Your 40s is a great time to take stock. Your needs and wants have probably changed in the past twenty years; so now’s the time to make sure you have your bases covered.
When you are in your 40s you tend to lead much more complicated lives than what you did when you were younger. The complexity stems largely from being responsible for more than yourselves and that you have now accumulated some assets.
Having a more-involved personal and financial life is a good thing – it shows you have grown as you have aged. You also need to be thinking about your overall financial position, including your cash flow and family budget, assets & liabilities, good debt vs bad debt, your insurances, investments, retirement plan and your will.
Let’s take a closer look at some of the areas that affect the average 40 year old…
Good debt vs bad debt
While it is possible to live completely debt-free, it’s not necessarily smart. Very few people earn enough money to pay cash for life’s most important purchases: a home, a car or a university degree. The most important consideration when buying on credit or taking out a loan is whether the debt incurred is good debt or bad debt.
Good debt is an investment that will grow in value or generate long-term income and capital gain. Generally speaking this includes property, shares and managed funds.
Bad debt is debt incurred to purchase things that quickly lose their value and do not generate any income at all. This includes cars, boats and other luxury items that generally diminish in value.
Having the right balance between good debt and bad debt will mean that your money if working for you, not against you?
Protecting yourself and your loved ones
The more financial commitments you have the greater the responsibility. And as you enter your 40s there’s every chance you’re building a beautiful family, a bigger home, or maybe both.
Either way it’s important that you plan for the unexpected. If you find yourself with a substantial commitments (a mortgage, children, car loans etc.) then its important that you’re protected against the unforeseen. This can be achieved through insurance and to find out more about your insurance needs, and the peace if mind insurance protection offers.
Estate planning – it starts with a Will
It’s more than just making a plan to distribute your assets to certain people. A complete estate plan will allow you to distribute your effectively and help determine who will make decisions on your behalf should you become unable to in the future. Admittedly, it’s not something we want to think about as we enter our 40s – but as you accumulate more assets and greater responsibility, its something you need to plan for.
Where to next?
You’re likely to be thinking one of two things: I don’t have time to review my overall situation or I don’t have the knowledge. If you’re thinking either, feel free to get in touch to arrange an appointment with our Certified Financial Planner professional. Start protecting the lifestyle you want!