Every decade of life has its financial challenges and opportunities.
In your 20s, you feel invincible.
Your 30s brings on a whole new set of responsibilities including career and family.
However, your 40s are especially important because you are closing in on retirement.
Making a huge money mistake in your 20s isn't nearly as devastating to your long-term prospects as doing so in your 40s.
Now that you're scared spitless, here are 40 financial rules for your 40s:
1. Finish Paying Off Your High Interest Consumer Debt
One of most important things you can do for your finances in your 40s — or at any point in your life — is to pay off high-interest consumer debt. If you have high interest debt, finish it off once and for all during your 40s. All it's doing is holding you back. If you think just because your in your 40s and you've lost some of your spunk, let this newlywed couple inspire you. They were able to pay off $52,000 of debt in 2 years.
2. Use and Pay Off Credit Cards Each Month
Just because you've paid off your high interest consumer debt doesn't mean that you should avoid credit cards forever. They can be a great financial tool. Use a rewards card for most of your expenses, and pay it off each month, and you can earn free travel or get cash back. Use your credit cards regularly as part of your spending plan, and pay them off before you are charged interest.
My wife and I just got into travel hacking last year when we realized how much money we were leaving on the table in airline miles.
Plus, when I read about this blogger taking his family of 7 to Hawaii for 11 days for basically free, I knew I had to learn more. In a short time, we've booked 7 round trip tickets with a few hotel rooms thrown in to boot. Not bad for some travel hacking newbies! Forbes contributor, Alexandra Talty, has some great travel hacking tips.
3. Learn a New Skill
Now is a great time to improve yourself. Think about how you can improve yourself, and learn a new skill. First of all, learning new things can help you keep your mind sharp, setting a precedent for the future as you age. Next, learning new skills can help you increase your marketability, better manage your resources, and earn more money. Make it a point to learn a new skill or two during your 40s. Learning a new skill doesn't have to take forever. In fact, here's some tips on how to learn a new skill in 20 hours.
4. Start a Side Gig
This is also a great time to start a side gig. As you get closer to retirement, a side gig can help you save more, and it can also help you create another source of income that isn't based on your day job. Consider a side hustle so that you can reach financial independence, and so that you have a little income even after you quit your traditional job. Now is the time to establish your side business so that you aren't scrambling later. If you're not sure where to get started, here are 100 ways to make $100 fast.
5. Ask for a Raise
Have you been an asset to your company? If so, now is a good time to ask for a raise. Depending on when you plan to retire, getting a raise now, and banking it for the next 10 to 20 years, could really help you increase your nest egg. Do the research. If you aren't earning what you're worth, ask for a raise or promotion, or consider looking for another job.
Ramit Sethi, best selling author and negotiation expert just released this awesome guide on how to negotiate a higher salary. While most people go about asking for a raise the wrong way, Ramit suggests,
“Negotiating your salary WILL take work – but with the right system, you can do it in days or weeks.”
Anyone can ask for more money, but without the right strategy you'll find yourself getting rejected more often than not.
6. Avoid Lifestyle Inflation
One of the great things about being in your 40s is that you are likely mostly established. You are probably making a decent amount of money. You can afford many of your wants in addition to having your needs covered. It's important to avoid the trap of lifestyle inflation, though.
While you can increase your spending on certain things, and can enjoy an occasional treat like a family vacation, it's important not to let costs overcome you. Don't spend all of your money increasing your lifestyle. When you let your lifestyle inflate, your net gain is zero. You don't want that in your 40s.
7. Boost Your Retirement Contributions
When was the last time you adjusted your retirement account contributions? Chances are you were in your 30s the last time you upgraded your contributions. If you are making more money now than you were five or 10 years ago, it's time to boost your retirement contributions.
Instead of putting that money toward lifestyle inflation, put some of it toward your future. This could be adding more to your 401k plan at work, opening a Roth IRA, or starting a taxable investment account. If you're still uncertain how to get started, here's the best way to invest for retirement.
8. Evaluate Your Retirement Account
Now that you're upping your retirement account contributions, it's a good time to evaluate your retirement account. Do you have access to the investments that fit your needs? How high are the fees? What kind of match do you get? Take the time to figure out whether you should stick with your company retirement plan, or if it's time to roll your 401(k) into an IRA that you can control.
