As you get older and increasingly close to retirement, planning your finances properly becomes increasingly important. For those who are going through their 40s, retirement savings become increasingly important even as other family expenses add up, like paying for college tuition for kids who will soon be graduating from high school. You may want to talk with a financial planner, like Family Financial Partners, as you enter these years in your life.
In your 40s, you'll have to balance quite a few financial challenges to maximize your savings and grow your wealth to the greater extent possible. The following are five financial planning mistakes to avoid to get through your 40s as successfully as possible:
Not reducing your debt down to nothing
It's in your best interest to get rid of most or all of your debt before you start focusing on savings. Fortunately, many consumers are getting close to paying off their mortgage by the time they hit their 40s. Pay off your mortgage and credit cards, and start paying for vehicles in cash rather than taking out another car loan if possible to avoid debt.
Not putting some thought into your cash reserves
Cash reserves provide you with some cushioning and serve as liquid assets if some financial problem comes up and you need to lean on emergency cash for a while. As you get older, you might want to think about increasing the amount of cash reserves you have available to you at any given moment to ensure peace of mind and financial stability.
Not consciously planning for your retirement
If you can afford it, you should make the maximum contribution that's allowed to the retirement plan offered at your company. If your employer matches your contributions, you can take advantage of this to the greatest extent possible by maximizing your own contributions.
Not making sure you're adequately insured
An accident that won't be covered by insurance can devastate you even when you're extremely comfortable financially in your 40s. Once you have accumulated a comfortable amount of wealth, it's a good idea to reevaluate your insurance and to look out for gaps in coverage that are putting your assets at risk.
Not taking full advantage of your employee benefits
Those in their 40s have often been at the same job a while. Unfortunately, even employees who have been on the job for years sometimes are not very familiar with their benefits package. As you get older, you're going to be more likely to need your health care benefits. You're also going to need to put more thought into the retirement benefits and options your company offers.
As you hit 40, it's a good idea to take a fresh look at your benefits package and to reevaluate what you need and what you may be missing out on.