Becoming Financially Fit After 40
It’s the best time of life! You’re independent and established in your career. You’ve achieved a few goals in life, whether physical, social or educational. Are you comfortable with where you’ll be financially in a few years? Do you have more assets than liabilities, a positive net worth? If your answers to these questions are unclear, then now is the time to set a financial vision. Our financial fitness helps to support the other important facets of our lives.
Where do we begin? Financial assessment. How much do you have? Check bank statements, 401K plans and other financial accounts. These are your assets or what you own. Cash and equivalents are easy to determine; other valuables may require research to assess value (for example, jewelry). However for this exercise, let’s focus on liquid (easily converted to cash) items. We spend these most easily. Record this information, preferably in a spreadsheet or a computer program.
Now determine what you owe. Theses are our liabilities. Check statements for credit cards, car loans, mortgage/rental/lease agreements, other expenses (phone, cable, grocery), etc. As you can see, this list will be long. This is a very important step because identifying what you owe should determine how much you spend and save. The latter tends to get missed when we were in our 20s and 30s. Now is the time to save more aggressively. However, saving can only be facilitated if we have more assets than liabilities. If you know what you have and spend each month, you can equip yourself to attain a positive net worth. This is the beginning of a vital aspect of strong financial health (and wealth) … budgeting! The best thing you can do for yourself is to have and stick to a budget. The knowledge
is only as useful as how you apply it.
Thus our next step is to reduce debt. If you do not have a positive net worth, this is top priority. Include in your monthly expenses funds to reduce high-interest credit cards or loans. You lose money each time you pay less than the balance due. Set a goal to pay off one creditor at a time; start with the highest interest credit. All extra funds should go towards aggressively paying off the debt. This means paying more than the minimum, preferably as much as possible. Once you pay off one creditor, celebrate your success by removing it from your liability list, and cheerfully move to the next. You are now that much closer to that higher net worth. Your ultimate goal is to be debt free.
Why do you want a high net worth? … Financial flexibility. Life is much easier when you have the flexibility to plan and secure your future. No consumer debt means you can move financial resources toward retirement, children’s college funds or elderly parental care. Your financial decisions now impact multiple generations. Plus additional funds can support other interests – world travel, higher education, sabbaticals or more. This is all achievable when you plan for it! So get in financial shape and stick to that budget! You’ll reap many rewards!
Latania Thomas, MBA, co-founded Tree of Life Resources, LLP with her husband. The company provided multi-media content on the subject of faith, family and finance. She resides in the south suburbs of Chicago with her husband and their two sons and proudly celebrated being 100% debt free in 2015.
Latania Thomas