Most people think that by the time they have hit 40 they will have solved all of their money problems, be a dab hand at budgeting, and will never miss a bill again. Well, yes and no. Whilst research shows you’re more likely to manage your money better aged 40 and up, you’re still going to need to learn how to do this. It doesn’t just happen magically overnight. With this in mind, we have put together 8 valuable money lessons you need to learn before you hit 40.
Consider Your Credit
Your credit will play a big part in your life, so it is important you understand how it works. Your credit rating will matter throughout your life; whether you want to buy a new car, get a mortgage on a house or even take out a store card. Understanding and considering your credit at all times is a good habit to get into, if you want to be better with your money in the future. Make sure you always keep an eye on your credit report, in order to know how you appear to potential lenders. This will also keep you safe from fraud, as you’ll be able to notice any discrepancies. Many credit report agencies will let you have a free snapshot or will send you a full credit report for the cost of a cup of coffee. It’s good practice to check your report as often as you feel necessary (once a year is good) and before you plan to make any big purchases, such as a home or car.
But Be Cautious With Credit
It is all well and good considering your credit, but that doesn’t mean you should take it for granted. All those big purchases you want to make are going to end up leaving marks on your file, so ensure you know what you’re doing. Too many credit applications in a short space of time can have a real adverse impact on your credit score, as can not having any credit at all. You have probably already had an experience of trying to dig yourself out of a debt you couldn’t afford, so hopefully this means you’re already pretty cautious with credit. By the time you are 40 you’ll probably only ever take credit out if you truly need it, and know you can afford it. If you have had a stumble, and those credit cards were too hard to resist, then make sure you pick yourself up, learn from your mistakes, and don’t succumb to temptation again.
When you’re younger the last thing you really think about is insurance; unless you actually, really need it for something. Most young people won’t bother getting anything insured, because it just seems like a waste of money. However, those young people are also spending a fortune on car repairs, stolen phones, and medical bills. As you get older you will hopefully come to realize that insurance saves you money in the long run. If something were to happen then you will have that safety net to fall back on, as opposed to worrying about scraping the money together. It is a good idea to set aside some time to look through the policies available to you, evaluate the ones you have, shop around for the best deals, and ensure you are well insured. This can save you a lot of money and stress, especially as you begin to get older. Even if that seems like a long way away now, consider what type of insurance you may need to keep yourself protected.
This is one tip that we cannot stress enough and one that will eventually become second nature as you hit 40. We hope. By planning ahead for all different types of eventualities you will find yourself in a much better position by the time you hit 40. For example, retirement. Although it may seem as though retiring is a long way off now, it will creep up on you quicker than you think. Plus, there is no harm in being prepared and having plenty of cash stored away for when you do want to retire. You may want to spend your younger years splashing the cash, but try to plan ahead for all of those big purchases we’ve already mentioned; like buying a house. By planning ahead you’ll set yourself up in a much better steed for the future. If you’re really clever and like the idea of investing, then planning ahead could also help you make your money go further by the time you want to retire.
Stick to Your Budget
This is one of those valuable money lessons that can be a real pain to learn. You can create the best spreadsheets in the world, be perfect at tracking incomings and outgoings, and even have a 5 year plan of what you want to do with your money, but if you don’t stick to your budget then all of that hard work goes to waste. There are going to be times when you think one little splurge won’t hurt, but if that’s the case then you need to factor those moments into your budget. Making the budget is not something to be proud of. Sticking to your budget, however, is a true accomplishment. Keep an eye on your incomings and outgoings, then keep going back to that budget and working out where you may need to make changes. Only by staying on top of this will you be able to stick to the spending plan you have set out for yourself. By the time you hit 40 budgeting should become a breeze!
Is Your Housing in Check?
Did you know that the average age of a first time buyer is 31 years old? This means that you really should have your housing situation in check by the time you hit 40. Buying a house is one of the biggest financial decisions you will ever make in your life, so it is important you understand everything that comes with it. Not everyone is going to be able to afford to buy by the time they’re 40 and that’s not a problem, just make sure you know what your situation is when it comes to renting. Only go for the properties you can afford (that’s common sense) and make sure you factor in any other charges, such as land rent, insurance, maintenance, fees and all of the rest of it. Make sure you make a decision early on whether you want to rent or buy, create your plan and budget, then stick to it. This will have a really positive impact on how your housing situation is by the time you reach 40. If you don’t know what you want to do in terms of renting or buying then you’ll always be living in a financial limbo.
Be Prepared for Emergencies
So, you have made all of the big planning and budgeting decisions, you know whether you want to rent or buy, you may have even made some of those big price purchases. However, something has happened and you’re in a financial rut. It could be that there is a huge medical bill to pay, your house is falling down, or even that you’ve lost your job. As the age old saying goes, always make sure you have some money set aside for a rainy day. Nobody says this to con you into saving, it really is something that everyone should consider. It will also help get you in the right mindset to save up for those bigger purchases. Whatever you need for your new home, make sure you have an extra wad of cash tucked away for improvements. However much you have saved for that new car, save a little bit more in case it needs repairs. Always be prepared for emergencies and you’ll never find yourself scrabbling around trying to make ends meet. Or, even worse, taking out more credit than you can afford to pay back.
Don’t be Afraid to Ask for Help
Our final piece of valuable financial advice is probably something most people will ignore, but it is an important lesson to learn. Let’s be honest, unless you’re a financial advisor yourself, you may find that money is quite a daunting thing to grasp. That’s where asking for help comes in. There is no shame in asking a professional what you should do about your debts, moving house, saving money, investing cash, or even setting up a retirement fund. After all, that’s what the professionals are there to help with. We’re not saying you need your own personal financial advisor for every shopping trip, but you may want to consider asking for help when it comes to the big decisions. Set aside a little extra money when you’re saving up for something important and invest that in seeking the help of a professional. Consider it as a strong return on your investment, seeing as they will be the people who can help you get more bang for your buck.