Talk to a debt counselor toll free:800-300-9550
Our Clients Rate Us Excellent
Based on 3234 reviewsTrustPilot Reviews
You would think that by the time people reach their 40s they'd be pretty knowledgeable about their personal finances. And in most cases this is true. By the time you reach 40 you’ll have had enough time to learn about budgeting, how to use credit sensibly and about the importance of saving for retirement. Unfortunately, there are still some financial mistakes you could make even at this time of your life. For example, you may be having a problem figuring out how you're going to pay for your kids' education and when and if you will be able to retire. Beyond these issues there are some financial mistakes that you could cost you dearly if you're not careful.
of that time that makes long-term saving so effective. And if you take money out of your 401(k) before you reach 59 1/2 you'll not only pay a 10% penalty, you’ll have to pay income taxes on the money and at your standard tax rate. Plus, you'll lose some of that power of time and compounding interest.
#8. Failing to diversify your savings and investments
You may have come out of the Great Recession a little shell-shocked about your investments. This is because at the same time as the housing market crashed so did the stock market. It's important at this age not to put all of your eggs in one basket – whether it's a particular investment or your house.
#9. Assuming that your best earning years are still ahead of you
You've probably seen your income go up almost every year but it's a mistake to assume that this will continue. While incomes generally rise for people in their 20s and 30s and maybe somewhat in their 40s, they generally peak at around age 50. You should not only plan for your income to flatten but also be concerned about job security. It's riskier if you lose your job as you get older. There are laws about discriminating against people because of their age but there can still be issues. You might not be fired outright but you could be "downsized" or your entire department or division could be eliminated.
#10. Believing that being risk adverse is not a good thing
There's nothing wrong with taking risk when you're in your 20s or early 30s. But being adverse to risk can be a very good strategy for most people in their 40s. You should have your savings account stocked so you have emergency cash, have a diversified portfolio and keep your debt very low. In other words, control the things you can control, avoid risk, and be conservative and prudent.
The net/net is that it might be easy to start feeling financially complacent now that you're in your 40s but it would be a mistake to set your finances on cruise control at this point. Watch out for what's ahead and keep from making the common mistakes you’ve just read that could tank the financial security you’ve worked so hard to create.