Budgets and Money

Financial Checklist for 40-Somethings

Finances in your 40s are a balancing act - building your retirement, saving for college, enjoying what you've earned. Here's a checklist to help you stay focused.

Money Management Tips & Saving Money in Your 40s

During your 40s, you will probably face some major financial decisions, like how to save for retirement and fund college tuition. Below are some financial tips and ideas to help you make the most of this decade.

Personal Financial Planning Fundamentals

Update your budget.

Planning for retirement in your 40s is becoming a higher priority, so take a new look at your monthly budget. Identify any frivolous or non-essential expenses. Does it make sense to redirect the money spent on those items toward your savings goals?

Bolster your credit score.

Did you know that not using an open credit card can lower your credit score? Use credit cards strategically, striving to pay off the balances each month. If your debt to income ratio is high, work to reduce it. You are entitled to a free credit report each year from each of the three reporting agencies. Go to AnnualCreditReport.com to request your reports.

How to Manage Money Better in this Decade

Build a relationship with a financial professional.

If you don't have an established relationship with a financial professional, now is the time to make it a priority. You have many decisions to make in the next few years, and most of them have long-term implications. Find a financial professional who can guide and advise you.

Get your paperwork in order.

If you haven't already done so, get your estate planning paperwork in order, by establishing a power of attorney, a will, and health directives. This is particularly important if you have children.

Maximize your retirement savings.

Retirement may only be 20 to 25 years away. Contribute the maximum amount allowable to your retirement plans. Also, contribute to an IRA if you are eligible. Strive to have two to three times your annual income saved for retirement during this decade.

Pay off big debts.

If you have financed vehicles or recreational equipment, try to pay these loans off so you have more to invest in your long-term financial goals.

Maintain a stable emergency fund.

As your income and expenses increase, so should your emergency fund. Maintain an emergency account with three to six times your monthly income.

Implement a financial strategy that supports your “big picture.”

Understanding your big picture goals, and knowing how every financial choice supports those goals is imperative at this life stage. For example, if you're trying to decide between saving for college or retirement, talk to a financial professional. While every situation is different, many financial experts advise that retirement savings should be the top priority because you can't get financial aid for retirement! By working with a financial professional, you can deploy a financial strategy that supports your long-term plan.

Extra Money Management for this Decade

Teach your children.

Preparing your children for adulthood includes teaching them the value of financial responsibility. Share the financial lessons you have learned and take every opportunity to teach them about smart money management.

Help your parents plan ahead.

Talk to your parents about their preparations and estate planning. Have they planned for long-term care expenses? Do they have a power of attorney, wills, and health directives? Have they thought about their final arrangements? A good way to start the conversation is by sharing the steps you're taking to prepare for your future.

Money Saving Tips for Any Age

Strive to save 30% or more of your income.

Pay yourself first. Save 10% for retirement, 10% for your emergency fund, and 10% for large purchases or vacations.

Start building an emergency fund.

Strive to save three to six times your monthly income.

Be mindful of your housing to income ratio.

Try to limit your housing expense to no more than 28% of your gross household income.

Watch your debt to income ratio.

Try to limit your total debt (mortgage, car loan, credit cards, student loans) to 36% of your gross household income.

Keep your credit card balance to limit ratio under control.

To keep your credit score as high as possible, try to keep your balances as low as possible.

Get started today. Call: 1-844-733-5433.

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All Learning Center articles are general summaries that can be used when considering your financial future at various life stages. The information presented is for educational purposes and is meant to supplement other information specific to your situation. It is not intended as investment advice and does not necessarily represent the opinion of Protective Life or its subsidiaries.

Learning Center articles may describe services and financial products not offered by Protective Life or its subsidiaries. Descriptions of financial products contained in Learning Center articles are not intended to represent those offered by Protective Life or its subsidiaries.

Neither Protective Life nor its representatives offer legal or tax advice. We encourage you to consult with your financial adviser and legal or tax adviser regarding your individual situations before making investment, social security, retirement planning, and tax-related decisions. For information about Protective Life and its products and services, visit www.protective.com.

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