9. Get Rid of Unnecessary Fees
It's fairly common to slowly build up fees. Fees on your telecom bills slip by undetected. You might be paying higher than average fees at your investment brokerage. If you're not sure what your paying in investment fees, FeeX.com is a free service that will help you uncover what you're really paying.
Maybe you are paying convenience fees or other fees. Take a look through your bills and statements. Evaluate your subscriptions. Get rid of the unnecessary fees you are paying. You'll save money every month.
10. Refinance Your House
Have mortgage rates dropped since you bought your house? If so, consider refinancing your home. However, make sure that you avoid refinancing to another 30-year loan — unless you want to be paying off the loan in your 70s. This is a good time to lock in some savings. Just refinance for a term similar to what you already have left on your loan to save on the interest.
11. Be Wary of the Cash Out Refinance
As you refinance your home to a lower rate (and hopefully a low term), you might be tempted to cash out. After all, you've built up equity in your home. However, cashing out increases what you owe on your house. It can mean a longer loan term and higher costs. Think very carefully before you cash out as part of a refinance in your 40s.
12. Carefully Consider Home Improvements
Since you have equity built up in your home, it's tempting to get a loan and use that money to improve your home. However, it's important to understand that such home improvements are rarely investments. You'll put the money in, but you won't likely recoup it if you decide to sell.
Think carefully about which home improvements you make, and how much they cost. Weigh the improvements, and how you fund them, against your retirement expectations.
13. Keep Your Home in Good Repair
Make sure that you do keep your home in good repair, though. If your roof needs replacing, that's something that you should do. Keep up with maintenance and repairs so that things aren't as expensive to fix in 15 years — right when you're ready to retire.
14. Take Care of Your Things
In addition to keeping your home in good repair, make sure that you take care of your other things. The better you treat your things, the longer they will last — and the less they will cost you. One of the best ways to avoid unexpected costs is to keep your things in good condition.
15. Carefully Consider All of Your Debt
Now is a good time to carefully consider the types of things you're willing to go into debt for. Some types of debt, like low-interest business loans, can help you get ahead, even if you take them during your 40s.
Other types of debt, like high interest consumer debt, are recipes for disaster. From home improvement loans to car loans, carefully consider how the debt will impact your long term goals.
16. Check Your Asset Allocation
Take a look at your investments and figure out whether or not your current asset allocation still makes sense. You want to make sure that your asset allocation meshes with your stage in life, and what you hope to accomplish. Make sure you don't have inappropriate overlap, that you are properly diversified, and that your asset allocation makes sense for your risk profile.
Make adjustments if necessary. If you still don't believe that asset allocation is important, here are 10 reasons that will change your mind.
17. Don't Raid Your Retirement Account for Your Kids' College
We all like the idea of helping our children. And, while it would be nice to help your kids pay for college to reduce their dependence on student loans, don't beggar your future to do it. You can't replace the lost earning potential when you withdraw your capital and use it to pay for a college education. This also applies for cosigning on those loans. Most kids can get a federal or private student loan with cosigner and still get reasonable interest rates.
Unless you are ABSOLUTELY SURE that your kids are going to support you in retirement, raiding your retirement account to pay for college is a bad idea, especially now that you need to be in high gear.
18. Don't Raid Your Retirement Account for Your Kids' Weddings
Your child is getting married. That's great! But don't raid your retirement account to pay for it. For the same reasons that you shouldn't raid your account to pay for college.
19. Encourage Your Kids to Make Good Financial Choices
Instead of enabling your children, now is a good time to encourage your kids to make good financial choices. Actually, it would have been good to teach them earlier.
However, it's never too late to start teaching your kids about smart finances, and encouraging them to do what they should to become financially independent on their own. That way, you won't have to worry about supporting them instead of enjoying your retirement.
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Think about the conversations and attitudes about money that you expose your kids to. Is that the example you hope to instill in your children? If not, face any shortcomings in your own financial habits, and your parenting on the topic will automatically follow suit
20. Re-Evaluate Your Priorities
No that you're in your 40s, it's a good time to think about your priorities, and make sure that they are still applicable. The things you set in motion during your 20s and 30s may not still be important to you now. Re-evaluate your priorities and figure out what's important to you.
If you find that you are still working toward things that aren't important to you now, it's a good time to change course. It's not too late.
