6 Tips for Managing Your Money in Your 40s

    

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6 Tips for Managing Money in Your 40s

Many perks can come with being in your 40s. For starters, research suggests that people make the most money in their lives during this decade. Your 40s may be the start of your prime earning years, which could bring along more financial stability.

At the same time, though, your 40s may lead to a number of other considerations. If you’re a parent, chances are that your kids are growing up. In addition to your efforts to keep the fridge full, college is right around the corner. On the flip side, your own parents are getting older, too—giving you the right to claim your status as a member of the sandwich generation.

Add it all up, and the argument could easily be made that knowing how to manage your money is perhaps most important when you are in your 40s. With that in mind, let’s take a look at six money management tips that can help you get a better hold on your financial future—and the financial future of your family.

Money Management Tips for Folks in Their 40s

As you begin planning your financial future, here are some tips to keep in mind.

1. Your emergency fund

If there’s anything we’ve learned in the midst of the coronavirus pandemic, it’s that the world can change drastically and rapidly at a moment’s notice.

As you enter your 40s and become more familiar with your financial obligations, we highly recommend stashing away cash in an emergency fund that can cover 6-12 months of living expenses.

That way, when the unthinkable happens, you may still be able to live comfortably while figuring out your next moves.

2. Funding your retirement plan

Here are some sobering statistics about retirement, courtesy of The Simple Dollar:

  • One-third of Americans don’t have anything saved for retirement.
  • Of those who have retirement accounts, 23 percent have less than $10,000 in them.
  • Nearly 30 percent of Gen Xers (those in their 40s and early 50s) have nothing saved for retirement.

Avoid this fate by not only funding your retirement but also maximizing those investments however you can. For example, if you work for a company that offers 401(k) matching, by all means maximize your contributions to take full advantage of that benefit. You may also want to contribute even more than that amount to your retirement savings, if you can afford to.

 

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On top of that, look into maximizing an IRA account each year. If you choose a traditional IRA, you’ll be able to reduce your tax liability each year. If you opt for a Roth IRA, you’ll be able to withdraw earnings tax-free once you reach retirement age.

  1. Open a brokerage account

If you have enough cash laying around, you should consider opening a brokerage account.

The upside here is that you don’t have to wait until you reach retirement age to access your funds. Unlike IRAs, there also isn’t a limit to how much money you can invest in your brokerage account each year. What’s more, you won’t have to withdraw your funds at specific times, either, giving you more flexibility on when you’re going to incur capital gains taxes.

With so many securities to choose from, managing a brokerage account can be tricky. But you don’t have to do it all on your own. A financial advisor can help you make the decisions you’re most comfortable with.

4. Insuring yourself

No one wants to wind up in a sticky situation only to find out they don’t have proper insurance. This is why life insurance, property and casualty insurance, and similar types of coverage can be so important.

In fact, property and casualty insurance—which may cover you in the event that a visitor gets injured on your property or if your home is damaged because of vandalism, a weather event, and more—is one of the more overlooked forms of insurance today.

5. Bad debt, good debt--Know the difference

Bad debt—including credit card debt—can be prohibitively debilitating. If you have any high-interest debt on the books, work expediently to pay it off.

Keep in mind that not all debt is bad. Mortgages, student loans, and small-business loans, for example, can be useful forms of debt.

6. Talk to your parents about their money

It might be a little awkward. But sooner or later, you will probably have to talk to your parents about their finances. Do they have enough money to live off? What happens if they get sick or decline cognitively? Is their housing taken care of? What about health insurance?

These are difficult questions. But they’re ones you will likely need to begin asking in your 40s.

7. Write a will and begin estate planning

What happens after you’re gone? Who gets what?

Let’s hope you still have decades and decades left on the planet. Even so, you’ll need to begin writing your will and getting your estate plans in order during your 40s.

This might sound like a tall order, but it doesn’t have to be. A financial planner can help.

You Don’t Have to Secure Your Financial Future on Your Own

Planning your financial future can be tricky when you do it by yourself. With so much on the line, you don’t want to leave anything to chance.

The good news is that you don’t have to go it on your own. When you partner with a financial advisor, the financial planning process may become easier because you’re able to leverage the knowledge and expertise of professionals who have helped people in similar situations build their financial plans.

Schedule a consultation today to find out more about how EP Wealth can help you prepare for the future and work toward meeting your financial objectives.

DISCLOSURES

  • EP Wealth Advisors (“EPWA”) makes no representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information presented in this article. EPWA has used its best efforts to verify the information presented. However, EPWA cannot guarantee the accuracy or completeness of the information included. All expressions of opinion are subject to change without notice.
  • This savings article should be used as a general tool that could assist you in considering your expenses and savings. It, however, should not be viewed as a comprehensive analysis of budgeting techniques, a definite savings formula, nor is it uniquely tailored to your situation. 
  • Information presented is general in nature and should not be viewed as a comprehensive analysis of the topics discussed. Content does not involve the rendering of personalized investment advice nor is it intended to supplement professional individualized advice. Always consult a professional Financial Advisor before applying any of the approaches or strategies made referenced directly or indirectly herein.
  • The need or type of savings plan or strategy required are specific to the uniqueness of each individual’s circumstances. There is no guarantee or warrantee that the analysis offered, or the strategies referenced here will satisfy your savings requirements. Other saving strategies not referenced in this article may align more to your specific needs. 
  • Nothing referenced here should be viewed as indicative of actual or expected results.  There is no guarantee or assurance that any results, positive or negative, will be achieved or sustained. Actual results may be better or worse than the projections or analysis offered or referenced herein.
  • All investment strategies have the potential for profit or loss. Different types of investments and investment strategies involve varying degrees of risk, and there can be no assurance that any specific investment or strategy will be suitable or profitable for a client's portfolio. The risk of loss can never be eliminated even if working with a professional.  
  • Content does not involve the rendering of personalized investment advice nor is it intended to supplement professional individualized advice. Always consult a financial professional regarding your unique financial circumstances. 
  • Content should not be construed as legal or tax advice, EPWA is not engaged in the practice of law or accounting. You should consult your legal and tax advisors before implementing any reference contained here.
  • EP Wealth Advisors, LLC is a registered investment adviser with the U.S. Securities and Exchange Commission (“SEC”). Registration with the SEC does not constitute an endorsement by the SEC, nor does it imply that EP Wealth Advisors Inc. has attained a certain level of skill or ability.

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