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8 Financial wellness priorities in your 40s

It seems like after 40 years on this planet, you'd have everything figured out, right? You've now spent as much time being an adult as you spent being a kid. But if you're in your 40s, you've still got a lot ahead of you. How are you feeling?

 

In fact, this decade is the point when many people really ramp up their financial wellness efforts. You have a career, you have a community you call home, and you have the basics of life all figured out. Now is when you get to fine-tune your financial health and compile a financial checklist for the decade ahead and your future beyond that.

 

There are concrete ways to step up your game before you hit the mid-century mark. Whether it's time to bring in a financial professional or hammer out your retirement plan, your 40s are a time to solidify the life you've been building for yourself.

 

Embrace these eight financial priorities to help you preserve your financial wellness throughout your 40s and coast smoothly ahead.

 

1. Set financial goals

 

If you spent your 20s just figuring out adulthood and your 30s putting your ducks in a row, your 40s are the time when you can take a step back and see your work, your family, your community, and your future all coming together.

 

As all the parts and pieces intertwine, this decade is an important time to develop a plan to keep it financially healthy by setting goals. Your personal finances are going to include outlining what kind of future you want to experience. Will you travel after you retire? Buy a second home? What about your health care and regular visits to the grandkids? Begin to solidify your ideas into specific goals.

 

Take time to calculate your net worth. You'll be amazed how many times you might want to have a handle on your overall financial picture when it's time to plan for your kids to go to college or outline your financial plans in a will. Don't just paint a picture. Diagram your entire personal finance landscape.

 

Develop a year-end financial checklist that you review annually. If running a marathon, you'd keep track of your pace. You got a year-end report card before moving on to the next grade when you were a kid. Consider this accountability your personal "split time" at each annual mark. You could do it in the spring with your taxes, or maybe in the fall once the kids are back in school,  just be sure you are tracking your forward progress.

 

If you already feel like you have a strong handle on where you're headed, get yourself a financial advisor. You may be an expert at managing your bank account and your 401k is growing, but there's never a bad time to learn and plan for what's coming. They can also help with your annual goal setting. Your financial literacy may be strong, but bump it up to the expert level with, well, an expert.

2. Take a look at your tax burden

 

Are you doing everything you can to minimize your tax liability? You're likely making significantly more than you did in your 20s and 30s, and you probably have more assets, like a home and investments. It's important to take steps to ensure you're paying only your fair share of taxes.

 

You might know your adjusted gross income and general deductions but finding the right consumer information for your tax needs may change from year to year and pay bracket to pay bracket. Would you benefit by putting more money in your savings account or your IRA? Does your checking account earn interest and should some of that money be earning dividends elsewhere?

 

Do you have passive income accumulating your wealth and retirement plan? Are those earnings dinging you on your tax return? Whatever questions you might have, there are also home improvements and bonuses and medical expenses that all factor into your tax liability.

 

Consult with an accountant or tax specialist to receive tax advice that fits your changing financial health. Discover ways to maximize your earnings and minimize your outgoing payments.

3. Increase your insurance

 

Remember those assets we mentioned earlier? You need to protect them — and your loved ones — in case something happens to you. You may not want to hear this, but your 40s might be the decade where you actually notice your body isn't 18 anymore.

 

Choose the best health insurance plan offered by your employer that you can afford. Keep in mind it may mean a different plan than you had last year. Maybe it means adjusting your health savings account (HSA) contributions each year based on expenditures. Maybe you are thinking of adopting. Review your insurance every year and adjust accordingly.

 

Be sure you have enough life insurance to keep your family secure if you (or even you and your spouse) were gone. The hope is to never need it, but the plan is to have what you need. Open a life insurance policy for your children. They won't need it the way you need yours, but it may prove to be a benefit when they start to think about buying a home of their own. If you're a small business owner, this may be especially important.

 

Consider carrying both short-term and long-term disability insurance (often offered through employers) to help keep you financially afloat if injury or illness made you unable to work. Understand gaps and coverage beyond just covering lost wages. If there's a history of medical conditions in your family, inquire about coverages beyond the basics.

