By Solid Serenity Legal Solutions
Every chapter of our lives brings new, and often, more rewarding challenges. There is no aspect of our lives where that is more true than the financial realm.
Every decade has different concerns and challenges. And each decade requires different areas of focus to become financially stable, and actually be able to retire one day. Today, we’ll focus on 10 mistakes to avoid financially in your 40s.
- Not Saving Enough
Retirement may still be a few decades away, but one popular formula says you should have three times your salary saved by 40. With costs of living likely to be higher when you retire than it is now, it’s important to start saving early.
Ideally, you should start increasing your retirement savings each year until you max out your financial abilities to save. This tactic will help you build the strongest retirement savings you can.
2. Raiding Retirement Funds to Pay for Kids College
Every parent wants to help their children through college, but dipping into your retirement fund can have severe consequences down the road. Your child is about to enter the workforce while you will be exiting it sooner, they will make more over the next couple decades than you will. You can still help with their finances by helping find scholarships and reasonable loans.
Do not risk your own finances for their educational future.
3. Not Having Enough Insurance
The chances of death or disability through accident increase after age 40. If you do not have enough insurance to provide for your family were you to pass away or no longer be able to work, then you need to reassess your insurance. We have a team of trusted insurance professionals who can help you figure out where to start.
4. Putting Off Estate Planning
With the possibility of death increasing as you age, it is important to have your estate plan in place were something to happen to you. You do not want to leave your family in the dark, and leave your assets to be distributed how the courts see fit, if something were to happen to you.
Call us today for help getting your goals set out and your plan in place!
5. Not Talking to Your Parents about their Finances
As you age, so do your parents. If they are reaching an age where they could soon need you to care for them, it is important to understand their financial situation. Sit down and talk with them.
We understand these conversations can be uncomfortable, but you have to have them to know how to properly help your parents. We can help you with this conversation too.
6. Refinancing into Another 30 Year Mortgage
It is best to have a mortgage while you have regular income coming in. If Refinancing is right for you, see if you can afford a 15-year mortgage that will not keep you in debt into your 70s.
7. Mortgage Tunnel Vision
Some people try to pay off their mortgage as soon as possible but that’s not always the best plan. There can be better uses of that money over the long term that wouldn’t be available if used up quickly on a mortgage such as investments or letting compound interest work for you.
Speak with a trusted financial advisor (we know some if you don’t) to find out the best strategy to meet your financial goals!
8. Letting Credit Card Balances Run Amok
While you may be able to afford a high credit card balance, your credit score cannot. A focus in your 40s should be limiting monthly expenses. Credit cards are a much-too-easy way to fall into deep debt. For the cards you do have, make sure they have rewards you can capitalize on.
Try to pay off your balances by paying the lowest first and only paying the minimum monthly payment on all other balances. Then, when your lowest card is paid off, cut it up and apply the amount you paid on the lowest card to the next lowest card, until it is paid off. Continue this process until you are free from credit card debt.
9. Having a Puny Emergency Fund
You should have an emergency fund with 6 months worth of living expenses set aside in case something happens where your income is halted for some time. Your first goal is to pay off credit cards. Then, stash that money away for your emergency fund until you reach your goal.
10. Spending too Much to Remodel Your Home
The average cost for a home remodel, according to HomeAdvisor, is $45,000. Before committing to a remodel, ask yourself if it is worth the cost it will have down the road. Keep in mind, making major renovations could cost you your retirement savings, or at least, force you to retire later than you’d like. Ask yourself if that remodeling job is worth the consequences for your family.
If you need help getting your plans in order, reach out to us today to get started!