Planning about your finances is really quite a challenge according to almost all the TED talks I've listened to. There's no question about it. Paying off your marriage expenses, paying off your rent, credit cards, and your children’s enrollment fees may be your financial summary during your 20s or even 30s. During your 40s, you get to think more long term it often features growing responsibilities and ever-competing priorities. Your parents are older, your mortgage is still on foot, children’s education costs are growing, and though retirement may seem a distant reality, planning for that reality becomes an important consideration.
The good news is that
in your 40s, the financial planning you undertook in your 30s begins to come to
fruition. Perhaps even better news for many is that it’s still not too late to
start this planning in your 40s if you haven’t already done so.
Controlling your Finances
Everyone’s financial goal
regardless of age is to organize and optimize your financial affairs. Everyone needs a financial plan, and all plans should
be in writing so as to be measurable and accountable.
At the very least, your
financial plan should encompass your current circumstances, such as specific
financial goals, budgeting, emergency funds, cash flow, as well as your road
map for achieving these objectives. This road map should cover both
wealth-accumulation strategies – that is, growing your investments – and
wealth-preservation strategies, which can include using appropriately
structured life and income insurance as well as appropriate legal
documentation, should something happen to your health, life, or family situation.
Augmenting Your Cash Flow
Having a budget is very important and making sure to
have a daily, weekly, or even monthly budget is a must in every household to
cover your basic needs. In your 40s, you should have a family budget
that you also regularly review. Simply writing down and organizing your key
priorities, then allocating the cash flow accordingly, can bring valuable
clarity and simplicity to your budgeting.
Often, you don’t need
to earn more to improve your
cash flow; you just need to better manage the money that passes through your
hands. Depending on your marginal rate of tax, a dollar saved can almost be
worth as much as $2 earned.
Settling Debt Faster with Lyle Advisors
In your 40s, if you’re
responsible enough and with some luck, you’ve left behind the credit card debt
and personal loans from your 20s and 30s. After all, these days, you’ve got
enough to juggle and should be dealing with only one non-deductible debt. But
in case you still haven’t settled your credit card statements yet due to high
interest rates, you may need help from a financial advisor about this such as LyleAdvisors.
Using Superannuation Effectively (for employees)
Employees are lucky for having superannuation. Although
superannuation is an important vehicle for your retirement wealth, if you’re in
your 40s and more than 10 to 15 years away from retirement, it’s generally
better to use your surplus cash flow for the repayment of non-deductible debt
instead of additional pre-tax super contributions. Within 10 years of
retirement, it’s typically better to flip this strategy and focus on maximising
superannuation contributions with your surplus cash flow.
Accelerating your Wealth
Even if you have your
company’s retirement plan ready for you, it’s a good idea to have some
investments outside of this retirement vehicle. These investments can provide
you with the flexibility of a retirement before the superannuation preservation
age (the age at which you can access those funds).
Living through your
40s and your finances
can be a challenging combination, but with some help and careful financial
planning, you can achieve your financial goals and live the life to the fullest - financially speaking.
