Yesterday was tax day and I hope you came out unscathed. Now it’s time to once again focus on your finances. If you are in your 40s, there are a few strategies you can use to help in planning your finances. Chances are that you either have children in college or will have children in college within a short time frame. You are probably also beginning to seriously consider retirement though it may be quite a while in front of you. You might also be caring or planning to care for aging parents. It all can be quite overwhelming at first glance, but you can alleviate part of the stress by planning ahead.
The first thing I suggest you do is consider how much you need to be putting aside for retirement in order to at least retire by age 67. This will allow you 20 or more years for your investment to grow into a nest sum for retirement. Check with your employer and financial planner to see what you need to do to ramp up the retirement account. Max out your annual contribution, if possible.
The next suggestion is to make sure you have a cash cushion on hand in case of emergencies. Typically, you should try to maintain three to six months of reserves on hand just in case something drastic was to occur. Better to be prepared in this case. Around my house, things seem to go wrong all at once. For example, the roof leaked, we had termite damage, the washer needed replacing, three of our cars needed new tires, etc. I think you get my point. When you least expect it, it usually happens.
Another suggestion is to make all efforts to reduce your debt and even pay it completely off. Once you do, stay out of debt and pay cash whenever possible! When you make it over that hurdle, you certainly don’t want to go back! Set up the plan for paying the lowest balance debt off first and work you way up until all debt has been paid off. It is a wonderful feeling!
If you company offers a flexible savings account and you typically have medical expenses, try to use the plan to help cover the costs of the expenses so you don’t have to go into debt to cover them. These accounts are also tax advantaged in that you do not have to pay taxes on the amount you contribute. However, there are limits to the amounts you can contribute and to the items that you can pay for with the funds. Some plans allow you to carryover any amount remaining in the account. Check with your employer today to see if you they offer this type of account.
Finally, if your children have not reached college age, make a plan to save diligently to pay for their college education. I speak from experience when I say the cost of post-secondary education can be quite expensive. Do your research and have you children apply for as many scholarships as they are qualified for to help reduce the cost. Even small scholarships can add up to large savings.
Make time today to consider your financial situation and the options you have to make it even better. Small savings today can bring peace of mind in the future!