Nest Egg: Tips to plan your finances in your 40s

Updated: December 21, 2018 7:02:06 AM

At 40, your responsibilities are much more than they were in your 20s and 30s. You need some prudent investments that can help you balance your life goals and your responsibilities.

Your money: Tips to plan your finances in your 40s (Illustration: Shyam Kumar Prasad)

BY Manish Sangal

At 40, your responsibilities are much more than they were in your 20s and 30s. You need some prudent investments that can help you balance your life goals and your responsibilities.

Here are some steps that can help you plan your finances in your 40s.

Use your disposable income prudently

At 40, you are at the peak of your career as your income is growing, you are in better hold of your finances and have more disposable income. At this stage, you may use this income to improve your lifestyle. But this is a golden opportunity to plan your income in a manner to make some sound investments for the future.

Focus on your financial goals

Everybody has different financial goals they would like to achieve at different stages in their lives. For instance, for people in their 20s, a popular financial goal is to create a large corpus to finance their vacation goals. Similarly, by the time you reach your 40s, you may have many different goals.

Funding the college fees for their children is a major financial goal for many parents in their forties. This is a major task since the cost of education has risen exponentially in India. For example, say you have to create a corpus of `10 lakh for your son’s college education that is five years away. If you invest `15,000 per month for five years, you may earn `11.1 lakh by the end of five years assuming an 8% average return per annum.

Increase your investments

A higher income means that you can channel a greater amount of money towards your investments. For example, if you were investing `5,000 per month in a financial product, you can consider increasing your investments to `10,000 or even more. The actual amount, of course, would depend on your financial needs and your monthly savings. So, by increasing your investments you can create a larger corpus and reach your financial goals at a much faster rate.

Fund your retirement

The 40s can be a busy phase in your life as there are many financial goals that demand your attention. Due to this, most people postpone retirement planning. What you need to note is that by investing early for your retirement, which could be 20 years away, you give more time to your money to grow by benefiting from the power of compounding.

By focusing on these smart, yet simple investment moves, and coupling it with discipline, you can get financial success at all life stages. This will help you achieve your financial goals even when you are pursuing your career goals in your 40s.

The writer is chief agency officer, Bajaj Allianz Life Insurance

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Next Stories
1How to prevent your transactions from falling prey to cyber fraud
2Failed to file ITR? Pay Rs 5000 late fee and file before Dec 31, else pay Rs 10,000 till March
3Want to avoid penalty on premature withdrawal of fixed deposit? Here’s the way out