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Financial Planning
Nov 2022

Financial Planning in your 40s

By Allison Barrientos, CFP®, CPA

Ah, the 40s. For many, entering this decade can bring a sense of dread. After all, in our 40s we can no longer be considered young and carefree and may be “sandwiched” between caring for our children while also supporting aging parents. Though, with the right planning, your 40s can be your most successful decade. Below are a few areas to focus on to properly set yourself and your family up for the next 40+ years.

1. Establish a well thought out estate plan

Good estate planning is not just about determining what happens to your stuff after you die, it is about defining both the emotional and financial legacy you will leave to your loved ones. Without an estate plan created by you, state law will dictate what happens to your assets, which may be vastly different from your wishes, is on public record, and can be time consuming and expensive.

Get in touch with a qualified estate planning attorney who can draft your plan. Before meeting the attorney, think about who you want to manage your affairs should you be unable to do so yourself or should you leave underage heirs. Consider whether you want to leave a family legacy, a charitable legacy or a combination of both. And, finally, document your healthcare wishes in detail so that they can be carried out on your behalf by someone you trust. Once created, revisit your estate plan regularly to ensure it continues to meet your family’s ever-changing needs.

2. Prioritize retirement savings

Though you may have many demands pulling at your finances, consider this: college can be financed, but retirement cannot. As parents, we tend to put our children’s needs ahead of our own, however this practice can backfire when applied to saving for retirement. Without adequate retirement savings, we may eventually become a burden to the very children we’ve worked so hard to successfully launch into the world. You may be experiencing this very thing with your own aging parents currently. As the flight attendants advise us, “Put on your oxygen mask before helping others with theirs.”

3. Plan for college expenses

As your children grow and college applications are on the horizon, begin planning for this future expense. Consider including your children in the discussion so that they are aware of what your family can afford and whether they may need to consider taking on student loans when the time comes.

We often insulate our children from financial discussions, but a good understanding of the cost of college in relation to their future career goals can help shape their decisions about their future. If student loans will be needed, have an in-depth discussion about the impact of interest rates and future payment schedules so they can make financial decisions with their eyes wide open.

4. Speak with a financial advisor

Your 40s are often your peak earning, expense, and tax years, which translates to additional complexity. A financial advisor can help you to prioritize your life goals and puts you on track to meet those goals successfully. They are the quarterback of your financial team, not only helping you manage your investment portfolio, but also helping coordinate efforts among your estate planning attorney, tax professional, insurance agent, etc. for their guidance and expertise. Without this quarterback, your team focuses on their own areas of expertise without one person there to oversee your entire financial “field.”

Seek out an independent professional who is a fiduciary, is fee-only and who has the proper credentials. There are many great individuals and firms who meet these qualifications and can support a wide range of family circumstances, wealth levels, and personalities. Ask your friends, your accountant, or your attorney for a list of people they trust in the area.

While this all may seem a bit daunting, we encourage you to look at financial planning as a slow, iterative process. Focus on accomplishing one step at a time and you’ll slowly build a stable financial house that will protect you and your loved ones from life’s storms for years to come.

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