If you are in your 40s, you may be thinking more about your finances now than in your younger days. After all, once you reach your 40s, you are more likely to have a family, job, and a home to be responsible for. Once you reach this decade in your life, you must be vigilant and dedicated to increasing your financial stability.
Here are some financial mistakes you should avoid in your 40s:
Once we reach an age where we become more financially comfortable, we are more likely to spend our hard earned money. In our early 20, we could easily get by with the absolute minimum in terms of living expenses and still have money left over. Now, you may have a mortgage, car loan, and your children’s college tuition to start saving for.
Although our incomes may have increased, it’s important to note how vital it is to save. Instead of spending money on a new sports car or a unnecessary home addition, save it for a later expense.
Set a budget for you and your family that includes some “entertainment” money for eating out or for buying extras. Try to save the money in a high-interest account or an index fund for maximum liquidity.
Not Saving for Retirement
Time tends to fly by, especially once you realize you are already in your 40s! Retirement savings are important to have, especially with the uncertainty that comes with social security and our government. Sadly, most people who save too little only find that out once they’ve reached retirement age.
In your 40s, you most likely have reached the peak of your financial income so be sure to increase the contributions you make to your retirement savings fund. Be sure to check and see if your employer can match your retirement contributions as well.
Milking Your Home
Being able to tap into your home equity is a great way to get access to money at a low cost (AKA low interest). Sadly, many of us who pay a mortgage use our Home Equity Line of Credit for unnecessary purchases that can lead us to financial ruin.
Avoid using your HELOC for lifestyle enhancements and only use it for essential emergencies, such as a job loss or large medical expense.
An emergency fund is a savings account that you can use in order to pay your living expenses in an emergency. In your 40s, you realize that unexpected emergencies can arise at any time. Your company may be reducing its workforce or you may have a hard time finding a new job.
With a mortgage, car payments, and a family to support, having an emergency fund is a great way to stay afloat in hard times. Experts recommend that you save up for 6-8 months of living expenses with an emergency fund.
All in all, we learn a lot about life by the time we reach our 40s. Being responsible and educated about your finances can help increase the quality of your life in the long run. Just because your income is more stable does not mean you should go on frantic binge purchases. Be vigilant and dedicated to saving for your family and your future.