Financial Planning Guide In Your 40s: The Dos and Don’ts

Your 40s, popularly known as the sandwich years, are typically tricky, financially speaking. With young children on one side and aging parents on the other depending on you, your financial responsibilities seem to stretch your potential to the limit.

It’s no wonder peak financial stress hits during your 40s. Hence, financial planning is important.


Below are some essential things to do to achieve financial health in your 40s.

1. Consult a financial advisor

Research by the Financial Industry Regulatory Authority (FINRA) reveals that 66% of Americans lack financial literacy. Not understanding key financial concepts, managing debt, and evaluating investment products may be a significant setback to getting a financial breakthrough.

That’s why it’s advisable to work with a financial planner. They help assess your financial status and recommend appropriate courses of action. Additionally, they assist you in identifying potential risks that could hinder you from earning and saving as desired. They can also suggest worthwhile investment products matching your income level, personality, and risk appetite.

2. Set tangible goals

Financial goals define what you want to achieve with your money. In your 40s, typical financial goals may include:

  • Paying off debt
  • Purchasing a home
  • Saving for retirement
  • Launching a business
  • Setting up an emergency fund

With definite objectives, you work consciously towards achieving them. Financial goals significantly influence your daily actions. You won’t spend cash impulsively while you have bigger plans in mind. It’d help to write your goals down on paper, so you can keep them in mind and stay committed.

3. Set a budget

After defining your goals, set your budget. A financial budget lists your income and expenses. Remember to include income from all your revenue-generating projects, including salary, bonuses, and business profits.

For expenses, specify how much you intend to spend on food, transport, taxes, insurance, entertainment, kids’ education, clothes, rent, utility bills, etc. Ensure your expenses don’t exceed your income. Otherwise, you might rack up debt.

An excellent approach is to live within your means. Avoid buying material things you can’t afford and save up for large purchases, such as a new TV. Create an emergency fund too. An emergency fund of three to six months is advisable, but you can begin with USD$100 to USD$200 for minor emergencies.

4. Save for retirement

By age 40, you should have set aside three times your annual salary. If you earn USD$100,000 yearly, you should have USD$300,000 in your retirement savings account. If you haven’t hit this mark yet, it’s best to exert more effort into saving for retirement.

A happy couple sharing an iPad in their living room

5. Get insurance

As the world is riddled with numerous risks, you’d want to get insurance coverage to protect yourself and your loved ones. Some essential policies you should have are:

  • Long-term disability insurance
  • Life insurance
  • Automobile insurance
  • Health insurance
  • Homeowner’s insurance

Through small monthly premium payments, you can cushion yourself against financial incapacitation upon the occurrence of insured risks.


You must get rid of unhealthy habits as you enter your 40s. The following are don’ts of financial planning.

1. Don’t spend without tracking

Not a lot of people track their expenses. A recent survey revealed that 65% of Americans have no idea how much they spent in the last month. It’s a detrimental habit.

Tracking your expenses might seem a tedious undertaking, but it’s actually a worthwhile and convenient one. You can now do it with a mobile app.

Keeping track of your expenses helps you maintain financial control. You know how much you have in your bank account and how much you can spend.

Tracking your spending also helps you see your progress to reach your goals. If your goal is to save USD$30,000 in a year and you monitor your expenses daily, you can reward yourself for all the small wins you have along the way. For instance, you can cook at home instead of dining at an expensive restaurant.

Another advantage of tracking your expenses is discovering ways to save more money. You might stumble across unnecessary expenses like forgotten online subscriptions. Once you eliminate wasteful expenses, you can put that money into savings.

2. Don’t make saving the least priority

Don’t list saving as the last item on your list of priorities. Treat it as your chief expense with the same earnestness you accord your mortgage or utility bills. If you get into the habit of saving whatever is left over by the end of the month, you may go for months without saving a single penny. So, make saving a top priority instead of taking it as an afterthought.


It’s never too early to start planning for a secure financial future. Financial planning is pretty much simple—you just need to stay on budget and track your everyday expenses. You can always consult a financial advisor who can guide you through the planning process.

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