ommon Mistakes to be avoided in ’40s
This article is the next in our series of avoiding common financial mistakes for a person in their respective age. This time we are going to have a look at financial mistakes to avoid in the ’40s of a person. So when a person reaches his ’40s, they are at the halfway junction between entering adulthood and moving towards their retirement age. At this point of time, one is at the peak of their career i.e. with high earnings but increasing expenses too. As you are moving closer to retirement, it is important to have better control of your finances. One can’t afford to make mistakes at this juncture. Some of the mistakes at this age which can be avoided are listed below:
1) Not taking care of emergency funds:
At the junction of ‘40s if any unforeseen financial crisis or unavoidable circumstances like job loss, medical emergencies, accident, etc. occurs and one does not have an emergency fund in place then one may be forced to buy costlier loans or liquidate their investments. A timely check should be done so that there are enough contingency funds as income and expenses rise.
2) Inadequate Life & Health insurance cover:
People confuse insurance with investments so as a result, they end up buying traditional insurance policies which will not serve the purpose. One must have a Pure term insurance cover as well as sufficient health insurance to protect oneself & dependent family members from rising medical expenses. As a premium for insurance continue to increase with one’s age so it’s better to start as early as possible.
3) Lifestyle expenses getting out of control:
As income increases the temptation to spend on lifestyle also increase. With everything available at our fingertips and an increase in affordability due to attractive EMI options, one can easily be lured. Higher consumer loans and credit card debt can hold one back, as repayment of these loans can take a toll on your savings. So One should have a check on their discretionary spending.
4) Not paying off loans:
Today everyone seems to be living on EMI & loans. Credit cards enhance purchasing power. But one needs to be cautious about the expenditure part. In case if one is using a credit card then the priority should be to pay off debt at the earliest, as the rate of interest charged is very high. Outstanding debts can affect your Credit Rating i.e. CIBIL score. This can prove to be troublesome when one genuinely needs a loan and there will be difficulty acquiring it.
5) Taking returns-based investment decisions:
At 40, one will be having goals like children’s higher education, their marriage& retirement which still have to be met. It is generally seen that many people do the investment based on the returns or by listening to others. Most people invest either in Real Estate or FD or other asset classes which may not always be liquid and can be volatile. So one should not make returns-based investments rather it should be first prioritizing their goals and then choosing the right asset class depending on goals tenure. This will help one to achieve their goals.
How to secure your financial freedom in ‘40s?
- One should always Top up their insurance coverage.
- Diversify the investments: In ‘40s, one is at the perfect age to diversify their portfolio ie choosing equity & fixed income instruments as per their goals and their tenure.
- High ticket purchase should be in control: One must ask before buying anything that is it worthy enough. Wants & desires are unending so do ask questions to yourself before getting swayed away by society or peer pressure.
- Paid off Loans: It’s always better to be debt-free. As in loans you are paying a huge amount of interest. So one should be consistent enough to pay back their loans.
Conclusion:
This age in life brings financial stability but there is less time to rectify any financial mistakes. So one should learn to save their money and make decisions towards their investments. This will help them to secure their financial health and pave the path for a better future. We at Nivesh ki Paathshala, would be happy to help you out with your queries and doubt.