It seems like your 40s catch up to you unfairly fast. The realization usually dawns about six months before your 40th birthday. You’ll pause one day and realize that you’re going to be…no, don’t say it and maybe it won’t actually be true.
Forty is a rough age because many people are caught between conflicting financial pressures. Your kids are reaching college age at the same time your parents start needing extra help. That’s why people in their 40s are sometimes called the “sandwich” generation because they’re frequently caught between conflicting priorities. Here are some of the things you can do to make your 40s less of a financial nightmare.
Up Your 401(k) Contribution
I get it, college bills are expensive and sixty-two percent of young people expect their parents to fund the American dream for them. All the same, you have your own retirement to think about and, unless you want to be living in your kid’s basement some day, you have to put some extra money aside.
Recognize The Risks
In your 40s you have to recognize that you don’t have decades left to recover from a major stock market loss. When you’re in your 20s and 30s it’s easy to forget about rebalancing your portfolio based on your age and many people cruise into their 40s way too heavy in equities. In your 40s you also have to start including preservation strategies to hold onto the money you’ve already put away. That means converting some of your cash to liquid hard assets and things of intrinsic value.
With the kids off to college and the real estate market reaching insane valuations, it might be a good time consider downsizing. Many people continue to pay maintenance and utility costs on a big house that is only used much during holidays. Downsizing will result in savings now and fix those savings into the future.
Start a Business
If you can start your own business without going massively into debt, this is the time to do it. You have enough experience to know how to research starting your own business and you still have the capability to put in the hours. You’re also getting out from under some of the bigger financial responsibilities of your 20s and 30s. Building a business can provide a stepping stone job for your kids coming out of college and provide a more secure working environment for yourself as you get older. As we’ve pointed out many times, running your own business is one of the consistent pathways to getting rich.
Talk To Your Kids And Parents About Money
How much flexibility you have to map out your financial future is going to be dependent on how much care you have to extend to kids and parents. You’ll have a lot more flexibility if your parents are already well cared for and there’s no danger of one of the kids moving back home. Giving everyone notice that you’re downsizing your housing life or starting a business will give you a better chance of getting buy-in from family.
Okay, it sucks getting older and there’s no way to paint a smiley face on aging. That said, you can still make the financial transition smoother and put together a solid plan for the future.