3 Money Milestones Everyone Should Reach by 40

There's no getting around it: Turning 40 means you're officially a full-fledged adult (sorry), and that you should, ideally, have your financial house in order by then. Here are three key milestones you should aim to have reached by the time your 40th birthday rolls around.

1. Have a fully loaded emergency fund

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Life has a way of throwing unwanted financial surprises at us when we least expect them, but by the time you're 40, there's really no excuse to not have a means of covering them. If you're nearing 40 without much in the way of emergency savings, it's time to make that your chief priority.

Ideally, your emergency fund should contain enough money to cover three to six months' worth of living expenses. The specific target you choose should depend on your life's circumstances. If you don't have kids or own a home, then you're probably safe sticking to the low end of that range. But if you have children and are responsible for maintaining property, then the higher end is more suitable.

Where will the money for your emergency fund come from? You might try cutting some expenses from your budget, whether it's the cable plan you rarely use or the restaurant meals you can replace with cheaper home-cooked alternatives. You might also look into getting yourself a side hustle, especially if you're not too keen on slashing expenses. The money you earn from it can be used to build that safety net so that the next time an emergency strikes, you're not automatically driven into debt. And that leads to the next point...

2. Get out of unhealthy debt

It's not unusual to carry a mortgage or even have some residual student debt by the time you reach 40. But one type of debt you don't want to have is that of the credit card variety. Credit card debt is pretty much the worst kind to have. It's costly, it can damage your credit score, and it can cause you a world of financial stress.

If you're carrying credit card debt, make a plan to get rid of it. You can use the aforementioned tactics (cutting expenses and getting a side job) to drum up the cash to eliminate it. At the same time, you might look at transferring your existing balances onto a card with a lower interest rate (or, better yet, a 0% introductory rate). The less interest you accrue on the amount you owe, the easier it'll be to dig out of that hole.

3. Buy life insurance

Many people assume they don't need life insurance because they're not rich or they don't have kids. You can come up with a dozen or more excuses as to why you don't need a policy, but the reality is this: If you have people in your life who depend on you financially, or who would be hurt financially if you were to pass, then you absolutely need insurance. It doesn't have to be a $1 million policy; rather, it needs to be enough to know that you've covered your loved ones.

Imagine you're nearing 40 and have a spouse with whom you jointly own a home. If you were to pass suddenly, your spouse would likely have a hard time keeping up with the mortgage. That's why life insurance is something you shouldn't delay, and if you apply by the time you turn 40, you should manage to secure a fairly favorable rate based on your age (keeping in mind that the older you get, the costlier life insurance tends to be).

You have a couple of different choices when it comes to buying life insurance. You can get a term life policy, which will cover you for a preset period of time, or you can buy permanent life insurance, which will cover you for the rest of your life. The latter option is more expensive, but permanent life insurance policies also accumulate a cash value that makes them an investment vehicle of sorts.

No matter which type of policy you choose, make sure to buy enough coverage to give your beneficiaries the protection they need. You might, for example, buy a policy that pays out five times your annual salary plus enough money to pay off your mortgage, assuming you have one. If you have children, you might factor in expenses like their education into the equation as well. It pays to consult with a financial advisor before buying life insurance to get a good sense of how much coverage you need.

While you might still feel relatively young at 40 (as you should), consider that big birthday a wakeup call to address the financial matters you might've neglected thus far. And then go ahead and celebrate like you deserve.

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