4 Ways to Make Sure You Are On Track with Your Personal Finances
When you reach your 40s, reassess your personal financial situation to make sure that you are on track with your goals. This is important especially at this stage in your life, because if you aren’t on track, you still have plenty of time to change course and reach your personal financial goals. Here are four ideas for assessing your financial situation to make sure you are accomplishing your savings goals and meeting your priorities:
Review your savings versus your goals
This is especially important for long-term savings, such as college savings and retirement savings. In addition to the account balances, you should also review your investment strategies. As your goals become more short-term, make sure you that your investments reflect this.
Obtain copies of your credit reports
Request free copies of your credit reports and make sure that your credit accurately reflects your situation. Now is the time to correct any errors that may exist. In addition, if you have any negative accurate information on your credit report, take the time to figure out how to reestablish your credit.
Calculate your net worth
Hopefully, you will discover that your assets are greater than your liabilities. If you still have significant liabilities (i.e., debt), now is the time to develop a plan to pay off your debt. You should strive to be in a situation where you have limited debt, with the exception of your mortgage. In addition, you should have a plan to completely pay off all of your debt, even if the plan spans over many years.
Review your spending and personal budget
If you haven’t reassessed your budget recently, it’s likely that much of your budget will change as your life has changed. If you need to save more or pay down more debt, it’s important that you factor that into your budget first, before adding additional expenses. Look for areas where you have the opportunity to decrease savings, so that you can save more aggressively.
While these steps do take time and work, they are essential at this stage of your life so that you are fully prepared for retirement when the time comes.