4. Boost your emergency savings

 

If you set a goal during your 30s to have a solid nest egg, kudos if you achieved your goal. Of course, you may want to change that four-month cushion to a six-month earnings gap should you want, or need, to take time away from work.

 

Keep your emergency fund in good shape with enough money in it to cover several months of living expenses and/or major financial crises, such as an unexpected medical bill or significant home repair. If it helps, adjust your direct deposit and have that money sent directly to your savings account.

 

If you have a rock-solid emergency fund, make it work for you. Consider moving those dollars into a higher interest rate account that builds your interest into an added buffer.

 

It might also be smart to increase your dependent care flexible spending account if you anticipate changes in daycare, the need to care for an aging parent, or if you anticipate an elective procedure, such as vision correction.

5. Elevate your retirement savings

 

Yes, retirement is getting closer. It may still feel a long way off as you are still on the upswing of your career, but as your income increases, so should your emphasis on your financial planning.

 

If you are already making the maximum contributions to your 401k retirement savings, it might be time to open an additional investment account. If you've changed jobs, be sure to roll over and consolidate your previous retirement account. Ask your financial advisor about your portfolio and if it is reaching its earning potential and aligning with your values.

 

Before long it may be time to shift your savings towards your teens and their future plans. Use this decade to move your money in the right direction for yourself and your family.

6. Prep for college financial aid

 

Many people in their 40s have children in high school, which means while your teens are considering what colleges they might want to attend, you need to start researching financial aid options.

 

Yes, you feel like you just put those student loans behind you not that long ago, and now it's time to think about the next generation of college financial aid process. Of course, you're hoping for scholarships aplenty, but getting a plan in place now may help save you and your teenager from the perils of federal loans.

 

Investigate the benefits of a 529 savings plan for college costs. Start planning for the inevitable federal student aid application process and know what has changed since you applied for financial aid.

 

In addition to helping your teenager develop a financial aid checklist to walk them through the process, use this decade as a time to help them learn how to manage money in their teens. Think about the lessons you've learned in your adulthood — pass that recession-surviving, pandemic-tackling, inflation-busting experience you can pass along to them.

7. Boot revolving debt

 

You know this part: kick the credit card debt to the curb. If you are already paying it off in full every month, super. If you are pushing the balance down after all the economic hiccups of the 2020s, that puts you in the same bucket as the entire rest of the planet. Keep at it.

 

It's still important to keep tabs on your credit score, even if you are already in a mortgage and not planning any major purchases in the near future. You might have the opportunity to change jobs —and land a prime promotion - and find yourself moving to a new house in a new town. Even just monitor your credit report for small errors, keep that score high. If you're currently watching it climb steadily, that's a good plan for your 40s.

 

If you still need some extra oomph to get over the hurdles of unwanted debt, set your financial goal for this decade to knock it out. You've got the whole decade to make it happen. You may need to buy a car or a new roof, so keep the credit score healthy.

8. Think about your estate

 

This is definitely new territory — most people don't spend their 20s and 30s thinking about their estate. But now you have all those assets, your home, your IRA and 401k, your family, and your future. What's it all worth, and what are your plans for it? It's a good time to put thought into those plans. 

 

Estate planning allows you to make strategic decisions with the wealth you are building for your family. It's also a plan for how you manage your dollars and cents once there is more money going out than coming in. Yet another reason why a financial advisor can help you draw out a framework for your future financial plans. 

 

Even if you are including social security benefits in your estate planning or relying entirely on your own personal capital, this is the time to start to weigh the considerations of when you hope to retire, how to stretch your finances and sustain your current home and lifestyle after you have said goodbye to the nine-to-five. 

 

While you still have time to adjust your financial decisions between now and retirement, having a long-term financial wellness plan can take shape before you start getting mailings and offers from AARP.

 

Prioritize your financial success 

Admit it: life is hectic, exciting, and challenging through your 40s. Some days you may not even have enough time to write out your grocery list, much less your financial goals for the next decade. No worries. That's part of your 40s, too. In fact, it may not look like what you expected, but it is your life and you want to keep making it exactly what you want it to be.

 

Take steps to preserve and prioritize your financial wellness during your middle decade. You can set the stage for long-term financial success and a secure future.

Tags: My finances, Future planning, Debt management, Banking

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