Top 4 Tips for Financial Planning In Your 40s

You are in your 40s now you have officially become the parents of your youth!

Your 40s is when the serious financial planning becomes a priority and not just something you will eventually get around to starting one day.

Whilst "retirement" was the ultimate end goal for your parents' generation, "financial independence" is now the bulls eye for which you will likely be aiming when you are in your 40s.
 

Gone are the days of the "week-days: strict diet and train hard - then party all weekend" it's more like "permanent paleo, pilates and yoga to stretch those tightening muscles, and not so much of the weight-training or else your shoulder injury will flare-up" (oh yes, it's fun in your 40s!).

There is however some good news about your 40s!

• The "you had better knuckle-down young'in" 30s are over and your financial circumstances are likely to be stronger in your 40s then your 30s (although everyone's circumstances are different)
• You should be more experienced in managing your finances (again, depending on your circumstances),
• So the financial planning should be getting a little easier or at the very least, more easily accepted as an important part of your future.

Your 40s is the time for you to consolidate your financial circumstances, and begin to think about planning for your financial future.

Here are my top four tips for financial planning in your 40s.

1. Continue to build your financial assets.

If you had followed my tips for your 30s, you should be getting close to owning your home, or at the very least have significantly more equity, and therefore the cornerstone of your financial plan (i.e. owning your own home) is likely starting to become a reality.

Now is the time to continue to build financial assets outside of personal-use assets such as your home, which will establish the foundation of your income-producing assets that you will need to meet your expenses once you have reached your financial independence date.

Superannuation investments should be building quite nicely now from your employer contributions, and it may be time to consider increasing your own contributions to super now that your surplus income may be increasing (and you may also have the added bonus of a tax effective investment strategy i.e. salary packaging into superannuation).

You may also want to consider other types of non-superannuation investments such as investment properties, managed funds, cash investments, gold, etc.

Essentially, you need to start considering how your money will best work for you when you are in your 40s.

2. Sharpen your cash flow management.

Whilst cash flow management is important no matter at what stage of the financial plan process you are, making sure you make the best use of your money in your 40s increases significantly, simply because your work life is shortening and you may not have time to recover financially if you are frivolous with your money.

Paying off your home loan debt is still likely a priority, and may still be the major expense for your whole budget, but it is likely getting closer to the date when your debt will be repaid. You will need to start thinking about what you will do with the surplus income you will likely have paying off the home loan.

As cash flow is the basis upon which any financial plan is built, you should be getting very good at your cash flow management when you are in your 40s as you need to make every dollar count!

3. Review your risk management.

It may have been years since you developed your personal risk management plan, when you and your family were young. Your circumstances may have changed significantly, and therefore you need to make sure you complete a comprehensive review of your personal risk management plan.

In your 40s, it is likely your children's education expenses may be getting close to ending, your assets may be increasing, your liabilities may be decreasing, and therefore the amount of life insurance cover you need may be decreasing.

Your income protection is still vitally important. As your income increases and you become more reliant on your employment income to build the foundation for your financial future, you need to ensure that your income protection insured benefit has kept pace with your income so you are likely not to be under insured if you something unexpected happens.

Your risk management plan in 30s will be significantly different to your 40s and therefore a comprehensive review of your personal risk management plan is a must-have in your 40s.

4. Begin to outline your plan for reaching your financial independence date.

A cliche is no less true just because it is a cliche, and so it goes for the old saying "your life goes past in the blink of an eye".

In your 40s you begin to realise that the last 20 years "flew by", and you naturally start to think about the next 20 years when, "gulp", you will be in your 60s (OMG!). You start to think much more seriously about your financial independence date, and more importantly what you need to do between now and that date to make sure that you have enough financial assets (that is not including your home) to generate sufficient income to meet your expenses when you are no longer working - whether by choice or not.

Therefore, in your 40s is the time to seriously start not just thinking about your financial independence date, but actually sketching an outline of what needs to be done to get you where you need to be when that date arrives.

In summary, when you are in your 40s financial planning starts to get serious and you need to start to plan because #everyoneneedsaplan

If you are serious about your future financial security and would like more information about our Financial Planning Services, please don't hesitate to Contact Us and arrange your FREE FINANCIAL ASSESSMENT today - because....#everyoneneedsaplan!