12 Signs That You Are Doing Well Financially After Age 40

Stephanie Allen

Published:

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When you’re in your twenties, you’re just starting to figure out your finances. When you reach your thirties, you are hopefully hitting your stride financially and saving towards your short and long-term goals. Once you reach age 40, your finances should be well-established as you prepare for retirement. 

How can you be sure that you’re where you want and need to be financially after you reach age 40? There’s no particular set of rules, but there are signs that you’re poised for financial success in middle age. If you’ve achieved these milestones in your forties, you’re in excellent shape. 

1. You Can Afford to Splurge

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From time to time, you might come across a luxury item you must have. It may be a designer belt or handbag, or that overseas vacation you’ve dreamed of taking for as long as you can remember. If you can comfortably afford the purchase, you’re in good financial shape. 

Being responsible with your money doesn’t mean you have to deny yourself anything frivolous. You should keep these expenditures to a minimum, but permit yourself to enjoy the fruits of your labor. After all, you’ve earned it!

2. Adequate Healthcare Coverage

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Medical bills are one of the biggest financial burdens you can face, especially if you’re uninsured or underinsured. Not only can they cause your credit score to drop, but you could be civilly sued for any outstanding balances.

Having adequate insurance coverage, with lower copays, coinsurance, and deductibles, means you’ll have to pay less out of your own pockets. It also reduces the likelihood of surprise medical costs. If your insurance is comprehensive, you’re in a good place. 

3. Bills Are Paid on Time

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No one enjoys paying bills, but if the sight of a new bill arriving in the mail doesn’t fill you with dread because you have enough money to pay it on time, you’re in good financial shape. Not everyone can say the same.

Paying utility and credit card bills on time or even early is more than just a sign of fiscal responsibility; it’s also a great way to keep your credit history on the positive side. It’s also a good sign that your financial house is in order 

4. Your Income Is Growing 

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It’s said that the more money you earn, the more you spend. You can turn that around and save more as your income increases. Your income should grow over time as you go from your twenties and thirties into your forties. 

You may switch to a career with a higher salary or you may pick up a side hustle to bring in more money. Either way, the more cash you bring in, the better off you are financially. There’s no such thing as having too much money for your future. 

5. You Have Emergency Savings

Emergency fund
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At one point in life or another, you’ll likely experience an unexpected expense, such as a major car repair bill or the breakdown of an appliance that needs to be replaced. For people living paycheck to paycheck, this could bust their budget.

Having an emergency savings account will spare you from the stress of finding a way to pay for unplanned expenses. It can be from a few thousand dollars or more, but it’s a nice safety net even if nothing ever occurs. 

6. You Have Little to No Debt

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It’s not unusual to have fixed monthly debts such as car and mortgage payments and revolving monthly debts like credit card payments. These bills can account for a significant part of your budget until you pay them in full.

If you can comfortably double up your fixed monthly payments and pay off your revolving debts in full, that’ll free up money to save in an emergency or a retirement fund. If you want to save up for a splurge item, you can do that, too. 

7. A High Credit Score

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Paying bills on time and keeping outstanding debts to a minimum is the best path to a high credit score. Having a high credit score makes it easier for you to be approved for apartment leases, mortgages, loans, and credit cards. 

If your credit score could stand to use some improvement, get a free copy of your credit report to see what adverse items are listed. Talk to a credit counselor to help you dispute erroneous entries and obtain advice on how to clear up other negative items on your report. 

8. You Can Live On Your Budget

Budget
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Having a budget is a necessity no matter how much or how little money you have. One indicator that you’re doing well is that you can live within your budget without feeling any strain. If your monthly income is higher than your bills, you’re where you need to be. 

A monthly budget is more than just a ledger of your income and outgoing expenses. It’s also a method of planning how much you’re able to put in savings, towards retirement, and into an emergency savings fund. 

9. A Healthy Retirement Plan

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When you’re in your forties, retirement is still a while away, but this period in your life is an excellent time to focus on building up your retirement savings as much as possible. By this time, your retirement plan should be well-established. 

By the time you reach your forties, you should have at least three times your annual salary saved up. If this describes you, then you’re well on your way to a comfortable retirement, provided you keep saving at this pace into your fifties. 

10. You Have Life Insurance 

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Life insurance policies have benefits to offer you and your loved ones peace of mind. When the time comes to file a claim, your family will receive a lump sum payment that can be used to pay your final expenses.

If you have one or more life insurance policies, there should be enough to use as a replacement for your income. This helps to pay for college costs, including tuition, mortgages, childcare, and other household expenses. 

11. You Have A Savings Account 

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Aside from having retirement and emergency savings accounts, maintaining a regular savings account means you have money left over in your monthly budget to set aside. It’s another indication that you’re in good financial health.

A savings account gives you ready access to your cash whenever you need it. You can be assured your money is safe since the money is insured by the FDIC for up to $250,000. Even if you have an emergency fund in place, it’s good to have additional savings available. 

12. A Diversified Investment Portfolio

Portfolio diversification
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When it comes to your investments, your goal should be a portfolio that’s diversified into different types of assets, such as CDs, savings accounts, real estate, funds, stocks, and bonds. These assets perform differently in the financial markets.

A diversified investment portfolio reduces the risk of financial losses caused by fluctuations in the market and may also lead to high returns over time. It’s a form of long-term financial planning that will carry you into your retirement years. 

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