Financial red flags you must address before you turn 40

Kenyans have a habit of ignoring red flags.

We ignore the blinking red light when the car fuel is running low, we neglect to pay taxes until the very last minute and we often overlook that our date “forgot” to carry their wallet to a date.

But there’s one red flag that’s non-negotiable.

After age 40, you really can’t afford to be financially clueless; so here are money red flags, big and small, you should attend to before then.

1.   Not funding your nest egg

Before years start running by, a plan should be in place for retirement. You may not have a fortune in your fund but aim to at least have a solid foundation by then so that you can grow it in the next decade.

Besides the statutory scheme, the National Social Security Fund (NSSF), you can set up an individual pension plan.

“There are also other unorthodox methods like tree planting. Say you have a piece of land somewhere in Embu, if you plant 100 trees at age 40 by age 55 they will have matured and you can sell them around Sh50,000 each. You have a cool Sh5m while still protecting the environment,” says financial trainer, James Maina.

You could also source for information from other plans under the guideline of RBA.

2.   Not purchasing a life insurance policy

Shopping and paying for life insurance may not seem very appealing, but if you have people in your life who depend on you financially, or who suffer if you were to pass away unexpectedly, then you absolutely need a life insurance policy.

Choosing term life insurance (one that expires after a number of years) over permanent life insurance (stays in place until one dies) is a good option for many reasons. It is not only a good way to keep premium costs down but also being so young (at 40) you should have a relatively easy time locking in a reasonable premium rate.

3.   Overlooking your personal development

At 40, your papers should be right. Study as far as you can when you are younger so that you are eligible for work promotions. If you want to grow at that job you had all your life, grow your skills.

“If you use your skills to earn money, you need to advance them to create that trajectory for success. Even in the army, if you are 40 and haven’t been promoted to higher positions, they retire you. This is because you cannot be 50 and your commander is 38,” adds Maina.

4.   Not legitimising your business

Have your business idea clearly outlined. Understand your business, put its growth plan in writing and it should be a registered business with its own account. Create clear strategies to scale it and project that for 10 plus years.

If possible have a professional guide you. This is to avoid legal issues that will bring your business down in future.

Meanwhile, have a fallback plan.

“Don’t fall in love with one business, it can break your heart. For instance, your business is farming and that is where you get your money. But now there is a locust infestation. What is your contingency plan? Try create about five streams of income apart from your day-to-day job,” he adds.

5.    Not Investing

If you already have a fully funded emergency savings account, no high-interest debt and are on track for retirement, then you are free to think about investment. When you invest, your money makes you more money.

Investing doesn’t mean you have to be a landlord, like many Kenyans are prone to thinking. There are many other options like shares, T-bills and unit trusts. These are speculative accounts that could create value in future.

Do your research to understand the trend on which areas people are moving to, then dip your toe into the pool.

6.   Ignoring government initiatives

Whatever the Government is offering, it is prudent to tap into it. Utilise government schools as opposed to private schools, or use NHIF for your healthcare or use the housing initiative to save.

 Maina also recommends that one aligns their business as well, with any government initiatives.

“I know a businessman who tapped into the SGR construction to get a contract to drill boreholes for water used in the construction. He raked in billions and even expanded his business. Pay attention to what the government is doing and place yourself strategically to reap the benefits.”