21. Think About What You'll Do in Retirement
What do you want your retirement to look like? Chances are that you have goals and interests beyond just sitting around the house all day. Think about what you want — whether it's a part-time job doing something you love or pursuing a new hobby — and figure out what it will take to make it happen.
This might mean adjusting your current priorities so that you will be ready later when the time comes. Give it some thought, and then make financial adjustments so that you will be able to support yourself as you would like.
22. Maintain Your Emergency Fund
Hopefully, you've been building an emergency fund over time. If you have an emergency fund, make sure you are maintaining it. You can consider building it a little bigger as you go through your 40s (this can be something that helps you get through a child's wedding, or helps him or her pay for one year of schooling). Make sure that you are committed to replenishing your emergency fund as you use it.
Now is a good time to consider whether or not some of that money might do well elsewhere. Perhaps keep some of it in a taxable investment account so it has the potential to grow. Don't put too much at risk, though: You still need it available for true emergencies.
23. Avoid Panic Selling when the Markets Tank
Now that you're in your 40s, the prospect of retirement is likely looming much larger. As a result, it's easier to panic when you see market volatility. It's especially important now that you don't engage in panic selling. Over time, the market does just fine, and selling now will only lock in your losses.If you have a solid long term investment plan, don't completely throw it over because you're afraid. That can lead to even bigger problems down the road.
One way to avoid panic selling is removing the emotion that goes along with investing by using something like AssetLock. AssetLock pre-determines that your comfort level is on the most you can stand to lose and automatically adjusts that number as your portfolio increases. Emotional selling is most investors downfall and finding a way to completely remove that could save you a ton of money.
24. Get Financial Planning Help
Now that you have more assets, you might be at a loss as to how to best employ them. Getting financial planning help in your 40s is a good idea because it provides you with solid help to organize your finances going forward. This is a good time because you have enough assets to be effective, and it's still early enough to put them to work on your behalf.
You don't need to get someone to completely take over the management of your assets, but it does help to sit down with a knowledgeable financial professional and plan out the next 20 years or so.
25. Create a Will
If you don't have a will yet, create one now. If you already have a will, review it to make sure that it still reflects your wishes. You want to make sure that your assets are disposed of in a way you prefer.
“A will helps your family members to adjust and make order out of chaos,” says John Corcoran, an attorney and business networking expert. “It makes sure your assets are passed along in an orderly way and really makes life easier on your relatives because they don't have to guess about your intentions or fight over your assets.”
26. Get Estate Planning Help
In addition to a will, now might be a good time for other estate planning help. If you are in your 40s and you have been reasonably successful, you might want to look into various trusts. Consider the benefits of gifting your money instead of passing it on when it will be taxed. Think about power of attorney and health care proxy. Consult with an estate planning specialist to help you work it all out.
John Corcoran also offers this on estate planning, “The benefits of having an estate plan far outweigh the short-term hassle and cost of creating one. The estate plan ensures your family members have clear direction in case you aren't able to make decisions for yourself, and it will maximize the amount of your assets that make it into your heirs' hands.”
27. Start Tax Planning
Many people don't think about tax planning. As important as tax planning is when you're young, it gets increasingly important as you age. Consult with a tax professional who can help you figure out the best ways to reduce tax liability each year, and in the future. Tax planning is an important part of saving money now, and planning for retirement.
28. Consider Disability Insurance
If you don't have disability insurance, your 40s is a good time to consider it. You're in the final sprint toward retirement. What happens if the unexpected means that you can't earn a living anymore? You could draw down your retirement sooner or deplete your emergency fund (or both). Disability insurance can help you avoid this fate. It can provide income replacement if you end up needing it.
29. Consider Long Term Care Insurance
For some in their late 40s, it's a good time to start paying for long term care insurance. Most people are likely to spend at least some time in a long term care facility as they age. If you don't have a large enough nest egg to cover such a stay, it can make sense to buy a long term care policy. This type of insurance can help make stays in care facilities affordable, and can help you avoid rapidly drawing down your retirement account. Figure out if long term care insurance makes sense for you, and purchase a policy now, while you can still receive a decent quote.
Financial advisor and founder of WealthAnatomy.com, Ryan Michler says,
“What is the bulk of your retirement savings going to be spent on? If you said medical costs, unfortunately you might be right. The odds of you needing some form of long-term care in retirement is very likely. With the average annual cost for assisted living at $43,000 and $80,000 for nursing home care*, you may burn through your retirement savings quicker than imagined.”
