Financial Planning Priorities in Your 40’s
In recent weeks, we looked at financial priorities for those of us in our 20’s and 30’s.
This article will continue the trend of financial planning per decade, we are going to focus here on the 40’s.
Your 40’s
Your 40’s is definitely a decade where we become more conscious of things.
More conscious of our health and what’s important to us.
We know by this stage what makes us happy and what doesn’t.
By this stage we should be more responsible.
The modern 40s are so busy it’s hard to assess them.
Researchers describe the 40’s the new “rush hour of life,” when career and child-rearing peaks collide.
Today’s 40ish professionals are the DITT generation: double income, toddler twins.
Create a Budget
Budget. Again!
It’s like being on repeat typing that word.
But I can’t overuse it, it’s that important.
However, one has to create a budget and update it.
Click here and learn more about creating your budget and download our free budget template.
Priority #1 Protect Your Emergency Fund
By this stage, you should have your emergency fund built up.
That’s six months worth of net after tax income or six months worth of expenses.
Did you know that emergency expenses typically rise as we get older?
You need to gradually increase your emergency fund based on your lifestyle changes and inflation.
This then gives you security and peace of mind you have it at the appropriate levels.
Furthermore, don’t forget to refill your emergency fund if you dip into it.
Priority #2 Focus on a debt free plan
It’s common to have loans.
Car loans, education loans, credit card debt and other debts.
You will make it easier to build wealth by shedding debt.
In your 40’s, if you haven’t already, you should be focusing on having a debt-free financial plan.
If you’re carrying debt, by budgeting you will be able to put more money to debt reduction.
Start by paying higher amounts of the debt with the highest interest rate.
When paid, redirect the full payment to the loan with the second highest interest rate. And so on.
Move through your 40’s owing less and focusing on other objectives.
Priority #3 Protect Your Most Important Asset: Your Income
In your 40’s, risk management is a critical component of financial planning.
You want to ensure that your family is protected in the event of a tragedy.
To form a comprehensive financial protection risk management strategy, you should have in place:
- Income protection
- Lump sum specificed illness cover
- A combination of life insurance or monthly income on death cover
This will ensure your current and future unearned income is protected against illness, injury and death.
The later you leave it to get these covers in place, the more expensive they become.
Priority #4 Accelerate Your Savings & Investments
These are also the years when you really want to turn up the dial on your savings.
Whether it’s increasing your pension contribution, purchasing an investment property or investing in equities, increasing your savings and growing your wealth is integral in your 40s.
Not only can these savings help protect you from those unexpected life events, but they can also be the difference between a ‘modest’ retirement and a retirement that is a lot more comfortable.
Priority #5 Diversify Your Investments
It’s very common for me to come across people where their ‘investments’ are share save schemes via their employer.
This is high risk, their invested assets along with their income are tied to their employment.
Investing is super important to growing wealth and beating inflation.
Investing sensibly is super important to managing risk.
Ensure you have a diversified investment portfolio, different stocks, regions and sectors.
I’m not talking two or three, more like a thousand.
Priority #6 Start Thinking About Your Retirement
Retirement is now only a couple of decades away.
I say only because life is now like the second week of your holiday, it comes at you fast.
Now is a great time to do a health check on your pensions.
If you’ve accumulated a number of pension pots over the years, you may want to consider consolidating these.
This will give you more visibility over your overall pension savings and make it easier to manage your money.
If your pension savings are on the low side, it would be a good idea to make additional contributions.
You can do this by making extra contributions to your employers’ pension pension.
Basic-rate taxpayers receive 20% tax relief, meaning an €800 contribution gets topped up to €1,000 by the government.
Higher-rate taxpayers can claim an extra 20% tax relief respectively through their tax returns.
Every €600 contribution will be topped up to €1,000.
It is important to start asking yourself important questions about what type of lifestyle you want in retirement.
Every day becomes a Saturday and Sunday. What do you want to do? Where will you go?
Start with the end in mind and build an effective plan towards it.
Priority #7 Speak to a financial planner
A good financial planner will be able to help you with the above.
They can tell you what you’re doing that’s good.
What you’ve done to date that’s good.
And what can be improved and the steps to take to make the improvements.
Still struggling? Start with baby steps
It’s fact, setting goals in anything that are too big can make them difficult to achieve and therefore cause demotivation.
If your struggling, as with anything go back to basics.
- Budgeting – what’s coming in versus what’s going out? What do I have?
- Living within your means
- Automate the savings and investments, start small
Summary
In summary, whether you’re in your 20’s, 30’s or 40’s, it’s never too late to put good financial behaviours in place.
Taking the correct steps now can save you a whole lot of pain in later life.
How we help
Confused about where to start or what you’re doing?
Wondering what you’re doing that’s good, bad, indifferent?
Avail of our low cost starter financial planning service.
For one small fixed cost we can help you with all of the above and give you a graphical forecast of your financial future.
Schedule my Financial Planning Consultation
Get in touch
Questions?
Email us at info@fortitudefp.ie or request a callback.
Alternatively, you can get us on 041 213 0307.
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You should always engage the services of a fully qualified financial planner before entering any financial contract.
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