Ashwin Kumar Palo

The 40s are a pivotal period for the majority of Indians. This is a time of high income, and people are about halfway between the age of working and the typical retirement age. What you do with your money and how you save to retire in your 40s will significantly influence your assets in the future. Here are 8 factors you need to consider in order to help you plan your finances and build wealth during your 40s.

A debt-free schedule:

It is common to have educational loans, auto loans, mortgages, credit card debt, and other debts before the age of 40. When you reach this age, it is important to have a budget to get rid of the loans.

If you're planning to increase your wealth during your 40s, be able to get rid of credit card debt since it is often the one with the highest interest rates. A better budget and a change in your spending habits could allow you to invest more towards debt reduction, which means you'll end up in your 40s without owing more and focus on other payments.

Emergency Fund:

Medical bills, unexpected expenses or layoffs may happen at any time.A well-stocked emergency fund can protect against the unexpected, and it's more essential than ever in your prime earnings times. Experts recommend three to six months' worth of living expenses in an emergency savings account, however, some believe that saving at least 12 months is the best option.

Retirement Fund:

It's likely that you've contributed to your retirement savings plan from the time when you began working. If you've not, it's not too late when you start saving for retirement around 40. Retirement plans offer tax benefits and leverage the ability of compounded interest in order to boost savings for retirement in the long haul.

If you are contributing by going to the branch of your bank or your HR department, you can switch to an automatic transfer from every paycheck to the retirement account. So, you don't need to contemplate it, and you can spread your investment throughout the year.

Life Insurance:

It is recommended that you have health insurance coverage for yourself as well as your entire family. The purchase of life insurance is a vital aspect of planning your financial future in your 40s. Whether permanent or term, life insurance will pay a death benefit to the beneficiaries of your estate that can be used to pay for the cost of living including education, mortgage, and funeral expenses.

Save for a permanent House:

If buying a house makes sense in your financial situation and location, your 40s are a good-time to start getting serious. It’s a good idea to save 20% for a down payment. With that amount, you’ll avoid paying private mortgage insurance, an additional home cost for some, which protects the mortgage company if you default on payments. Those putting 20% down when buying a house don’t have to purchase this coverage, which is a financial saving.

While this is a long list of things to do, you don’t have to do it all at once. Chances are you’re already on track with many of these financial steps, but considering all these factors is a good start to building wealth in your 40s.

Build multiple income streams:

The creation of multiple streams of income during your 40s is an excellent investment as you'll earn extra money in the coming two decades or less that you can use for retirement savings, or investing it into more income-generating assets. One benefit of having additional income streams is that cash can flow after retirement.

Children’s education:

If you have kids and want to save for their education, this must be top priority on your list of financial goals. The cost of college is currently between INR 4 lakh to INR 20 lakh per student annually for premier colleges and is increasing at an average of 9 per cent per year.

Building Assets:

A good distribution of funds in multiple investment streams can help you generate wealth at a rapid pace.

(DISCLAIMER: This is an opinion piece. The views expressed are the author’s own and have nothing to do with OTV’s charter or views. OTV does not assume any responsibility or liability for the same.)