Cowgills statement and position on COVID-19   |   View

Home  >  News & Insight  >  Tips for planning your finances in your forties

Tips for planning your finances in your forties

As the saying goes ‘life begins at 40’. The financial choices you have made through your twenties and thirties will hopefully have paid dividends already, perhaps in the shape of home ownership and life savings, which could include cash savings, investments and pensions.

But there’s much more to look forward to and it can certainly be a very good time to take stock of your finances and make sure you’re on track to meet your future goals.

Your forties can be a particularly busy decade, with many people focusing on having young children, or on moving to a bigger house, the positive financial choices you make now can give your savings time to grow so that you can pursue your dreams later in life.

Here are our top tips to make the most of this decade, which is often a time of peak earning potential and good health.

Budget

Your forties are a time when income is higher, so it’s easy to fall into a pattern of spending more than you need. But reducing unnecessary spending could mean that your money could be working really hard for your future if you invest it now.

Investment usually outperforms cash savings in the long term, and by diverting money into a pension you can ensure that you take advantage of generous tax breaks with some of the money, as well as using your ISA allowance for more readily available cash.

Finding spare cash for investment can be easier if you make a budget to work out where your money is going. Cancelling subscriptions, cutting back on eating out and switching bill providers can all help to give you cash to put away for retirement.

Protect yourself

The forties can also be a decade for the unexpected. You may find yourself as part of the “sandwich generation” which means caring for elderly parents and young children. The pressure on your health and the responsibility on you is hard in these cases. Make sure that you are protected should the worst happen by ensuring you have a good emergency fund in place.

Depending on your circumstances, it may also be appropriate to consider critical illness or life insurance that recognises the responsibilities you have, and the financial burden that could ensue if the unexpected happens.

Review your property plans

What you do with your home is a vital part of financial planning in your forties. If you feel the need for a bigger property, or haven’t yet bought a house, these are likely to be your peak earning years – so ensure you secure the best mortgage you can now, and consider any move carefully.

On the other hand, if you’ve lived in your home for a while and have amassed significant equity and aren’t planning to move, this could be a good time to re-mortgage. On a lower loan-to-value you may find you can get a significantly better mortgage deal.

Look at your family spending

People in their forties have children of many different ages – you may be paying university fees or still be budgeting for nursery care.

Wherever you are at, plan the spending on your children carefully, accounting for inflation (particularly if you are looking at private education), and prioritising the outcomes that are most important to you as a family, whether it is ensuring they have the best education now or a housing deposit in future.

Don’t neglect your own life savings to save for the children – it’s important you remain financially on track.

The financial choices you make in what can be a busy decade can give your savings time to grow so that you can pursue your dreams later in life. For a no obligation chat about your financial planning please get in touch at enquiries@cowgills.co.uk

Disclaimer

The value of investments and income from them may go down. You may not get back the original amount invested.

Wealth Management
Posted by Matthew Bromley
8th December, 2020
Get in touch with Matthew Bromley