• Guest Writer – Linda Richardson

  Linda Richardson is a New Jersey-based financial content writer and enduring learner with an ongoing interest to learn new things. She uses that curiosity, connected with her knowledge as a financial writer, to write about subjects valuable to small business. You can find her on Twitter at @LindaRossie9

If you are already 40 with no savings, then you should start thinking about your savings as soon as possible. Because the 40s mark a crucial point in everybody’s financial journey. This is the time when everyone tries to stabilize their expenses and savings. This is the time when people have to think about investment and other financial goals to secure their financial future (retirement).

According to the report of Smart Asset, the financial technology company, most of the people retire at the age of 63 in our nation. However, many people work till the age of 65 and unfortunately some never retire either by choice or to fulfill their necessity. The main reason behind this is the coming financial mistakes at the age of 40.

You should take some proper financial steps in your 40s instead of committing childish mistakes.

So, here is a list of financial mistakes that you should avoid in your 40s. Check out the list so that you can announce your retirement in a proper time and enjoy your golden age unboundedly.

Here you go:

Mistake #1: Spending money excessively

You have to be strict in regards to spending to get early retirement. You must challenge your expenses first to achieve your goal.

If you don’t curb your spending behavior, then you will never be able to save for your future. As per the experts, at the age of 40, you need to have a big paycheck and fewer bills to get the desired result.

So, take a close look at your budget and cut all the unnecessary expenses. Track your spending in such a way that you can save 45% of your income every month.

Mistake #2: Incurring high-interest credit card debt

High-interest credit card debt and other consumer debt can destroy your financial future. This kind of debt can literally eat all your income and leave nothing but empty savings accounts. The debt repayment takes away all your money and investment that you have. So, stop incurring debts and deal with credit card debt to become debt-free as soon as possible. Get a better repayment plan to get rid of these pesky debts as early as possible.

Mistake#3: Not growing money through compound interest

Saving a major portion of income is not enough; you have to grow your money through compounding. Investing in mutual funds and stocks can be beneficial. You should have an investment portfolio with nearly 65 annual rates of return. As per the experts, the assets in your portfolio should have a growth rate that should be higher than the inflation rate.

Mistake#4: Not investing early and for a longer period

“The early bird catches the worm” concept also applies in investing money.

Jim Wang of WalletHacks said, “assuming a standard 7 percent return, someone who invested $100 a month from age 20 to 30 would still end up with more money than someone who invested $100 a month from ages 30 to 60.”

However, it is also important to make the money grow over the decades rather than months or years.

Investment in indexing and asset allocation over the decades can help to grow money significantly. Remember, you are already 40, so, you should start investing otherwise you will be late.

Mistake#5: Not having an emergency fund

It is very important that you save some amount of money every month from your monthly income to create an emergency savings account. The best way to do this is to deduct a certain amount of money from your paycheck every month regularly. However, this should not be an alternative to paying your debt or saving money for retirement in any fund. This should be done simultaneously. This emergency fund can come off a lot of use, right from paying medical bills, to meet any emergency financial requirement to pay for the school or college fees of your children.

Mistake#6: Not diversifying investments

Unless you diversify your investments, you stand at a high risk to lose your money. You should maintain a diversified investment which should be a mix of equity-indexed annuities, universal life insurance, blue-chip stocks, real estate investment trusts as well as money market funds.

Mistake#7: Ignoring medical expenses

Many of us believe that Medicare will cover everything. It is true that Medicare covers many types of medical expenses starting at age 65 but it won’t cover everything. You should remember that Medicare will cover certain medical expenses. Also, you’ll be liable to pay deductibles and copayments on these expenses out of your own pocket which Medicare does not cover. Thus, you should go for supplemental health insurance coverage where the costs will vary as per the coverage you select.

Lastly, you should watch out for these above mentioned financial mistakes and rectify to ensure a better financial life ahead. Remember, when you hit 40, you should have clear planning about short-term and long-term financial goals. If you still don’t know where to start, then get financial expert help to understand better financial planning. Otherwise, you will not be able to secure your financial future.