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As you head towards the so-called big four-oh milestone, taking stock of your finances and understanding your net worth becomes more critical. While it’s common for people in their 40s to increase their net worth (ideally double your annual salary), getting there takes some planning and commitment.

From investments to saving, there are many ways to increase your net worth. So, will you be financially fit enough at 40 and have you taken the necessary steps to ensure you are at least laying the foundation?  What will it take?

  1. A retirement plan: Previously, the idea of retirement seemed affordable – a natural progression of life. However, the reality is that many middle-class South Africans will not be able to retire comfortably or even at all due to a lack of planning and the inability to save from an early age. Although you should have been saving towards your retirement from your very first pay cheque (financial advisors recommend putting away 10%–15% from day one), when you’re approaching 40 it’s time to get serious about a future that’s not quite so distant anymore. Work out how much you’ll need for your retirement, take stock of your current retirement funds and assess whether your current rate of saving and growth will meet your retirement needs. Make a plan to increase your contributions if you’re falling short.

  2. Saving and investment goals: Your retirement isn’t the only future you should be considering. With 40 on the horizon, you should have short- and medium-term savings goals in place as well. These change regularly, as the short term passes into the medium term, but the point is you shouldn’t be living hand to mouth from each pay cheque. Check your goals and progress monthly, adjust your savings or investment plan accordingly, and speak to a financial adviser to ensure you remain on track.  

  3. Property ownership: You may already own a home, rent or even home-share. There’s no rule that says that you have to own your own home by the time you are 40, but you should at least have thought about your long-term property plan. A homeowner sentiment survey showed that 67% of South African consumers are positive about the benefits of owning a home rather than renting one – but you need to work out whether it’s best for you based on your requirements and circumstances. 

  4. Education for your children and support for your parents: If you have or are planning to have children, you should have given some thought to the long-term costs of educating them. Consider what your child’s education is likely to cost, bear in mind the annual rate of education inflation and start doing the maths.

    You may be in the fortunate position of having parents who own their home and have their retirement all sorted out, but then again, you might not be. Try to gauge exactly how much help and commitment they will need in the coming years so that your financial plan and life decisions can accommodate their needs as well, within reason.

  5. A career plan: By the time 40 is approaching, you should have at least some idea of where you’re headed career-wise. This doesn’t mean you can’t change your mind or that surprise opportunities won’t come up, but you should have a sense of what your next promotion will be and what steps you need to take to get there. Don’t only think about your current trajectory but consider whether you would like to take a different direction and whether this is financially and logistically possible. Consider all your options and do what’s necessary to make the change that will be most satisfying for you.

  6. The insurance products to meet your needs: While a large part of your planning should revolve around the best possible outcomes for your career and earning potential, you must also confront the possibility that things could go wrong. You could be faced with illness, disability or even death, and you need to have the right insurance products in place to protect yourself or your family from the financial implications of such an outcome. Make sure you have medical aid, short- and long-term dread-disease and disability cover, and life cover.

No matter how far or close 40 might be, there’s no time like the present to get your ducks in a row and your finances in order. The sooner you start thinking about these crucial money decisions, the better your outcomes will be.

For more information, visit 1Life.

This article was paid for by 1Life.

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