7 Financial Milestones You Should Hit Before 40
Written by
Crystal Mayer
Edited by
Molly Sullivan
Commitment to Our Readers
GOBankingRates' editorial team is committed to bringing you unbiased reviews and information. We use data-driven methodologies to evaluate financial products and services - our reviews and ratings are not influenced by advertisers. You can read more about our editorial guidelines and our products and services review methodology.
20 Years
Helping You Live Richer
Reviewed
by Experts
Trusted by
Millions of Readers
For many people, turning 40 marks a huge milestone. At this age, adulthood is undeniable. You may be a decade or more into your professional career and may even be thinking about retirement. At 40, it is a good idea to take stock of your finances and make sure that you are setting yourself up for success later in life.
At GOBankingRates, we asked experts from around the country what financial milestones people should reach before they turn 40. Achieving these benchmarks can help ensure you have a robust retirement saved up for when you are ready to quit your 9-to-5. It can also help make sure that money is in the bank in case of an emergency.
Here are the seven financial milestones you should hit before 40, according to our experts.
Establish an Emergency Fund
This financial milestone is an important one to help keep you afloat if you run into hard times or a big expense.
Shawn Plummer, CEO of The Annuity Expert, said individuals reaching the age of 40 should “[e]stablish a robust emergency fund. Aim to have at least six months’ worth of living expenses saved. It’s a safety net for unexpected events like job loss or medical emergencies.”
Scott Friedson, a multistate licensed public adjuster and CEO of Insurance Claim Recovery Support (ICRS), LLC, agreed.
“One key milestone is having enough savings to comfortably deal with emergencies. This is something we see frequently in our industry; property damage often comes unexpectedly and can cause a significant financial burden if one is unprepared. A substantial emergency fund can alleviate this stress and prevent a complete derailment of one’s financial progress,” he said.
Eliminate High-Interest Debt
Getting debt-free should be a priority as you approach 40 so that you’re not wasting any more money on past purchases and their interest.
“Prioritize paying off high-interest debts like credit cards,” Plummer said. “This reduces financial strain and improves your credit score. If you’re behind on some debts, start by reassessing your budget. Cut unnecessary expenses and allocate more towards savings and debt repayment.”
Friedson added, “Paying off one’s debt, or at least reducing it to a manageable amount, is another crucial checkpoint. Whether it is in the form of student loans, credit card debt, or an auto loan, carrying a substantial amount of debt into one’s 40s can have a severe impact on financial stability and flexibility.”
Getting rid of your debt doesn’t have to be hard if you put a plan together.
“If you find yourself behind these milestones, the key is to stay disciplined and persistent. Start by setting clear, achievable financial goals. Prioritizing expenses and managing spending habits can make a considerable impact. Also, consider working with a financial advisor or coach to devise a plan tailored to your financial situation. Making progress may be slow, but every little step counts toward reaching your financial objectives,” Friedson said.
Debt-Free Education
Many Americans are burdened by student loan debt, but this is a debt you should work toward eliminating around this age.
“Strive to pay off any educational loans before 40. Education is an investment, but it shouldn’t be a lifelong financial burden,” said Grant Aldrich, founder of Preppy, which offers affordable career and certification training and emphasizes the importance of financial literacy.
Investment in Continuous Learning
Aldrich also recommended “[k]eeping yourself educated, whether through formal education or self-learning, helps you remain competitive and financially agile.”
Obtain Life Insurance
Life insurance is an important piece of your financial puzzle, and it can put a lot of your worries at ease.
“At our office, I’ve seen how early investment in a robust life insurance policy can bring peace of mind to individuals and provide financial safety for their families. Starting early with dedicated installments allows for a significant payout in the event of unforeseen circumstances and ensures that you will be adequately covered as you age and possibly face health issues,” said Robert Macoviak, president of Oyer, Macoviak and Associates.
Secure Home Insurance
“Another key financial milestone,” Macoviak said, “is having comprehensive home insurance — and if you own a car, auto insurance as well. These assets often represent significant investments and need to be protected against theft, damage, or other losses. They also require regular payments, making them important considerations in any comprehensive financial life plan.”
Maximize Retirement Savings
One of the most important money tasks to be doing is taking care of your retirement savings.
“Ideally, by 40,” Plummer said, “you should have at least three times your annual salary saved for retirement. Contributing to a 401(k) or IRA consistently can make a significant difference.”
Macoviak added, “I believe setting up a retirement plan and regularly contributing to it, no matter how small, is an essential milestone.”
“However, if you’re behind on these milestones, don’t panic. My advice would be to seek professional guidance, prioritize your spending to allow for savings, and aim to make small, manageable changes rather than large, unsustainable ones. Regardless of where you are on your financial journey, it’s never too late to take steps towards securing your financial future. It’s about planning smartly and making informed decisions,” he said.
More From GOBankingRates
