Money doesn’t grow on trees, and you’ve likely figured that out by the time you’re in your 40s. At this point, your decisions matter more than ever because they lay the groundwork for the decades ahead. It can be hard to know what to spend now and what to save for later, and even harder to discuss your financial future with your family. Retirement may seem far off, but how you handle your finances today will determine how comfortably you live tomorrow. Here are a few common financial missteps to avoid, particularly if you’re over 40.
1. Using Your Retirement Savings Account as an Emergency Fund
Picture your retirement account as a seed planted long ago. It’s had time to grow, mature, and produce fruit. The last thing you want to do is uproot the tree to grab a piece of fruit early. For young adults in their 20s, tapping into a 401(k) for emergency funds or a first-time home down payment will not influence their retirement much because the account rebuilds over time. Tapping into your 401(k) or IRA in your 40s can have lasting consequences, especially when the runway to retirement shortens. Withdraw early, and you’re not just taking cash—you’re sacrificing compounded growth and possibly adding years to your working life. Instead, build a dedicated emergency fund. A few months’ worth of liquid assets gives you the flexibility to cover life’s curveballs—without touching your future.
For useful tips on how to save on groceries, check out our blog post here.
2. Spending More Than You Can Afford
The Oracle of Omaha, Mr. Warren Buffet, says, “If you buy things you don’t need, soon you’ll have to sell things you do.” This statement rings particularly true for people who seek the most extravagant house or the newest car without considering the long-term cost. Living beyond your means is a one-way ticket to financial stress. Overspending today can lead to draining your emergency fund tomorrow or, worse, diving into your retirement savings. A practical solution is to get into the habit of asking yourself one simple question: “Can I afford it?” If the answer is no, walk away. Life isn’t a race to accumulate things—it’s about collecting experiences, security, and peace of mind. Your future self will thank you for it.
For an article on how the power of compound interest can help you, click here.
3. Putting Your Child(ren)’s Needs Above Your Own
Parents want to give their children the world, and that’s admirable. But remember, you can’t pour from an empty cup. Many parents put their children’s needs—whether private education, extracurriculars, or college tuition—above their own financial security. And while it’s noble, you have to strike a balance. Make sure to set aside money for your own savings when considering extracurricular expenses.
Think of it this way: there are loans for college, but there are no loans for retirement. Nearly 3 out of 4 parents are saving to help their children with college costs, but if that’s coming at the expense of your retirement fund, you’re putting your future at risk. You want to be the parent who teaches their children responsibility—not one who becomes financially dependent on them down the road. It is much easier to pay back loans for schooling than for retirement.
4. Seeing Credit Card Debt as the Norm
Credit card debt not only affects your credit score and ability to get a loan but is also an expense that sticks with you for years. Unlike selling a car or home to pay off a mortgage or auto loan, you cannot sell a credit card, so these costs are nearly impossible to get rid of without consistent, timely payments over a multi-year period. Building credit is a great strategy, but credit cards should always be used responsibly and in increments that the holder can pay off.
There’s a dangerous myth that credit card debt is just part of life. Don’t believe it. The fact is that nearly half of all American adults have some form of credit card debt, with the average household owing credit companies an average of $6,501. Carrying a balance on your credit cards not only weighs down your credit score but can also become an anchor, pulling you deeper into debt with interest payments that compound over time. Credit card debt is not your friend. Your best bet is to set a plan to pay down your balance every month—consistently, without fail—and avoid spending more than you can pay off. Building credit is important, but building debt is a dangerous game.
For helpful tips on how to reduce your credit card debt, click here.
5. Not Reevaluating Your Life Insurance Policy
As we go through life, our needs evolve. The life insurance you bought 10 or 20 years ago may no longer serve your current situation. Whether you’ve married, had children, divorced, or even paid off your mortgage, the coverage you needed then might look very different from what you need now. Don’t make the mistake of assuming your insurance is set in stone. To read about how much life insurance you need, click here.
Sit down with a trusted agent, review your policy, and ensure it still aligns with your goals. The right policy gives your family financial peace of mind; the wrong one could leave them with a burden. To speak with a licensed agent today, call us at (888) 539-1633.
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We hope this information on financial mistakes to avoid over age 40 is helpful.
If you’d like to learn how we can help you plan your retirement, call Empower Brokerage to speak to one of our Life and Annuity experts (888) 539-1633.
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