Financial Planning in your 40s

Financial Planning in Your 40s 

Let’s recap some wealth building and protecting strategies that you hopefully implemented in your 30s: 

You met with your financial planner and worked up your financial plan. As a result, you have a budget and are living within your means. 

You took care of your insurance needs: life, health, disability, home, auto, liability. 

You are reducing debt, which is the biggest killer of your wealth. 

You have built up an emergency fund to cover three to six months of living expenses in case you lose your job or you need a new roof, the car breaks down, you’re in an accident, etc. 

You are contributing to your retirement fund.  

Now that you’ve reached your forties, it’s time to revise your financial plan. You may be in your peak earning years, you may have purchased a home, you may have children who want to go to college someday.  

Revising your financial plan means revising your budget as your income grows. If you were only able to contribute 2-3% of your income to your retirement fund in your 30s, try to bump that contribution up to 10% or more as your income grows. If you have fully funded your emergency fund and reduced your non-mortgage debt to zero, try to put at least 10% to retirement funds and another 10% to other investment funds, which may include college savings if you have children.  

Most financial planners recommend that you do not neglect your retirement funding to fund your children’s college education. You can borrow to fund college, but you can’t borrow to fund retirement. And you don’t want to be a financial burden on your kids in your golden years. 

Even though retirement may still seem far away, saving now rather than later will make your future self thankful. Due to the power of compounding, the earlier you can contribute to your retirement fund regularly, the less money you actually have to contribute to achieve the same amount of money at retirement. 

As your income and wealth increase, be sure to review your insurance needs with your insurance agent. As your assets increase so will your insurance needs. If you have children, you may need more life insurance too.  

Don’t forget estate planning. It is especially important to have a will if you have children.  

If you established good financial planning habits in your 30s, you already know how to work on your plan one goal at a time. If you’re just getting started, I can help.*