SMART INVESTING TIPS BEFORE TURNING 40
·
They
say life begins at 40, because by that age you should be settled into your long
term career, instead of just working at your job.
·
You
should also ideally have enough financial security to take care of your
family’s goals, pamper your loved ones and yourself too.
·
But
this cannot happen automatically, and you must take steps to ensure that your
40s are everything that you need and want them to be financially.
· You cannot afford to mess up your life's goals at this age.
1. If you don’t already have a Provident Fund account,
open one
·
It is a solid, long term
retirement oriented investment avenue, and you should put it in place as soon
as possible.
· Also,
check your employer’s Provident Fund plan, and make sure you match it by ensuring that you
contribute at least 12% of your Basic salary.
·
You
can even make additional voluntary contributions, through monthly salary
deductions, into it.
2. Top
Up Your Contingency Fund – Every Year
·
The
logic behind having an emergency fund is for tiding over
o
Loss
of your job
o
Inability
to work all of a sudden for whatever reason
o
A
sudden medical emergency on your hands not covered by insurance
·
You
should have enough money in the bank (for immediate access) and in liquid funds, to meet these emergency related expenses.
· You
need to have a contingency fund equivalent of 6-24 months of regular cash
outflows, depending on your need and capability.
· Match your contingency fund with inflation by topping it up every year by at
least 7-8%, preferably 10%.
3. Get a Handle On Your Debt
·
Some
debt is good, some is bad.
·
The
good debt helps grow your wealth by enabling you to buy appreciating assets,
such as a home.
·
The
bad debt lets you buy depreciating assets, like your car, or no assets at all – like credit card debt.
·
If
you have a credit card and use it freely, ensure you don’t run up
credit card debt, as the rate of interest is so incredibly high (up to 40% a year) that you may as well throw your money away.
·
If
you have a home loan, consider whether it is better to prepay your home loan or
not.
· The monthly loan instalments are regular cash outflows and your contingency fund should include them.
·
Whatever
you do, don’t stretch yourself too far out of your comfort zone.
4. Do You Have Enough Insurance?
·
The
premiums of insurance companies are decided on age.
·
In
the case of life insurance, people in their 40s are much more likely to suffer from serious ailments than people in their
30s.
·
For medical insurance too, your age decides your personal health
history and pre-existing diseases.
·
Therefore, the earlier you take insurance, the cheaper it will be to
maintain.
· You
should ideally also have a basic cover, a Personal Accident cover and a Critical Illness
cover, in addition to any insurance provided for you by your employer.
·
Start
young, pay less premium, and renew policies on time, every time.
5. Know
Your Magic Number
·
Everybody
has a magic number which will set you financially free.
·
To
put it simply, it is the amount that you need to retire and live the rest of
your life with your loved ones in a manner to which you are accustomed.
·
You
can achieve this number by saving and investing as much as you can right now,
so you can spend once you retire.
·
Your
Retirement Corpus enables you to live your golden years without
worry, and for which you need to invest every month into growth-oriented assets.
·
So,
know your magic number and start working towards it now.