Savings

40 And no savings yet? Here are 5 ways to start saving for your future

By the time you reach the age of 40, you would have checked many of your financial goals off your checklist. By this time, you are expected to understand most things about your money and other priorities.

Given that on average people these days live just under 80, it’s safe to assume that a 40-year-old man has lived more than half his life. It is therefore an age that feels like a wake-up call for most when a person needs to take stock of their financial situation.

And if you haven’t even managed to save a penny or invest so far, there’s still time. We will tell you how to do it here.

It’s never too late: When you are 40, you would have spent at least 15 years working, if you worked regularly, that is. This would mean that at this age you would be in a fairly high or mid-level position in your workplace. It also means that you would earn a living wage. With 15-20 years ahead of you to save and invest properly, you could start doing it with your excess money. This would give you time to take advantage of long-term capitalization. You might also be in the position of closing some of your loans, giving you extra money for the investment.

Also, remember that since you’re just 30 years older, don’t fall into the equity trap, which is reserved for young people. “Commit to equity for the long term, and since you have the money now, focus on lump sum investing whenever you can. Don’t fall into the traps of guaranteed returns, you know better now! says Shweta Jain, financial planner, CEO and founder of Investography, a financial planning company.

It would be wise of you not to lock your money into assets and loans. You would know from the experience of others and yourself how it works. “Avoid this mistake, and it will help you take advantage of your age and wisdom,” says Jain.

Development of a detailed financial plan: It’s never too late or too early to start planning your personal finances. If you are approaching 40 or are in your early 40s and have not saved enough so far, developing a detailed financial plan should ideally be the first step, as this would highlight your personal financial situation to date.

You need to identify and determine your short, medium and long term financial responsibilities in life when planning financially.

According to Arijit Sen, registered investment adviser with Sebi and co-founder of Merry Mind, a Kolkata-based financial advisory firm: “There is a need for deep cash flow and net worth analysis. When planning financially, you need to identify and define your short, medium and long term financial commitments in life. Once you have a clear idea of ​​”what” you need to do, “when” you need to do it, you’ll be ready to figure out “how” you can fulfill your time-bound commitments. »

The needs may be unlimited, but the resources (your income and existing assets) are obviously limited. With a limited work life, prioritizing is the way to go.
“The exercise of developing a matrix for prioritizing and marking existing investments with specific objectives involves a lot of discussion. It’s important to know “what” you need to do sequentially to get you on track and fulfilling your commitments one by one. This exercise will prevent you from abusing your investments. A typical example of such misuse can be the withdrawal of retirement savings for your child’s marriage or higher education abroad,” adds Sen.

Basic mistakes to avoid with a limited working life: If you feel like you’re already 40 and behind others around you, don’t make the mistake of chasing high returns on investments – it’s a trap. Seeking only high yielding products, without understanding your own risk profile, can prove damaging and irreparable due to the constraint of limited time available.

“It would be wise to focus on how you can save more and invest in your priority goals. So focusing on your cash flow is key. Financial planning tools and processes to track your family’s cash flow and review it with the budget will allow you to trace the surplus for goal-based investments,” says Sen.

Recharge your SIPs: Try to increase your Systematic Investment Plans (SIP) each year. In addition to your regular monthly investments, try to increase it with your bonuses, incentives, etc. Long-term SIPs would eventually help you build a portfolio large enough for your retirement.

Consider extending your career; Start a side job: If you haven’t been able to save by the age of 40, you may want to extend your career for a few more years. You can use this period not only to save money, but also to leave your existing corpus intact. Also, be mentally prepared to work long hours so you don’t feel financially stressed. You can also start a side job to help you earn extra money. Above all, remember not to keep all your eggs in one basket. And you must learn to diversify your money into different portfolios.