*Source: Genworth Cost of Care Survey 2014
30. Consider Renewing Your Term Life Policy
If you bought term life insurance during your 20s, your policy is on the verge of expiring. Now is a good time to figure out if you need to renew your term life policy. If you are worried about dependents as they head off to college, and you are concerned about your spouse, it's probably a good time to renew your policy. You can usually get favorable rates when you renew without letting your life insurance policy lapse. Now is also a good time and age to consider getting personal liability insurance.
31. Review Your Beneficiaries
By the time you reach your 40s, chances are that you have had quite a few life changes. As a result, your beneficiary designations might be out of date. Realize that your beneficiary designations on your accounts trump what's in your will.
So if your ex-spouse is still listed on your life insurance, or your retirement account, you might want to change that. Every year, review your beneficiaries and make changes as necessary.
32. Review Your Insurance Coverage
Now is a good time to review your insurance coverage. Do you still need to pay comprehensive on your old car? Do you need to boost your home insurance coverage due to appreciation? Is your health coverage still what you need? Make it a point to look through the policies you have had in place for 10 years or so, and make sure that the coverage is still appropriate. Make changes if you need to.
33. Take Care of Your Health
If you want to have a more enjoyable future, you need to take care of your health today. Make it a point to eat better and maintain an appropriate level of physical activity. The healthier you are, the more money you'll save now (and later), and the more you will enjoy your life in general.
34. Try “Mini Retirements”
You don't have to wait until you're too old to enjoy retirement. If you have the ability to do so, consider taking “mini retirements.” You can work at something for a year or two, then take a few months off to travel and enjoy yourself. Then, when you get back, you can find another job. This type of approach takes a little extra planning, but it can be a good way to enjoy yourself after the kids move out and while you are still young enough to enjoy what you're doing.
35. Think About Downsizing
Now is a good time to downsize your lifestyle. In your late 40s, it makes sense to think about reducing the stuff you have. Do you need such a big house now that the kids are moving out? How many cars do you need? Could you manage with less stuff? Consider simplifying your lifestyle and downsizing so that your money can be directed at your priorities.
36. Take Time to Relax
Part of life is enjoying yourself and relaxing. You might have worked at a frantic pace all through your 30s, but now it's time to slow down a little bit and enjoy your life. Learn to relax and let go. It's better for your physical health, and for your mental health, too. Don't run yourself ragged to the point that you break down just as you are getting ready to retire.
37. Learn Technology
Keep up with technology. If you keep up with computers and phones and other consumer technology in your 40s, you'll be more used to the continuing changes that come later. Technology can help you stay fresh, keep your mind active, and help you move with the times. If you want to prepare for a better life over all, it's a good idea to keep up with tech.
38. Be Open to New Things
The ability to adapt remains important throughout your life. Whether it's being flexible in your career so that you are marketable (and have higher earning power) or being flexible in other ways, be open to new things. Financial flexibility goes hand in hand with good health, and flexibility in other areas of your life. Emma Johnson, Forbes contributor and founder of WealthySingleMommy.com says,
“You cannot grow as a person, professional, partner, parent, citizen, friend, athlete or artist if you do not try new things. If you are stuck in some aspect of your life, do not keep repeating the same habits or practices — switch it up! Even little, seemingly irrelevant habits can make a giant shift: Take a new route to work each morning, try a new workout routine, switch up your kids' bedtime routine. Also, go for some big risks, too. Over the aggregate of your lifetime — just like playing the stock market — risk is rewarded.”
39. Measure Your Progress Against You
Hopefully, by the time you're in your 40s, you have given up on trying to keep up with Joneses. But, just in case you're still measuring your financial situation against where others are at, now is a good time to stop. Measure your progress against you, and resolve to do better for your own sake — not for the sake of impressing others.
40. Enjoy Your Money Now
While you do want to use your 40s as a time to really kick your retirement planning into high gear, don't forget to enjoy your money now. You've worked hard to get to this point, and if you can afford some of the pleasures of life, go ahead and do so. You don't want to wake up 20 years from now regretting that you completely wasted your 40s even though you didn't have to.
This post originally appeared on Forbes.com.