This is quite an interesting topic. Personal financial management is one of the most topical issues globally. Many studies have shown that most couples divorce due to financially-motivated feuds – one particular research said it ranks number 2 when it comes to causes of divorce. Given how important the family unit is to overall national development we must discuss financial goals. The things I shall discuss herein are important takeaways.
By the time you reach 40, you are supposed to have saved sufficiently towards your retirement. Financial gurus have a benchmark that you can use. More is always better but there is the least amount that you should have saved up by the time you get to 40. You simply have to consider how much you get in a typical year – as in, salaries for a whole year. Let us supposed you earn US$2000 per month – that is US$24000 per year. Take that amount and multiply it by 3; for this example, you get US$72000. So, in this case, by the time you reach 40, you should have saved at least US$72000 towards your retirement plan. The principle is simple – the total salaries for one year multiplied by 3, that must be your starting target.
There are so many things that can happen at any given point. A wise person must have more than enough if some emergencies arise. You are supposed to save at least something to be ready for such scenarios. Here you have to consider your fixed monthly expenses. Let us suppose you have monthly fixed expenses amounting to US$1500 per month. Take that amount and multiply by 6 – you get US$6000 for this example. This means by the time you hit 40 you should have at least US$6000 saved up for emergencies. In principle, the amount of money you have set aside for emergencies must be at least 6 months’ worth of fixed monthly expenses.
You have to invest in your children’s education. Most parents struggle to cater for the educational needs of their kids because of poor planning. The wisest thing to do is to save up monthly for your kid from the time they are born. By the time you get to 40, you will be having enough to cater to your kids’ tuition and other academic needs. For instance, you can save US$100 every month from the time a child is conceived or born. If you do so by the time a kid reaches 5 years of age they will be having at least US$6000 saved up for their tuition. Even better you can save up for your kids before they are even in the picture at all – the earlier the better.
Cassper Nyovest recently released his latest album – AMN (standing for Any Minute Now). On the album, there is a particular song called Egyptian Cotton. On that song there is a part where he sings, “I think I might let go of the Bentley (Okay!), ‘Cause I don’t wanna see his little stomach go empty (Nah), I’d rather keep the crib, that’s more important, So him and my baby-mama always got a place to live yeah…”. I quoted that to drive home a point that a house is extremely important – it is an asset by many definitions. By the time someone reaches 40 they should fully own a debt-free house – this is indispensably important!
It would be very disturbing for one to get to 40 without a single investment. By that age, one should have at least one viable investment to their name. This is central to earning passive income – something that will be pertinent to financial freedom in retirement. Of course, you have to be careful how, where, and how much your investment. Some of your retirement savings could even be directed this way for it to generate more. Closely tied to this, if not the same, is having multiple income streams. By age 40 you cannot just be waiting on a salary from one job – you should have well established multiple income streams.
One of the milestones that go without saying is being debt-free. Endeavour to ensure that by the time you hit 40 you will not still owe anyone or anywhere anything. This will even give you peace of mind and overall good health. The best place and time to start is NOW!