where the prize is saving money and reducing waste.
10. Not Using Cashback Apps
If you’re ignoring cashback and reward apps, then you’re essentially leaving free money on the table! Many of these apps offer cashback on purchases you were going to make anyway – sign up and start collecting. Just make sure you only stick to your regular purchases. It’s the closest thing to finding money on the street.
11. Hoarding Reward Points
Talking of reward points – don’t just leave them to gather dust. Sometimes, companies put an expiry date on them, which will leave you with nothing. Plan a trip or redeem them for something you’ll enjoy and make those points work for you! They’re there for a reason, so you should use them.
12. Paying Bank Fees
Bank fees for ATMs, checking accounts, and overdrafts can add up to a hefty sum over time. There’s no reason to pay for the privilege of accessing your own money, so shop around for a bank that offers fee-free options. In the digital age, your bank should be paying you for the privilege of holding onto your cash, not the other way around!
13. Forgetting to Negotiate Bills
Many people pay their bills as they come, never questioning if they could be lower. You can negotiate almost any service you pay for. You’re not being cheap – you’re just not overpaying. So, pick up the phone and channel your inner negotiator. You might be surprised at how many companies are willing to offer you a discount to keep you as a customer!
14. Overlooking Secondhand Savings
New isn’t always better. From cars to clothes, buying secondhand can save you a ton of cash without sacrificing quality. Give pre-loved items a chance to impress you – this is your chance to score nearly new items at a fraction of the cost. Plus, you’re helping out Mother Nature by cutting down on waste, which is always a good thing.
15. Undervaluing Your Time
Time is one of the few resources that you can never get back. Successful people often choose to spend money to save time because they understand that time is priceless. Try outsourcing the things that don’t make you money or improve your financial situation and focus on activities that do.
16. Not Getting Professional Help
Trying to figure everything out on your own, especially matters outside your expertise, can be a huge mistake. Successful people aren’t afraid to ask for help and hire professionals like lawyers, accountants, and financial advisors. They know that these people can help them save time and avoid costly mistakes.
17. Relying on a Single Source of Income
You might think you’re fine with just one job, but you’d be wrong! Having multiple income streams can keep you safe if one source dries up. This could involve side hustles or even creating passive income to keep the money coming in. Make sure your income comes from multiple sources to keep yourself afloat.
18. Ignoring Employer Benefits
Many employers offer matching contributions to 401K plans, and there’s absolutely no reason not to use them. Even some state governments will do it! If you put a beneficiary on any employer-provided life insurance, you’ll be able to make the most of your benefits package. There’s nothing to lose!
19. Overlooking the Power of Health Savings Accounts
Health Savings Accounts (HSAs) can be a great tool for any immediate medical expenses or retirement savings. Your contributions are tax-deductible and grow tax-free. If you need to withdraw for qualified medical expenses, then that’s also tax-free. After the age of 65, you can take out funds for any reason, subject to regular income tax. Get one!
20. Forgetting to Update Your Financial Plan Regularly
Your financial situation should be changing with you. Got married? Change it. Got a new job? Change it. Received an inheritance? Change it. Any major life event can completely change your financial goals and strategies, so keep that in mind. You should revisit your financial plan at least annually or after any major life change to ensure it matches your current situation and future goals.
A Penny for Your Thoughts
Money management doesn’t have to be difficult. Following our advice can help you turn your financial journey into an adventure filled with learning and growth. Forget about being perfect – the main goal is to make progress. Each small step towards correcting these mistakes can help you make some significant savings and secure a better financial future.
Tamila McDonald is a U.S. Army veteran with 20 years of service, including five years as a military financial advisor. After retiring from the Army, she spent eight years as an AFCPE-certified personal financial advisor for wounded warriors and their families. Now she writes about personal finance and benefits programs for numerous financial websites.
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