reached your 40s, have a family and a job, and maybe you
think itís time to coast into the future. Think again.
you make now can impact whether the second half of your
life will be filled with prosperity and health ó or
not. Examine these personal and financial examples of
how to invest in yourself now for a wealthy tomorrow.
UP AN EMERGENCY FUND
furnace goes out or the roof springs a leak. Do you
borrow to pay for the repairs? The correct answer is no.
In order to successfully meet your present and future
financial goals, you need "insurance" for
unexpected life snafus.
emergencies will always arise when you least expect
them, so being prepared is your best defense. You should
have six to nine months of your living expenses in an
easy-to-access account for such occasions.
example, without an emergency fund, if your roof needs a
$2,000 repair, you would be forced to borrow money for
the repair. If you use a credit card, which charges 18
percent interest to pay the repair, it will take you
eight months to pay off that $2,000. And thatís with
an added $124 tacked on for interest in addition to the
$300 youíll have to fork over every month. This can
put your budget in disarray and cause you to neglect
other financial commitments.
should always keep your finances in order so you can
meet your current and future financial needs ó
especially in your 40s. A cornerstone of sound financial
management is financially preparing you and your family
for the unexpected with an emergency fund.
YOUR HUMAN CAPITAL
youíre looking to retire at the full retirement age of
66, now is the perfect time to maximize your human
capital and subsequently your lifetime wealth. Human
capital is similar to any capital; itís all about
investing in yourself, typically through education or
training that will benefit you in the future.
your career and working years as your human capital. If
you earn $70,000 per year, then youíll have earned
$1,820,000 between the ages of 40 and 66. Think about
how you can maximize your human capital so that it will
be worth more over time. In fact, how you manage it over
the next 26 years could be the difference between a
comfortable retirement and a tough one.
YOUR 401K CONTRIBUTION
Hearn, a financial planner and vice president of
Palisades Hudson Financial Group, advises 40-year-olds
to put retirement saving first ó even above childrenís
college education. No one else will save for your
retirement, yet kids have other options to pay for
2015, the maximum contribution amount is $18,000. This
might sound like a lot, but consider the benefits. If
you start with zero retirement savings at age 40, and
invest $18,000 per period, you can end up with about
$1.24 million at retirement age 66.
a minimum, you want to contribute enough to your 401(k)
to at least take full advantage of any company-match
contribution your employer may offer," said Hearn.
"Donít stop at just making the maximum
contribution to your company retirement plan. If your
budget allows, consider contributing to a Roth IRA as
your income is in excess of these limits, and youíre
also covered by a company retirement plan, consider a
"backdoor" Roth IRA contribution. This entails
making a nondeductible contribution to a traditional
IRA, then doing a Roth conversion immediately after.