Finance 0

40 Money Things You Need To Know By 40

By Kurt Osterberg · On October 24, 2013

Many by-40 milestones have become debatable: Get married? Only if you really want to. Own a home? If it’s financially feasible. Know what you want to be when you grow up? Well, if 40 is the new 30, you’re certainly entitled to change your mind.

But there’s one thing that’s nonnegotiable: By age 40, you can’t get away with being financially clueless anymore. Especially since retirement might be a lot closer than you think! We’ve put together 40 money things, big and small, you should know before you turn the big 4-0. Why? So you can help achieve your financial goals with plenty of time left over to enjoy them!

1. The three basics of a solid financial foundation. Credit card debt paid off. Emergency fund stocked up. Retirement account(s) in existence and growing. Everything else (travel, homeownership, investments) should come after.

2. How to create a budget. Because without one, you may not reach any of your goals, like buying a home, paying off your credit card debt or traveling the world. Learn how to build your budget with our step-by-step guide.

3. How much you should be saving. The answer: 20%. Not sure how we arrived at this number? Look no further than the 50/20/30 rule, which divvies up your monthly budget as follows: 50% is reserved for essentials (think mortgage, rent and groceries), 30% is allocated for your lifestyle choices and at least 20% goes to “financial priorities,” which includes your debt payments, your retirement contributions and your savings. Here’s more detail on the why and how of saving a fifth of your paycheck.

4. Your net worth. Yes, you have one. This is the sum total of your assets (bank account balances, savings, investments, etc.) minus your debts (loans, mortgage, credit card debt, etc.). Your net worth is the easiest way to get a big-picture perspective on your finances. Want a quick way to figure it out? Link your accounts in the free LearnVest Money Center, and we’ll do the calculating for you.

5. How much you make and how much you spend each month. It sounds like a no-brainer, right? “But most people, regardless of their age, don’t know how much money they have coming in and going out,” says Natalie Taylor, a CFP® with LearnVest Planning Services. For a full breakdown, visit the Money Center to see your incoming versus outgoing finances.

6. How to get out of debt. Now is the time to be saving for your future, not paying off your past. Hopefully your debt repayment efforts are already in full swing, but, if you’re not there yet, now’s the time to make a plan. Here, a quick checklist to help you. Want the big kahuna? Get Out of Debt Bootcamp is our three-day, in-depth plan to help you finally live a debt-free life.

7. Your credit score. Still not familiar with this number? Afraid to look? Here’s why, by 40, you should know it cold. Your credit score determines not only what kind of credit cards you’ll get approved for but also how expensive your mortgage and car loan would be. Learn how to monitor and improve your credit score here. Speaking of …

8. How to pull a free credit report. Voilà.

9. It can take a long time to save up a down payment. When it comes to buying a house, “People always say, ‘Get in as soon as you can,’ and ‘It’s O.K. to be house poor.’ But before buying a house, you should be financially stable. If that’s not until your 30s or 40s, that’s O.K. So many people have rushed in, and then they can’t handle the payments,” says Taylor. Find out how much house you can afford.

10. What is a financial emergency and what’s not. Sure, it may have been cute to splurge on shoes and come up short on rent when you were 22. By 40, you ought to know what it feels like to have a fat six months of savings sitting pretty in your account and the only five reasons you should be dipping into it. No, that out-of-state wedding doesn’t count. (It’s actually optional, no matter what your sister-in-law says.)

11. What your ideal retirement will cost. Have you ever really crunched the numbers? On the internet, there are practically as many retirement calculators as there are singing cats. But most people we know don’t visit them. (The calculators, that is.) However, at 40, retirement—if you’ve planned right—may be a mere 25 years away, so you ought to know how much you need to save up. Here’s a good place to calculate that. And here’s why starting to save more right now, instead of a decade from now, will make getting there significantly easier.

