Peter Boys, Boys Financial Services

Taking Charge of Your Savings in Your 40s

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Suddenly, you realize you’re in your 40s, and perhaps you don’t have the savings you’d like to have by this point in life. It’s time to take action, and there’s still time. The key is to focus your efforts in three key areas: build a plan, repay debt and maximize savings. By tackling these areas, you can start making steady progress towards your goals, one manageable step at a time.

Build a plan: A financial plan identifies specific goals and the strategies to meet them, with a clearly marked path leading from where you are now to where you want to be. And it can help to answer the questions that keep many of us up at night: What can I afford today? When can I retire? Will I run out of money? Challenges may come along – an illness, a job loss, a divorce – but with a financial plan you’ll be in a better position to leap the hurdle and get back on course.

Repay debt: Having a debt repayment plan is an essential component of any financial plan. Setting a schedule can help you eliminate all debt by the time you retire. That’s important because in retirement, on a fixed income, it can be more difficult to manage the extra expense of interest and of paying down debt. There’s also the risk that interest rates may rise in the future, adding to the cost of carrying debt.

Consider consolidating your loans into one account with a lower interest rate to reduce the cost of debt. Make a habit of putting a specific monthly amount towards debt. Reduce unnecessary expenses and pay with cash to avoid adding to debt. If you have multiple debts, pay down those with the highest interest rate first. Need extra motivation? As soon as you’re debt free and don’t have to make any more principal or interest payments, you will have more money available to add to your savings.

Maximize savings: You may have to work harder at building your savings but you still have time on your side. Work with your advisor to answer questions such as: How much have you saved so far? How much income do you expect to receive in retirement from government and workplace pension plans? How much income do you need to sustain your lifestyle throughout retirement?

Next, to help make saving a priority, set specific saving goals – as much as you can afford – and check in every year to see the progress you’ve made and to fine-tune your plan if necessary. It’s also critical to maintain a long-term perspective, since you may have 20 years or more of saving and investing ahead of you before you retire.

Use these timeless investing principals: 1) Always diversify, 2) Be rational, not emotional, 3) Stay invested 4) Focus on the long term and 5) Learn to turn market volatility to your advantage. Learn from these suggestions and you will become older, wiser and richer!

Work with an advisor: Studies have shown that those who work with a financial advisor are more successful in reaching their goals.
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