Your 40s are a time when you often have to juggle prioritizing financial security for yourself and your children. It’s a time when you’re established in your career, but retirement still seems a long way off. It’s also a time when you may have more disposable income than at other times in your life, but you may not be sure how best to use it.
Because this decade can seem like a juggling act, it’s no surprise that many people in their 40s often make mistakes when it comes to their finances. GOBankingRates spoke with Kerry Keihn, Partner and Financial Advisor at Earth Equity Advisors, about the top money mistakes to avoid during this stage of life.
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Thinking it’s just about numbers
Your financial decisions may have deeper roots than you think.
“It may seem counterintuitive, but making good financial decisions isn’t just about numbers,” said Keihn of Earth Equity Advisors. “There is an important psychological and emotional dimension that should not be overlooked. Financial changes can bring to light deeply held beliefs and anxieties about money, regardless of whether these changes are windfalls or unexpected crises.
“Seeking guidance from a financial therapist can help break down these underlying emotional barriers and foster a healthier relationship with money,” she continued. “Whether addressing issues such as dealing with conflicting money personalities within a relationship or working as an entrepreneur with ADHD, financial therapy offers personalized support to help people make more informed and emotionally intelligent financial decisions.”
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Being perfectionist
“As a recovering perfectionist, I notice clients express fear of making mistakes while discussing their financial plans,” Keihn said. “Many people in their 40s struggle with the pressure to achieve financial perfection, fearing that any misstep will lead to failure.”
This applies in particular to attitudes about long-term savings.
“At this stage of life, many people experience increased pressure when imagining their retirement, particularly as they watch their parents transition into retirement,” Keihn said. “However, those in their 40s are still far enough away (in most cases) to be in the early stages of their savings journey, so fears may arise that they are not doing enough, which which can be paralyzing.
“The reality is that small, consistent efforts can have a big impact over time,” he continued. “For example, even if you can’t max out your 401(k) contributions, contributing an extra $25 to $50 per month can still pay long-term benefits. Don’t rule out any step towards your goals, no matter how small you think they are.”
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Not prioritizing your own financial health
“In the whirlwind of responsibilities that often characterize life in your 40s, such as caring for aging parents or supporting children, it’s easy to overlook your financial well-being,” Keihn said. “However, failing to prioritize your needs can jeopardize both you and your loved ones’ long-term financial security.”
It’s important to understand that taking care of yourself will ultimately benefit your loved ones as well.
“If you prioritize saving for your children’s college education over your retirement, try reframing your retirement contributions as a gift to yourself and your loved ones,” Keihn said. “By saving for your retirement, you are taking steps toward future financial independence so your children won’t have to take care of you in retirement.”
Overlooking sustainable investing as an option
“People in their 40s sometimes hesitate to invest in the stock market because of concerns that their investments may not align with their values,” Keihn said. “However, with the increase in sustainable, responsible and impact investment options, you can still create a diversified portfolio that focuses on the industries you want to own.”
This is beneficial for everyone.
“You can create a diversified portfolio that reflects your values while still participating in the market,” Keihn said. “By being intentional about where your assets are allocated, you can invest in industries that interest you.”
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This article originally appeared on GOBankingRates.com: I’m a Financial Advisor: These are 4 Financial Mistakes People Make in Their 40s
