Invest Financial Planning

6 Financial Red Flags You Should Address Before Turning 40

Mike Brassfield  |  March 25, 2020

When the restaurant isn’t clean, that’s a red flag. When your date forgets his wallet, that’s a red flag. And when an auto mechanic pushes a bunch of costly repairs on you at the garage, that’s a huge red flag.

Then there are financial red flags. Those are the little signs you encounter that say, “Hey, your finances aren’t quite where they need to be.” Think: Overdraft fees.

As we mature, we try to cast off these red flags, but sometimes they’re difficult to shake.

Here are several common financial red flags you should address before you turn 40 — plus easy ways to eliminate them by the end of this week.

Red Flag No. 1: You’re Breaking Even Each Month

Breaking even isn’t necessarily a bad thing — you’re not overdrafting anymore — but don’t you want to start shoveling some money into your retirement fund? Saving for a dream vacation? Tackling some of those big life goals, like buying a home or investing in property? If so, you’ll need to do more than break even.

One way to get over this hump is to start budgeting. We know, we know. Budgeting doesn’t sound fun. But it’s a great way to help you hit some of your big financial goals — like saving and investing more money.

One of easiest ways to budget is to use the 50/20/30 method. It’s super simple. Here’s what it’ll look like:

  • 50% of your monthly income goes toward living expenses. These include rent, mortgage, utilities, groceries, car payments, gas and loan payments.
  • 20% of your monthly income goes toward money goals, which can include investments, savings and debt-reduction payments above the minimum amount.
  • 30% of your monthly income goes toward personal spending. That’s everything else.

Now that you’ve got the framework, you’ll be able to stop breaking even and start getting closer to hitting some of your big goals.

Red Flag No. 2: You Can’t Pay Off Your Credit Card at the End of Each Month

If you’re not able to pay your credit card off at the end of each month, you’re probably a little stressed. And those high interest rates you’re having to combat? Red flag.

The truth is, your credit card company doesn’t really care. It’s just getting rich by ripping you off with high interest rates. But it’s time to get proactive. A website called AmOne wants to help.

If you owe your credit card companies $5,000 or more, AmOne will match you with a low-interest loan you can use to pay off every single one of your balances.

The benefit? You’ll be left with one bill to pay each month. And because personal loans can have lower interest rates, you’ll get out of debt that much faster.

AmOne won’t make you stand in line or call your bank, either. And if you’re worried you won’t qualify, it’s free to check online. It takes just two minutes, and it could help you eliminate this red flag in your life — once and for all.

Red Flag No. 3: Your Family Relies on Your Salary

Have you thought about how your family would manage without your income after you’re gone? How they’ll pay the bills? Send the kids through school? If you don’t have a plan in place, that could be a red flag.

That’s why now’s a good time to start planning for the future by securing a life insurance policy.

You’re probably thinking: I don’t have the time or money for that. But your application shouldn’t take more than about five minutes — and you could leave your family $1 million with a company called Bestow.

Rates start at just $5 a month, and you can change or cancel your plan at any time. Plus, the security of knowing your family is taken care of is priceless.

If you’re under the age of 54 and want to get a fast life insurance quote without a medical exam, pushy sales calls or even getting up from the couch, get a free quote from Bestow.

Red Flag No. 4: Your Credit Score is Below 700

Another red flag: Your credit score isn’t up to scratch. What happens when you want to buy a car? Or a house? Your credit score will play a huge role in whether you’ll be able to do that. 

Sometimes you can even have a hidden error on your credit report (one out of five reports do) that’s holding you back.

Thankfully, a website called Credit Sesame will help — for free. It allows you to check your score, helps you find (and dispute) errors and even shows you ways to improve your score.

Take, for example, Salome Buitureria, a working mom in Louisiana who, in using Credit Sesame, found a major error on her report. The site helped her fix the mistake and take additional steps to raise her credit score nearly 200 points.*

Want to check for yourself? It only takes about 90 seconds to sign up and get started.

Red Flag No. 5: You’ve Had the Same Car Insurance For, Well, Ever

When’s the last time you checked car insurance prices? If it’s been more than six months, that’s a red flag. Shopping your options twice a year could save you some serious cash.

Let’s be real, though. It’s probably not the first thing you think about when you wake up. But it doesn’t have to be.

A company called Gabi makes it super easy to compare car insurance prices for the same exact coverage you already have. Plus, it makes switching plans a breeze.

Take Lourdes Robles-Velazquez, for example. The single mom lives on a tight budget. She was paying $205 a month to insure two Toyota Priuses — hers and her daughter’s. By using Gabi, she knocked $80 off her monthly car insurance bill. That’s nearly $1,000 in savings per year.

Wondering how much you could save? Head over to Gabi and link up your current insurance account (this is how it gets you that apples-to-apples comparison). Then, browse your options. 

Use this strategy to take a closer look at your other monthly bills, and challenge yourself to find more ways to save. Your budget will thank you.

Red Flag No. 6: You Have No Retirement Plan

If you haven’t started thinking about retirement, now’s the time. The sooner you start, the better.

If your employer offers a 401(k) plan as part of its benefits package, then you should absolutely, definitely take full advantage of your employer’s matching contribution. If you’re already at the full company match, consider increasing your contributions even more. Try raising it by at least 1%.

If your employer doesn’t have a 401(k) package, or if you’re self-employed, consider stashing retirement savings in a tax-free IRA. Contribute to it routinely and automatically, if you can.

* Like Buitureria, 60% of Credit Sesame members see an increase in their credit score; 50% see at least a 10-point increase, and 20% see at least a 50-point increase after 180 days.

Credit Sesame does not guarantee any of these results, and some may even see a decrease in their credit score. Any score improvement is the result of many factors, including paying bills on time, keeping credit balances low, avoiding unnecessary inquiries, appropriate financial planning and developing better credit habits.

This story originally ran on The Penny Hoarder.

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