Underfunded retirement, unplanned spending, plus more can all affect people in their 40s
Your 40s are some of your most powerful earning years – and if you purchased your home in your 20s or 30s, you already have one of your biggest investments in place. If you haven’t already started looking ahead, retirement planning is a must for this decade. From investing too little for later to overspending out of habit, these common mistakes can have a big impact on your financial outlook when you are in your 40s.
Retirement 911
Neglecting retirement or funding accounts at low levels is a major mistake made by people in their 40s. Retirement still seems a long way off – so you have plenty of time, right. Not true. If you haven’t already started saving for retirement, there is still time, but it is essential that you start soon. Your money grows over time, so the more time you give it to multiply, the better off you’ll be. This is also the decade to check the amount you are investing each month. If you are not fully funding your employer’s program (to get the matching funds) and saving money in other investments as well, you could be missing out.
Diversification
That old cliché about putting all of your eggs in one basket applies to investing in your 40s. Make sure you are truly diversified; if something goes wrong with one account, you won’t lose all of your nest egg. Review your investment portfolio to see just where your money is going. You may have chosen higher risk/higher yield investments in your 20s and 30s; adding some conservative investments can help in your 40s. Make sure all your money isn’t in one location; that diversified portfolio will pay off in a few years.
Budget Checkup
Budgets are just for young, inexperienced adults – right? Not so fast – they matter for you now more than ever. With a great income and some investments and money in the bank, you may feel like you are in great financial shape by the time you reach your 40s. You are likely right, but a careful review of the money you spend each month is a must. When you have abundant income, it’s easy to let your expenditures slide. If you haven’t reviewed your budget and financial picture in a while, it is time to do so. The money you save can go to investing and improving your net worth.
Health And Wellness
Neglecting your health or wellness will do more than make you sick – it will make you poor as well. Proper attention to issues related to aging and setting up good habits now can help keep your health and insurance costs down later. While you can’t predict every event that will happen to you, developing strong muscles and bones now will help you avoid costly injuries later. You’ll also find you get a break on your life insurance if you are within healthy limits for your weight and blood pressure and if you are a non-smoker.
Insurance Issues
Neglecting your estate and life insurance can impact your bottom line in a variety of ways. If you have a spouse and kids, then setting up a will and applying or continuing your life insurance is a must to protect your family. Disability insurance can help if you are injured, ill or unable to perform your current job; getting these powerful protections in place now can help you lock in a low rate. You should also review your policy; if you took it out when you were 25 and childless, you might need to up the amount to reflect your current income level and obligations.