5 Things You Should Be Doing In Your Forties Tips for the 40-something's financial plan

Keeping the budget in check

It’s easy when kids are growing up to want to provide them with the necessary things to help them succeed. Whether it is dance classes, sports equipment, overnight camp costs, tutoring fees, the list will go on and on. Also, it’s nice to reward yourself for working hard over the past two decades – annual vacation, a new car, gadgets, redecorating, clothes, and again the list becomes endless. However, make sure you are still keeping your budget in check. Save as much as you can for retirement and college costs, and continue to pay down your long-term debt. 

Continue an aggressive retirement savings plan

As you become more established in your career in your 40’s, you may see your paycheck increase. Don’t let this increase spill over into your discretionary spending just yet.

Consider these things:

• Are you maximizing your retirement savings accounts?

• Are your children’s college accounts fully funded?

• Do you have big ticket items (e.g. house repairs or remodeling) that you need to save for?

 As you continue to plan and save throughout your career, you may find that you become financially independent sooner than your goal. When this occurs, you will have the freedom to choose where and when you want to work, and how you want to shape your life. Remember, you’re not saving for saving’s sake. You’re saving to be able to live a life where you are free from the worrying about money, and the harder you save, the sooner you reach that goal.

 Account consolidation

You may have gone through a number of jobs in your 15-20 year career. If you have multiple retirement accounts and/or brokerage accounts cluttering up your financial life, it’s time to consolidate those accounts. Roll all of your old company accounts into an IRA, and consolidate all of your brokerage accounts into one. If the balances are substantial, you may want to split these across different custodians, however one custodian will usually suffice. 

Review Property & Casualty (P&C) Insurance

If you’ve lived in your house for a number of years or your kids are starting to drive, it’s important to review your P&C insurance. When your kids become involved with driving and other activities which have the potential to result in a lawsuit, expect for your insurance premiums to increase. Likewise, if your house has appreciated, be sure to review your homeowner’s policy to ensure you have sufficient coverage. In the event of a disaster, your policy coverage would dictate your cash settlement or how much would be available to rebuild, so be sure your coverage will provide a comparable house to what you have now. Additionally, be sure to review your automobile coverage. If you have older cars, it may not be cost-effective to maintain full comprehensive coverage. With all these variables, it’s important to sit down with your insurance agent and regularly review your policy coverage.

Estate Planning

No one wants to think about dying, yet it is something that happens to everyone on the planet. In order to ease the burden your family will bear when you die it is important to have some basic estate planning documents in place. Most likely these will include a will (which declares how your possessions are distributed), powers of attorney (which authorizes an individual to make medical and/or financial decisions on your behalf if you are incapacitated), and possibly a revocable trust (to allow you to keep your estate private, amongst other things). It’s important to sit down with a reputable Estate Planning attorney to discuss your options. 

As you are in your 40’s, it’s time to start refining your approach to the management of your finances. You will hopefully have acquired a decent amount in savings and investments. With that in hand, making sure to follow through by strategizing your risk management (Insurance and Estate Planning) will go a long way to protect this growing wealth.

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