5 Financial Mistakes to Avoid in your 40’s & 50’s
We are all guilty of trying to keep up with the Jones’s. Spending too much happens quiet a lot, especially in this consumer driven society.
There are 5 areas that I highlight for people to pay a little more attention to, which can make all the difference later in life.
1. Spending beyond our means
In our 40’s or 50’s we can all get sucked into wanting to have the latest model car, luxury holidays in exotic locations and at the same time paying for house extensions and private school fees. Without keeping track of this type of spending some people can end up in serious debt.
It is important to understand the difference between a “need” and a “Goal”.
Is a nicer car more important than putting money aside for your children’s education?
People make decisions all the time with money but they are not always the correct ones. Most financial advisers would suggest not to spend on your kids at the expense of your pension.
2. Rainy day fund
As a rule of thumb it is advised that you have six months of expenses to hand should things go awry. It should be liquid and not tied up in property. You should be able to access it quickly.
3. Leaving it too late to get on the property market
If you did manage to buy your first property in your 20’s or 30’s, then you are probably in a position to trade up or are planning to trade up in the near future. Most banks will offer a mortgage for those looking to trade up but be careful not to over extend or to take out a new mortgage that runs for 25 to 30 years or you will end up making mortgage repayments into your 70’s.
4. Not paying enough into your Pension
Pensions can be complicated. But they don’t have to be. I blame the pension providers for making them unnecessarily complicated. Some questions you need to ask yourself.
Have I got a pension?
How much is in it?
How much are you paying in each month?
How much do you plan on having for retirement?
If like most people you are putting £200 per month into retirement this will only provide £70,000 at retirement and this just won’t be enough.
You should also know what your basic state pension entitlements are. The current maximum level is £122.30 per week. To get it you must have paid or been credited with National Insurance contributions.
Research suggests that people in their 40’s in order to have enough money in retirement they should be putting 25% of their salary into their pension each month. For example, if your take home pay is £5,000 per month then you should be putting £1,500 of this into your pension per month.
Not everyone can afford to commit to this level of contribution. But if you are in your 40’s or 50’s then you have some time on your side. But get started now.
5. Thinking it’s too late
Don’t panic, as there is always time to turn things around. It will just take some serious financial commitment and some smart investment decisions to maximise your returns to give yourself the best possible retirement that you desire.