Turning 40: Key Financial Steps To Take

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Barry Choi

June 29, 2021

Saving strategies

I’m turning the big 4-0 this year. It seems like yesterday when I celebrated my 30th birthday with all my closest friends, but a decade has passed just like that. During that time, I became a father and changed careers. It’s crazy to think about all I’ve been through over the last 10 years.

Many of my friends are in similar situations. We’re mostly all settled and comfortable. It’s unlikely that we’ll stray from the course we’re currently on. That said, we may need to take some financial steps to ensure that we don’t get detoured from reaching our goals.

Get rid of consumer debt

If you’ve hit 40 and you’re still hanging onto consumer debt, you may find it a challenge to reach some of your financial goals. Think about it. It’s hard to save for retirement when you’re paying 20% interest on your credit cards. Even if you have a low interest line of credit where the monthly payments are somewhat more affordable, you’re still paying someone back. In contrast, you could be saving more money if you didn’t have any debt.

Educate yourself

At this age, you’ve likely got a good grasp on your monthly budget, but how much do you really know about money? Do you understand how the markets or compound interest works? How about your RRSP and TFSA? Are you clear about all the tax benefits that come with those accounts? If you said no, it’s an excellent time to educate yourself about personal finance. Understandably, you might be tight on free time, but spending an hour or two a week doing some research can go a long way. No one expects you to become a financial guru, but a little bit of research could pay off big in the long run.

Reassess your relationship with your financial advisor

There are many great financial advisors out there, but there are also ones who pay very little attention to their clients. Have you spoken to your financial advisor about your portfolio recently? Is it performing as well as the average index? Are you getting the service you think you deserve?

If you feel you are not receiving the level of care you expect, then it may be time to find a new advisor. You can also look at taking more control of your finances yourself and with the advent of robo advisors in recent years, there are even more options available for self-directed investors.

Figure out what your priorities are

Once you hit 40, you’re in an exciting situation. You’ll likely be nearing the peak of your career, so your income might be higher compared to your 30’s. That said, you may still have many financial goals on your mind. You might want to contribute to your child’s Registered Education Savings Plan. Paying down your mortgage as soon as possible might be top of mind. Or you may want to focus on your Registered Retirement Savings Plan or Tax-Free Savings Plan. It’s not like you need to focus on one thing, but you’ll need to crunch the numbers to ensure that you’re on track to reach your goals.

Get on the same page as your partner

At 40, you may have been married for many years, or you could be at the start of a new relationship. Regardless of where you’re at, you’ll want to ensure that you and your partner are on the same page regarding financial goals. It’s not like you need to disclose every dollar you’re spending, but it’s a good idea to have regular money conversations. By doing this, you can ensure that you’re both working towards common goals. If there are any money disagreements, use these conversations to find common ground.

Invest in your health

We all know that exercising and eating well should be a priority at any age, but once you hit 40, your body may need some extra maintenance. Make sure you schedule regular visits with your doctor and take any optional exams as they may help catch any health issues early.

Besides keeping in shape, you may also want to consider life insurance if you don’t already have it. Having life insurance ensures that your loved ones are set financially if you suddenly pass. You may also want to look into disability insurance since you’ll want to protect your income if you’re unable to work for an extended period.

Talk to your parents

While 40 is still relatively young, the reality is that many people who are at this age will have parents that are well into their retirement years. If the subject hasn’t come up already, you should talk to your parents about their financial situation. Will they be relying on you for some additional income? If so, how does that affect your lifestyle? Even if they’re financially secure, you still need to talk to them about what their wishes are. Some people may want to live in their home for as long as possible, while others may need to move into an assisted living home. Either way, you’ll need to plan their finances accordingly.

The bottom line

Turning 40 is a milestone that should be celebrated. Instead of having a mid-life crisis and buying a fancy sports car, take the time to reassess where you currently stand financially. Don’t be discouraged if you haven’t saved as much as you would have liked, there’s still plenty of time to get on track.