7 Important Money Insights for Those in Their 40s

Personal Finance

They say old habits die hard, and they usually do, but that doesn’t mean you can’t change them. Now that you’re in your 40s with retirement quickly approaching, if those habits you said you would change in your 20s still haven’t changed then now is the time to start.

So whether you’re the proverbial financial procrastinator – “I’ll start saving tomorrow” – or you have been dotting the I’s and crossing the T’s on your finances for decades here are 7 money insights that can help jump start your personal finances today.

  1. Turbo Charge Contributions: Many in their 40s are climbing the corporate ladder, starting businesses, and advancing rapidly in their careers. As additional disposable income becomes available be sure to stash away increasing amounts towards retirement, college savings, or that business you’ve always wanted to start. Avoid letting your lifestyle rise as quickly as or faster than your income level does.
  2. Stay the Course: Market fluctuations happen frequently. In fact, stock market drops of 10% (commonly referred to as a “correction”) occur on average about once per year. Depending on the time horizon of your goals do your best to stay the course (a.k.a. stay fully invested) throughout the occasional ups and downs of the market. It has often been said it is not “timing” the market, but “time in” the market that wins.
  3. Prepare to Live a Long Life: The biggest threat those entering traditional retirement face today is their own good health. Certainly quality health is a good thing, but a 30- to 40-year retirement will put a heavy strain on even the best savers. Be sure to estimate how much you might need in retirement using a realistic life expectancy number; take into consideration family history of longevity and the state of your current health. Also, don’t overlook the cost of health care in your golden years when estimating future expenses and how much you might need to save.
  4. Consolidate Accounts: Many of those in their 40s have had multiple jobs throughout their careers and with multiple jobs oftentimes comes multiple dormant 401ks. If you have multiple old 401ks or Rollover IRAs look to consolidate some of your accounts for simpler monitoring. Be sure to keep costs low and understand the pros and cons of wherever you move your retirement dollars to.
  5. Don’t Put College Savings, Before Retirement: While saving for a child’s education is an admirable goal, don’t do it completely at the expense of your retirement. Kids can take out loans to finance their degree, while parents don’t have that same flexibility when it comes to funding their retirement. Be sure to avoid stopping retirement contributions entirely to fund education.
  6. Have the Talk: It is never too early to have “the talk” with your kids; that is the “money talk.” Whether your kids are still in grade school or entering into high school, providing guidance around money is critical as it will begin to set the stage about how they deal with money later in life. Lose the antiquated one-slot piggy bank and give them a modern piggy bank with various slots for spending, saving, investing and donating. If your kids have outgrown their piggy bank help them understand the importance of a budget by working through one with them.
  7. Ensure You’re Insured: Nobody likes the thought of dying, but being properly insured is critical to ensuring your family is taken care of in the event of an unexpected death. Having proper insurance is particularly important if you have small children and/or a spouse who doesn’t work. A good rule of thumb is that a surviving family should be able to withdraw 4% annually of the life insurance proceeds. If your surviving family is looking to replace $80/000 per year, then you’ll likely need to consider nearly $2,000,000 in life insurance.

These things may seem difficult or like a pain now, but doing them may actually be simpler, easier, and more rewarding than you anticipate.


About Matt Cosgriff, CFP(®)

Minneapolis Financial Planner | Intrapreneur | Young Professional | Millennial Guru | Tech Aficionado | Traveler | Food Lover | Minnesota Wild Fan | Movie Quoter | Follow on Twitter| LinkedIn

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