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Personal finance checklist for age 40

| MoneyRates.com Senior Financial Analyst, CFA
min read

People often are not sure how to feel about age 40 as a milestone. It has traditionally been thought of as the official entry point into middle age, but it does have some compensations. Compared to 10 years earlier, you are likely to be wealthier, your career should be further along and your personal life is probably more settled.

All those developments entail some changes to your financial situation. While such developments usually happen incrementally, your 40th birthday is a good reminder to take a look at how much your circumstances have changed, and what adjustments you should make as a result.

Personal finance checklist for age 40

Here are 10 financial issues to address once you turn 40:

1. Gain traction on retirement saving plans

According to the National Institute on Retirement Security, average retirement assets more than double between the 35-to-44 age group and the 45-to-54 group. In other words, your 40s is where retirement savings need to accelerate so you can begin to accumulate a significant balance.

2. Take stock of progress on retirement targets

It might be comforting to witness that retirement plan balance growing, but don't look at that balance in isolation. Always look at retirement plan targets to see how you are doing relative to your goals. Even an impressive retirement plan balance looks a lot thinner once you spread it out over a couple decades of retirement spending.

3. Consider if savings targets fit your lifestyle

Say your savings are on target with your retirement plan. Now consider when you formulated that retirement plan. If it was back in your early 30s, both your income and your lifestyle may have improved since then. If that is the case, it may be time to raise your retirement targets so they would support that improved lifestyle. Early on, it is unrealistic to base retirement planning on the assumption that you will achieve financial success, but once you reach that success, it is wise to adjust your plans and the amounts in your savings accounts accordingly.

4. Assess whether your house meets your needs

If you have owned a house for several years, think about your present family situation and decide whether you are likely to stay in that home or move to something that better meets your needs down the road.

5. Look into buying if you currently rent

If you rent your current residence, age 40 is a good time to evaluate whether homeownership is ever going to be in the cards for you. Your conclusions will determine whether you should focus on making your current living arrangement more cost-effective, or whether you should start saving for a down payment on a new home purchase.

6. Research options to save on mortgage

If you are staying in your current home, see if you can save money on your mortgage. Refinancing is one option, but if you are financially comfortable, other options include shortening your remaining mortgage term or paying the loan off altogether. Both of these moves would reduce your long-term interest expense by eliminating years of interest payments.

7. Set a timeline for eliminating high-cost debt

If your mortgage is not the only debt you have to deal with, formulate a plan for paying off that debt over a specific period of time. Otherwise, chronically carrying debt balances is going to steadily erode your wealth, especially with credit card debt.

8. Get serious about college savings contributions

As you move through your 40s, your kids will probably be rapidly approaching college age. At this stage, saving for college is no longer just a matter of putting the odd hundred dollars aside on the kids' birthdays. Saving money needs to be geared toward a specific plan to meet their needs when the time comes.

9. Update your life insurance

Life insurance is intended to help your loved ones replace your income should you die. If you got that insurance back when your income was much lower, chances are you need more insurance now to replace a higher income.

10. Determine job market competitiveness

Don't let your skills get out of date - consider new training if necessary. If you already have in-demand skills, think about whether you are maximizing the career opportunities for those skills.

Ideally, this financial review will find you are starting to reap some of the benefits from financial moves you began making around the time you turned 30. If not, don't worry - it's not too late to start, but it is time to get going so you have some progress to show by the time you turn 50.

More from MoneyRates.com:

Over 40 with no retirement savings? Take these 6 steps

What's the best way to invest $12,000 in my 40s?

Turning 30? See this personal finance checklist

1 Comment
Founder Finance 14 July 2016 at 11:16 pm

This is a good list. It doesn't include "Are you doing what you love?". My favorite is "determine job market competitiveness", I would rephrase to "Do I create value and how much?"