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5 Ways To Improve Your Financial Health Especially When You Are In Your 40s

Published by Autumn on 31 March, 2021

What is the state of your financial health? Do you aspire to be on F.I.R.E (Financially Independent & Retire Early)?  When is a good time to start taking stock of your financial health?

It’s never too late to start working on your financial health, even when you are in your 40s.

The 40s could be a golden decade for most people – armed with the benefit of a formal education combined with actual working experience; you’ve had time to clear your student loans and are now at the peak of your earning potential; and yet you still have enough energy to pursue your goals. You may also be at a life stage where you are juggling multiple financial priorities.  That is why, this is an important time for you to take stock of your financial health.

Here are 5 tips to improve your financial health that will have you future-fit in your 40s and beyond.

 1. Live within your means

Living within your means requires a lot of financial discipline, especially when you have worked hard and feel that you deserve some pampering.

It is expected that as your income grows, so will your consumption. However, it’s important to ensure that your consumption does not increase at the same rate or at a higher rate than your income. Keep focused on growing your savings and investments instead of getting tempted by luxury buys.

There is no golden rule for budgeting as it depends on your financial obligations at this point in time. But you should strive to achieve 30%/20%/50% (Needs/Wants/Long-Term Investment). Leverage on the concept of compounding interest and start putting aside more money for long term savings/investment.

The current pandemic has helped us put things in perspective – firstly the prospect of jobs uncertainty and secondly a realisation of what we could live with.  Are there alternative ways of doing things? For example, instead of joining gym membership, could you jog around your neighbourhood, climb the stairs etc? Or instead of buying a brand new car, could you settle for public transport or buying a second hand car?

So, this is a good time to recalibrate how you want to bucket your money.

2. Manage your cashflow

Financial planning is more than just investing to generate more income. Many people overlook the concept of “Cashflow Management” in their Financial Planning.

Besides building up a nest egg by saving and investing, you can stay on top of your finances by diligently managing your cashflow. You may be unwittingly “leaking” cash by spending money on subscriptions you are no longer using or paying premiums for services you no longer need. You could also consider refinancing your mortgage to take advantage of lower interest rates. By plugging the leaks and cashing in on assets in a timely manner, you can better manage your cashflow.

Your quality of life is not dependent on how much you make but how well you manage your cashflow for long term sustainability.

3. Maximise your income earning potential

In such times of rapid digitalisation, job security cannot be taken for granted. There is a real possibility that your job could simply cease to exist or get replaced by technology. It is crucial to remain relevant in the job market by continuously upgrading your skill set. Life-long learning and the willingness to re-skill or up-skill will ensure that you never go obsolete.

You have heard about the concept of dollar cost averaging in investment. Why not apply it on yourself? Set aside an annual budget on courses that will build new skill sets or in demand skill set that will ensure you stay future ready.

Alternatively, you can set up a side hustle or home-based small business for an alternative stream of income. This will also serve as a safety net if you ever lose your job.

Another way to ensure an alternative stream of income is to invest wisely. Build a diversified investment portfolio of different products (bonds, equities, mutual funds, currencies, real estate, etc.) with exposure in different sectors and geographies. Understand the risks associated with the different types of products and make sure to do thorough research before committing to any investment. This way, you can create a passive stream of income, maximising your earning potential.

4. Marie Kondo your portfolio

In your 20s and 30s, you could have invested your money across a variety of investment types and accounts. You could have invested in a financial instrument based on friend’s recommendations when you first started out. Some of these investments may no longer serve your purposes.

A great way to stay on top of your finances is to periodically declutter and streamline your investments and insurance. Go over your assets conscientiously to ensure you’re cashing in on them and not holding on to a white elephant. Review your insurance plans to ensure that you’re not paying for a policy you no longer require.

5. Manage your risk

The two major risks you face in life is dying too soon or living too long. If you are the sole breadwinner, dying too soon may saddle your family with unpaid debts or mortgages, or even medical bills. A medical crisis or loss of income can derail your financial health.

Ensuring that you have the proper health and hospitalisation plans is important. These are very basic insurance everyone should have. Besides having MediShield Life, you should have a good hospital and surgical (H & S) insurance cover. A good H & S insurance is one that will allow you to enjoy good medical care without much out of pocket expenses. Here’s a site from MOH you could check out.

Also make sure that you also have a critical illness rider with your existing insurance plans to cover medical expenses due to unforeseen illnesses.

If you are afraid that your savings won’t outlast you, invest in an annuity plan. CPF Life is the answer to longevity risk. It is a national annuity plan that provides lifelong income to individuals throughout their retirement as long as they live. This should give you a basic “pay cheque” on retirement. For anything more, like a “play cheque”, which you need for the occasional indulgence like travel or new hobbies, consider taking up additional annuity plans.

Of course, a big part in mitigating risk is staying healthy. Exercise regularly and develop healthy eating habits. This will stave off diabetes, high cholesterol, heart disease etc. which may result in high costs to treat. By staying healthy you can keep your insurance premiums low.

It’s never too late to take stock of your financial health and the 5 tips above will secure your future in your 40s and beyond.

Autumn simplifies future-planning by bringing all your finances together in one place. With greater clarity and control over your finances, you can now live well today without the anxiety of planning for tomorrow. Join the waitlist for Autumn at www.autumn.sg

*The information in this article is not intended to be and does not constitute financial advice, investment advice, trading advice or recommendation of any sort offered or endorsed by Autumn

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