Don’t Wait Till You’re 40 To Do This With Your Money

01 Dec 2016 

As the saying goes, with more power comes more responsibility. If you're turning 40 within the next couple of years, you'll realise that the same thing happens when you hit a milestone age – you become wiser, more experienced, and more likely than not, find yourself with more responsibilities, especially where your money is concerned.


You might also have heard of this saying: knowledge is power. So read on, and get started on these must-dos for a "powerful" 40th birthday.


As you earn more, spend more wisely

By your mid-30s, you're likely to be in a more powerful position in terms of earning capabilities, as compared to your 20s.  But at the same time, you're also likely to have more wants and needs, which might translate to higher expenditure and bigger debts.

Don’t Wait Till You’re 40 To Do This With Your Money 

Rather than avoiding credit altogether, the important thing is to ensure that you're adequately balancing your cash with your credit. Too much reliance on credit will likely translate to higher interest payments, which will affect your cash position in the future. As the interest payments add up, you'll effectively be spending more as time goes by.  Conversely, avoiding debt and relying on cash as much as possible might result in opportunity costs, as you will have less capital to draw on for investments.


As a general rule of thumb, consider the 50/30/20 budget – it's not a hard and fast rule, but it provides a framework for you to customise your expenses based on your personal needs and goals.


Don’t Wait Till You’re 40 To Do This With Your Money  

It's also worth looking at these items in greater detail – your housing loan, the type and number of credit cards you own and use regularly, as well as car ownership. Remember that a car is a depreciating asset that has a typical 'shelf-life' of 10 years. This means that you'll have to be prepared for another car purchase 10 years down the road, possibly sometime in your mid-40s.​


Plan your health coverage while you're healthy

In your 30s, you're probably busy climbing your way up the career ladder. But are you working equally hard on ensuring that your career rests on sturdy foundation?


While the adrenaline and satisfaction that comes with hitting career milestones may be exciting, you're subjecting your body to greater stress – not to mention the wear and tear that comes with age. In order to ensure that you stay fit to pursue your career ambitions, you need to pay attention to your health.


What does money have to do with this?

Proper health coverage will enable you to seek medical care without worry in future, so that you can focus on your health and not on the costs.


As a start, consider the basic healthcare coverage that you are entitled to as a Singaporean – MediShield Life. As a basic, universal hospitalisation plan, MediShield Life offers lifetime protection and enhanced payouts for everyone, regardless of your age, or whether you have pre-existing conditions. It provides basic coverage, such as helping to ease large bills in Class C/B2 wards in public hospitals.


Additionally, you may wish to add on an Integrated Shield Plan, which provides higher coverage, such as stays in private hospitals or Class B1/A wards in public hospitals.

Don’t Wait Till You’re 40 To Do This With Your Money 

There is, however, a cost and benefit trade-off involved in doing so. An Integrated Shield Plan is designed to provide better comfort, but this comes at a higher premium.


It all depends on your financial position, as well as your personal preferences – but regardless of the decision you make, you can rest assured knowing that you are prepared with suitable health coverage.


Read also: What If You Become Seriously Ill


Don't miss out on financial grants and schemes

Being in your 30s is a unique time with added responsibilities – such as becoming a parent. Are you making the most of the financial grants and schemes designed to help you through this journey?


For instance, the Child Development Account (CDA) benefits parents with an upfront grant of $3,000 from the government. Beyond this initial grant, parents will enjoy a dollar-for-dollar top-up from the government on any contribution they make, for up to $15,000 (depending on the birth order of the child). This means that if you top up your child's CDA and leave it to grow, you can end up with almost double the amount at the end of the term, which will eventually end up in their Ordinary Account. Find out how blogger Alvinology did that in this article.


By taking advantage of the various schemes available for parents, you can better plan ahead for your child's future. Beyond the Medisave Maternity Package and Medisave grant for newborns, you will also need to plan further ahead, such as for your child's education and healthcare expenses down the road.


Start your retirement planning now, if you haven't already​

Retirement may seem like a hazy and faraway concept, but now is the best time you can start planning for it.


Being in your mid to late-30s puts you in a sweet spot, where you're actively working towards your career and income goals, with the luxury of time on your side. It's the ideal position from which you can plan and work towards attaining the retirement goals that you set for yourself now.


The CPF Retirement Calculator is a good place to start, as it gives you a quick gauge of the amount of savings you'd need to meet your desired retirement age and lifestyle. Based on this, you will be in a better position to start planning to build up your retirement savings. Not only that, you will also have a better idea of how realistic your retirement goals are, based on your current and projected income and expenditure.


It's also important to take your CPF savings into consideration, as the way you manage your CPF funds now will have a significant impact on the amount of savings you'd have in your CPF retirement account. Your retirement account savings determines the monthly payouts you will receive under the CPF Life scheme.​

Don’t Wait Till You’re 40 To Do This With Your Money 

It might be a smart move to engage a financial planner to help keep track of your goals. A financial planner should be more up-to-date with current events, policy changes and so on, which reduces the burden of keeping track on your own. Of course, due diligence on your part is always necessary to ensure that you are making well-informed decisions.


Read also:

Retirement questions to ask your certified financial planner


Go ahead and make the most of your 40s

Though the tips above may seem simple and straightforward, they do require active planning. Once you've done that, you can confidently step forward into your 40s knowing that you're well-prepared for the future!


Writer's Profile: Jonathan Lim is a writer who loves taking showers – because that's when the best ideas strike! Showers and deadlines aside, most days are filled with copious amounts of black coffee and gym sessions.

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