We came across a great article a while ago from Get Rich Slowly which covered money mistakes to avoid in your 40s. Looking at these mistakes, we decided to pull out a few of our favorites. We all make mistakes, but there are some mistakes that people tend to make more often around their "midlife crisis" - 40s and early 50s. Here are a few of them.
- Not updating your emergency reserve balance to match your current needs. Your emergency reserve is meant to cover 3 to 6 months of your family's living expenses. If your living expenses go up, so should emergency reserve fund.
- Not taking care of your health. By taking care of yourself now you'll actually save money on medical bills later.
- Not continuing to grow in your career. You may feel “stuck” or “complacent” at your current job, but it's time to kick that feeling to the curb. First, don't allow yourself to grow complacent with your career. You should always be learning, growing, and improving in your career. If you're more interested in pursuing a new career path, then find a way to get started. There are many people who switch careers later in life or pursue a passion that earns extra income on the side. Find what you're passionate about, and then find a way to monetize it.
- Not keeping your lifestyle spending in check. This is really a point that we should all remember regardless of our age. It's never a good idea to let your spending get away from you (or your budget). This is especially important for people to remember when in their 40s, though, because typically your 40s and early 50s are your peak earning years. This just means you have more money to accidentally overspend.
- Supersizing your house (or doing a big remodel). If you’ve lived in the same place for a while, you likely want to improve your living situation. You've earned it! Before putting a big deposit down on a McMansion, though, be sure you're being realistic about your wants versus needs. Do you need more room or a bigger house? Census data shows median and average house sizes have been increasing consistently since 1973 whereas the average household size is actually shrinking.
- Not saving towards retirement. If you haven't already started saving towards retirement, then today's the day! There is no time like the present to start saving towards retirement.
- Paying for your children's college tuition rather than saving for your retirement. We understand that there can be a lot of pressure to help support your children's decision to attend college, but ultimately, you need to put your retirement savings ahead of your kids' college expenses. Your kids can take out a student loan for college, but you can't take out a loan for your retirement. There is a flip side to this coin, which is…
- Not saving for your kids’ education if you can afford it. If you’re taking care of your retirement, and you're in a position to allocate money for it, start saving now for your kids' education if you consider it a priority. There are a variety of strategies for how to save for your kids' college. You might want to start here.
- Treating your long-term investments like a checking account. We understand that when you have a large expsense that needs to be paid, it's easy to look at the accounts that seem to have accrued a nice chunk of savings and think it makes sense to just pull some money out of there. Whether it's your mortgage or a 401(k), taking out a loan against these accounts is typically not a smart financial move. You have to remember your original purpose in savings and investing in these accounts. You have to weigh the importance of the purchase you're looking to make versus having a comfortable retirement and/or having a fully paid off house (bye bye monthly mortgage payments).
- Ignoring your insurance. Your insurance needs are dynamic, and this tends to be the time in your life when you need to evaluate what you have versus what you need. Have your life insurance needs changed? Do you have disability insurance or long-term care insurance? There’s a lot that goes into it, more than we can cover here, but it’s important to discuss with your advisor.
Be sure to take care of yourself. Life gets crazy and we all have lots going on but keep things in perspective and take time to enjoy all the hard work you put in. Go on a date night with your spouse or a football game with your kids. That’s why we created Wela the way we did. We know life gets crazy and often the important stuff gets pushed to the back burner. We use technology to help deliver the important stuff on your terms and on your time.