David Lerner Associates Financial Resolutions In Your 40s
In this series of articles, we have been suggesting New Year’s financial resolutions that may be appropriate for each stage of life. This article offers three suggestions for New Year’s financial resolutions for individuals in their 40s.
Financial Resolution #1: Don’t get lulled into financial complacency. The good news if you’re in your 40s, is that you may be entering your peak earning years, especially if both you and your spouse are working. This may open up more financial opportunities for you than ever before. The bad news, however, is that your financial obligations may also be at an all-time high.
In fact, one of the biggest financial dangers if you’re in your 40s, is getting lulled into financial complacency. If your earnings are at an all-time high, it can be easy to allow your lifestyle, but not your savings, to rise along with them. For example, you might decide to buy a more expensive home (or even a second home) or expensive “toys” like an RV or boat, but not increase your savings rate.
Many financial experts say it’s OK to enjoy the fruits of your labor by splurging a little. But at the same time, you should consider increasing your savings rate commiserate with your increased income. One of the best ways to do this is to save a percentage of your income, instead of a fixed amount, so it automatically rises along with your earnings.
Financial Resolution #2: Don’t try to do too much financially. The 40s actually represent a continuation of many of the same financial challenges and opportunities of the 30s. But a decade later, these challenges and opportunities may be even greater.
Many people in their 40s are trying to balance multiple and competing financial demands such as maintaining their current lifestyle, saving or paying for their children’s college educations, saving for their own retirement, helping care for aging parents, and maybe even helping support grown children who are suffering from long-term unemployment.
However, it’s important to remember that you probably can’t do everything. This requires setting some financial priorities. For example, some people in their 40s place a higher priority on saving for their children’s college than on saving for their own retirement, since college is looming nearer. However, other sources of financing may be available to help pay for college, such as scholarships, grants or loans. But unless you have a pension plan, there will be no other major source of financing for your retirement other than your own savings.
Financial Resolution #3: Keep a close eye on your debt. Excessive debt can be the biggest financial derailer for people in their 40s. This often happens as they try to increase their lifestyle to “keep up with the Joneses” or to juggle the myriad of financial responsibilities they face (as noted above) during this life stage.
Many financial experts suggest that individuals in their 40s attempt to pay down all of their debt except their home mortgage. Start with credit card debt, which is likely your most expensive debt. If you have debt on more than one credit card, focus on paying off the highest rate card first, and move on from there. Then focus on paying down other consumer debt, like car and other installment loans.
One strategy is to make it a goal to be debt-free, except for your home mortgage, by the time you reach 50 years of age. Then you may want to consider making extra payments toward your mortgage principal, which can potentially shave years (and thousands of dollars) off the cost of owning your home — and possibly enable you to own your home free-and-clear by the time you retire.
Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities. Member FINRA & SIPC
Founded in 1976, David Lerner Associates is a privately-held broker/dealer with headquarters in Syosset, New York and branch offices in Westport, CT; Boca Raton, FL; Teaneck and Princeton, NJ; and White Plains, NY. For more information contact David Lerner Associates 1 877 367 5960 http://www.davidlerner.com
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