Finances In Your 40's

In the Finances in your 20’s and 30’s articles, I wrote that those two decades tend to be a lot about debt: accumulating debt, living with debt, trying to control debt.  In your 30’s, hopefully people start a bit of saving for retirement, emergency purposes, and children’s education as well.

Finances in your 40’s changes things a lot.  In your 40’s you are probably on your second or third home.  Hopefully you haven’t gotten the largest home and mortgage possible, as this could cause problems for the financial effectiveness of this decade.  This is the decade when you should be clearing off your debt, ending your 40’s with only a mortgage as debt.  You are approaching the height of your earning potential, and with that money you should clear off credit card debt, pay down your mortgage at more than the basic payment, and start seriously saving for retirement.

The last item mentioned is the real eye opener.  As people head towards 45 years old, they suddenly realize that retirement is not the long-distant goal it used to be, but is approaching much more quickly than they thought.  People in their 40’s start to scramble to save money, but often have trouble putting much away because their large mortgage/credit card payments make it very difficult.  This is when most people look back at their financial decisions in their 20’s and mutter “If I’d only known then what I know now.” 

It’s not too late to get rid of the excess debt and start building a good nest egg.  By making some good choices and a serious commitment to those goals, you can put yourself in a very good financial position by 49 years old, but it may mean making sacrifices (fewer travel vacations) if your position isn't where you want it to be.

In addition to decreasing debt and saving for retirement, there are some other important decisions and actions that need to be made during this time.  You will need to decide if your insurance coverage is enough to care for your family.  You need to create a will, and decide who will be your executor and who will be the guardian for your children.  All of these documents need to be entrusted to someone you trust.  You may need the help of financial and legal experts to make your investments and assets work for you and your loved ones.

You should also talk about your decisions with your family.  If your kids are old enough, sharing these decisions can help teach them some important lessons about money management.  You will also want your other loved ones to know of you decisions so that they don’t’ come as a shock if something happens to you.  Not the most pleasant of thoughts, but it could be far more unpleasant for your family if you haven’t taken the time to organize your thoughts and intentions.

A good article with more information about this decade can be found at MSN Money.
Jerry