Are you in your 40s and niggled by the feeling that there is something you should be doing to protect and grow your finances? For every decade of your life, there are financial tweaks that can be made to strengthen your position, but the 40s has extra significance. It is a turning point in personal financial planning that affects what kind of retirement you will have, what legacy you will leave behind, and even the standard of your health in your later years.
It all sounds very serious and foreboding, but it doesn’t have to be! Making a few smart financial moves now can give you peace of mind so that you can enjoy today without worrying about the future. Check out our 5 financial tips that you should take advantage of sooner rather than later…
5 tips to get your personal finances in order in your 40s
1. Yes, having a pension fund is top of the list!
The maximum state pension for someone aged 66 – 88 is €232 per week. We’re all for improving that situation! If you don’t have a pension plan, create one. If you do have a pension plan, review it. Many people think it is too late to start a pension in your 40s, but this is not the case. Now is the time to start making substantial contributions to your pension fund and/or to choose a smart investment plan. If you already have a pension, you need to review your retirement account and maximise its potential. The same retirement plan you made in your 30s probably isn’t working hard enough for you now.
Founder and CEO of The Penny Hoarder, Kyle Taylor, says to use the ’50-30-20 percent rule’. That’s 50% of your money should go straight to the back (your savings or pension), 30% should fund your lifestyle and 20% goes towards fun.
2. Time to stop putting life insurance on the long finger
The longer you leave life insurance the more expensive it is going to be, especially as you pass the 5-0 mark. If you don’t have some kind of life insurance or income protection already because you thought you didn’t need it, that’s fine, but going forward (towards your mature years!) it would be wise to tone down that gung-ho attitude and get some tailored financial advice in this area. We say financial advice, because there are so many different types of insurance and everyone has different needs. When it comes to life insurance, it really is something that should be carefully considered on an individual basis.
3. Diversify your investment portfolio
People can get very conservative with their investments in their 40s, and considering we’re advising you to take care of your pension and get life assurance you would think this adds up. But if you are hoping for a reward from your investments, you need to continue to think like an investor. This doesn’t mean that you have to take financial risks that will keep you up at night. Instead, we strongly advise that you diversify your investment portfolio to lower risk without hurting performance. For example, 10% of your liquid assets should be in gold. You can find out more about this investment strategy in our blog, “A beginner’s guide to investing in gold”.
“First, know how to balance your portfolio so that you don’t have any systematic bias toward bull or bear markets in anything. Second, don’t make the mistake of thinking that investments that have been good over the past few years [will continue]. Rather than more expensive investments… think about how to rotate your portfolio to buy that which is cheap and sell that which is expensive.”
Ray Dalio, Bridgewater Associates founder
4. Find a side income
Did you know that most millionaires have an average of 7 income streams? This stems from the same philosophy behind diversifying your investment portfolio – spread the risk to increase the reward. You may have heard of the venture capital model which states that when you are investing in equity, invest in at least 10 companies. This is because some companies will fail, some will break even and then a few will actually be successful. Of course, you always want to do your due diligence before you invest, but it can be a bit of a numbers game. You should approach all your finances in the same way and nurture alternative income streams.
“You won’t get rich without multiple flows of income. That starts with the income you currently have. Increase that income and start adding multiple flows.”
self-made millionaire, Grant Cardone
5. Create a will
By the time you hit your 40s, you will probably have a few assets that are worth protecting. Taking control of your will now can give you some peace of mind and feel a lot less morbid than leaving it until the last minute! The most obvious reason to create a will is so that you can ensure your assets go to the right people, but if you have a business you will also want to pass on your company with clear terms and conditions. Planning for succession saves money and gives your business a real chance to succeed. Think about who is going to take over and if there are any skill gaps for these individuals. Creating a will can be a very enlightening experience, because it gets you thinking hard about what kind of legacy you want to leave behind and how you are going to start planning for it.
Are you looking for tailored financial advice?
Get in contact with our team today for a chat about what financial moves you should be making to reach your personal goals. At Hobbs Financial Practice, we offer unbiased advice tailored to you!