12. How much you have saved for retirement. O.K., cool, you’ve been diligently contributing to your 401(k). Somewhere out there you may have an IRA or two. (And you might want to look into rolling over these balances into fewer accounts.) The important thing is to know how much you’ve saved and how much you still need to. So, go on. Dig up your passwords. Crunch the numbers. Or link your accounts in the free LearnVest Money Center and we’ll show you.

13. How to manage budget-busting friends. If you were duped by them in your 20s, shame on them. If you’re still letting it happen in your 30s, shame on you. By this age, you should know who they are and how they operate. While you may love their sense of humor or style, you may hate how empty your wallet is after you hang out with them. It’s about time you learned how to neutralize these culprits.

14. Your own money personality. Maybe you’re the Budget-Buster. The Protector. Or the Pleaser. Discover how your Myers-Briggs quotient is affecting your finances.

15. That, the older you get, the more complex your money life becomes. “A lot of my younger clients say, ‘I’ll be able to save more for retirement when I make more money,’ but the truth is, as they start to make more money, they have way more financial obligations,” says Taylor. “They’re not living in the shoebox apartment anymore. Then they get married, and they have a wedding to fund. Then they have kids, and they have college to save for.” The bottom line? Today is the time to start, not tomorrow.

16. How your significant other handles money. By now, you probably know his favorite color, first pet and worst habit, but do you know how he thought about money growing up? Or exactly where she stands—financially—today? Here are six money questions to ask each other and a Love & Money Bootcamp to help you get on the same page. And, when you’re ready, a financial plan to help you build the life you want together.

17. Where your parents stand financially. It’s a rough role reversal, to be sure. After all, they were probably the ones who took care of you, but trust us, you’ll be glad you had this conversation. Start by finding out how to access their account balances, health insurance and long-term care insurance. Then ask them these six money questions today.

18. The basics of investing. Before you put any money in the market, you should know how it works. Get a quick tutorial here: Investing 101. Or, try our everything-you-could-possibly-need-to-know-and-more in-depth program: Start Investing Bootcamp. But don’t get ahead of yourself, either. Don’t even think about investing until you have a fully funded emergency savings account, no high-interest debt and are on track for retirement.

19. A good tax accountant. Whether you D.I.Y. your taxes or hire someone to file your returns is up to you—and depends on your financial situation. Here’s where you can find out whether it’s worth it to pay an accountant. Got other tax questions? We answer them here.

20. Your total compensation package. We know: We’ve all been so grateful to get the job that we signed on the dotted line without a backward glance, too. But that was then. By this stage in your career, you should know more than the number that makes up your base pay. “Does your employer offer disability insurance? Life insurance? You should know that,” Taylor says. The same for matching retirement plans, health benefits and even 529 plans.

21. What a 529 plan is. No, it’s not a cut of blue jean. If you have kids, and you think their education is important, you should know this term. Hint: It helps you save for college.

22. How to maximize your time. Binge-watching on Netflix can be fun … until it’s not. Here are the eight best time investments you can make.

23. Who your health care proxy is. We cannot overstate the importance of choosing someone to make medical decisions for you if you were incapacitated. Fun task? No. But you don’t want to leave this to chance.

24. That it’s possible to juggle a couple of money goals at once. Some of the most common questions LearnVest Certified Financial Planners™ get are what they call “This or that?” questions. In other words, you may want to build up your savings, pay down your debt, save up for retirement and make that dream vacation possible, but you only seem to have $200 left at the end of each month. First, know that many people feel like this. Second, know that a financial planner can help you prioritize.

25. That you will never have “enough” money. “In nine years of being a financial planner, I’ve never met a person who’s had enough money,” Taylor says. “Our lifestyles seem to be ever-expanding as our incomes expand.” Case in point: Even the uber-wealthy feel poor. The takeaway? Stop feeling like tomorrow is the time to tackle your financial burdens and take control of your money today.

26. That you never know the truth about other people’s finances. The co-worker with great clothes could be deep in debt or have family money. The neighbor could be close to foreclosure or have paid cash for her house. That’s why it’s never wise to compare yourself to other people.