Problem – The proportion of working individuals who stumble upon professional problems is far higher in the 40s than it is in their 20s or 30s. The race to the top in corporate hierarchy catches feverish pace in the forties. But, there may not be enough room for everybody at the top. Also, any setback on the work front can hit you far harder in the 40s than during the 20s or 30s. So, it would be prudent to prepare for a period of zero income due to job loss.
Solution – The solution lies in the emergency fund. This fund will work like your very own bank that gives you money to survive the cold and proverbial ‘winter’. All your monthly basic expenses, recurring liabilities like loan repayments, children related spends, household expenses and utility payments when added will be a number. The emergency fund should have 10-12 months equivalent of this number. It is that simple and easy.
You can make it even bigger by keeping extra money for unforeseen expenses and medical emergencies that may not be covered by health insurance.
Action – Try to keep 10% of your salary each month in this fund, and within a year or so, this contingency fund will be ready for use. You may use term deposits and recurring deposits to accumulate the amount. They will also earn interest in the interim. Once done, shift the funds to liquid mutual funds or a separate savings account. Check out the wide range of account options at Standard Chartered here.
Problem – We can understand the need to borrow. Homes today are impossible without home loans. You may want to take a personal loan for your dream foreign trip. There are also loans given against your securities and bank deposits. Loans allow you to use your future income to make your dreams come true today. However, too much of anything is bad. If you’re in your 40s and still paying 40-50% of your income as loan repayment, now is the time to consolidate your debt and lower outgo.
Solution – You are just twenty years away from retirement. Thanks to inflation, maintaining the same lifestyle post-retirement will prove to be challenging if you don’t act now. Also, healthcare costs will slowly rise. This requires you to lower debt outstanding. Your loans have to come down or be replaced with ones with cheaper rates. This will ensure a lower monthly outgo for loan repayment and more resources for your retirement plan.
Action – For home loans, you may use Home Saver facility to reduce interest burden by keeping more savings in home saver account. Use this calculator for Personal loan EMI to migrate your personal loans to a cheaper option. Pay your high-cost credit card bills as soon as possible, but keep a credit card handy for all your emergency situations when you can’t access funds right away. Check out Standard Chartered’s value for money credit cards.
Also, remember that the next 20 years need you to save the maximum. Hence, widen your investment horizon to add more savings and lower tax outgo. Use Section 80C tax savings option by investing in ELSS mutual funds and insurance products. Grow your wealth by investing in Standard Chartered’s suite of third-party investment products. Learn more about them by clicking here.
The forties can be the new 30s if you play the financial planning game right. By reducing loans, saving and investing more and being prepared for all types of emergencies, you can truly be at peace. Widening your horizon and investing more should not be done at the cost of lowering your insurance covers. Take your health insurance after carefully studying the policy inclusions and exclusions, and consider having a personal health policy for the family, instead of relying on the policy provided by your employer. Good luck!