The old saying goes that “with age comes wisdom”, but sometimes that’s not always the case. Mistakes and poor decisions don’t stop just because we’re getting older. In fact, as your life and circumstances continue to change, you may be faced with new challenges that you’re unsure how to handle.
When it comes to money, making the right moves may be even more important the older you get
With that in mind, here are 8 money mistakes to avoid if you’re over 40.
1. Living too large
By the time you turn 40, you’ve probably been through a lot. It may feel like now is the time to celebrate the successes and reward yourself for getting through the low points. There’s nothing wrong with indulging in a meal at a nice restaurant or taking a well-earned family holiday. However, this could be an issue if you’re always saying “we deserve this”, regardless of cost.
Overspending on special treats or funding luxuries with credit cards could impact your personal or retirement savings, potentially leaving your family vulnerable to financial hardship down the track. You may want to rethink this type of spending now, so you can still enjoy all life has to offer later.
2. Not adjusting your emergency fund
Life changes as you get older. When you were younger, you may have only needed to worry about yourself and your partner. But as your family’s grown, so too have your financial responsibilities.
Experts recommend keeping an emergency fund to help cover the mortgage, rent or other bills if you’re ever temporarily out of work or other unexpected events happen. Having enough to cover 6-8 months’ worth of expenses is often suggested. However, the amount you needed in your 20s or 30s was probably much less than it is now. If your emergency fund hasn’t grown in decades, it might be time to set aside a bit more, just in case.
3. Loaning too much to the kids
As a parent, you probably want to help your children as much as possible. This might mean big expenses like paying for university or helping with the down payment on a home. However, the “Bank of Mum & Dad” might also lend money here and there for smaller matters.
If you can afford to help your kids financially, that’s great! However, opening your wallet shouldn’t mean putting off saving for your own retirement. As hard as it may be, you might need to let them go it alone whilst you secure your own financial future. It may be wise to remind the kids of this—especially if paying their way now might mean you’ll be moving in with them in the future!
4. Being clueless about retirement
Do you know how much you’ll need to retire? It might be more than you think. A recent study found that a single person needs to save over $260,000 by the time they’re 501 to afford a comfortable retirement!
Retirement isn’t something to ignore. However, if you didn’t start worrying about retiring until you reached 40, there’s still some time to get sorted. Think about the retirement lifestyle you want and do some research as to how much that will cost. Then you can start to figure out how much you’ll need to save or adjust your expectations, if needed.
5. Neglecting your savings goals
Maybe you already know exactly how much you need to save each week for retirement (or something fun, like a new car or a summer holiday). Problem is, you’re not always sticking to the plan. You might tell yourself that you’ll save extra next week, but will it really happen?
Once you have a savings goal in mind it’s important to stick with it. Putting it off week after week may make it harder to keep the momentum you’ve built going. It might also make it more tempting to use a credit card instead of saving up, especially if your goal is a shopping trip or travel. And with retirement, there’s really no replacement for consistently setting money aside for the future!
6. Forgetting about your life insurance
Your life insurance policy may have been in place for a while. However, when was the last time you gave it a close look? If the only time you think about your cover is when you double check your account debits, it might be time for a review.
Just like the emergency fund, your life insurance needs may change as you get older. you may want to review your cover, and also, check if your policy is set to expire once you reach a certain age or if there are health exclusions that may now apply.
7. Procrastinating on end-of-life planning
It’s no surprise that many people put off thinking about what will happen at the very end of their life. However, this could be an important step in securing your family’s financial future and making your final years the best they can be.
8. Overlooking funeral expenses
Even if you’ve sorted an advance directive and your Will, chances are you haven’t given your funeral much thought (if any). But you may be shocked to realise the expense that many families face when they arrange a loved one’s final farewell.
An average funeral in New Zealand can cost anywhere from $8,000 to $10,000—or sometimes much more. Finding this money (often on short notice) can be difficult for some families. Helping with this expense now could help remove some of the financial stress for your family’s shoulders. Funeral insurance can help with this.
1. NZ Herald, Want a comfortable retirement? You'll need $101k by age 30, 28 Dec 2018
About Author: Momentum Life is a leading provider of Life insurance and Funeral insurance in New Zealand.
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