Financial planning in your 40’s: What you need to know

The 40’s are a crossroads in a person’s life, financially speaking. When you reach your 40’s, you’re halfway between entering the workforce and the traditional retirement age of 65. It is a critical time for retirement savings because, in most cases, this is the decade when you’ll reach your peak income and can start to make some real headway with respect to your long-term goals, such as paying off your debts. There are some important considerations when it comes to financial planning in your 40’s and building your wealth.

After your 30s, maximizing your earnings should be one of the top priorities of financial planning. How you invest and save these earnings can have a real impact on your future assets. If you haven’t already been contributing to a retirement plan since you entered the workforce — an IRA or 401K– there’s still time to catch up on your contributions. Retirement plans offer tax advantages, and you can increase your retirement savings over the long run.

Another part of a sound financial plan is to set up an emergency fund which offers some financial stability in the event of some unforeseen circumstance. In your 40’s this is especially important because you have more responsibility for providing for your family. Your fund should have enough money in it to cover your living expenses for at least 3 to 6 months, but ideally for a year.

Moving to the next stage

As you plan for building your wealth in your 40’s, you need to consider how you’re going to eliminate debt such as car loans, a home mortgage, credit card debt, or student loans, so you can be debt-free in retirement. More than likely, this part of your plan will involve reviewing your budget and making changes in your spending habits, especially when it comes to credit cards which tend to the highest interest rates.

Your 40s are also the time to think about estate planning to help your spouse and family in the event of your death or if you should become disabled. Having life insurance may also be important in your 40’s because it provides a death benefit to your beneficiaries that can be used for a variety of expenses, such as education for your children, to pay the mortgage on your house, and funeral expenses.

Plan accordingly

The focus of financial planning in your 40s is going to be on retirement and financial stability. A financial advisor can help you look at the big picture with respect to long term goals such as investments, retirement, paying for college, becoming debt-free, and other goals. The financial plan that you make in your 40’s can help you to live a full life when you retire.

At Blankinship & Foster, our wealth management services integrate financial planning with investment management. We’ll work with you to develop a financial plan to meet your needs, and then design an investment plan and portfolio to support it.

Call our office to request a consultation with one of our financial advisors.

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