The 40s are a time when you’re often having to juggle prioritizing financial security for yourself and your children. It’s a time when you’re established in your career, but retirement still feels a ways away. It’s also a time when you may have more disposable income than at other points in your life, but may not be sure of the best ways to use it.
Because this decade can feel like a juggling act, it’s no wonder 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 phase of life.
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Thinking It’s Just About the Numbers
Your financial decisions may have deeper roots than you realize.
“It may seem counterintuitive, but making good financial decisions is not just about the numbers,” said Earth Equity Advisors’ Keihn. “There is an important psychological and emotional dimension that should not be overlooked. Financial changes can unearth deep-seated beliefs and anxieties about money, regardless of whether these changes are positive windfalls or unexpected crises.
“Seeking the guidance of a financial therapist can help unpack these underlying emotional barriers and foster a healthier relationship with money,” she continued. “Whether addressing issues like navigating conflicting money personalities within a relationship or working as an entrepreneur with ADHD, financial therapy offers tailored support to help individuals make more informed and emotionally intelligent financial decisions.”
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Being a Perfectionist
“As a recovering perfectionist, I notice clients express a fear of 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 is true for attitudes about long-term savings in particular.
“At this stage of life, many people experience heightened pressure as they envision their retirement, particularly as they observe their parents transitioning into retirement,” Keihn said. “However, those in their 40s are still far enough away — in most cases — to be early on in their savings journey, so fear can crop up that they aren’t doing enough, which can be paralyzing.
“The reality is that small, consistent efforts can have a big impact over time,” she continued. “For instance, even if you can’t max out your 401(k) contributions, contributing an extra $25 to $50 per month can still yield long-term benefits. Don’t discount any steps toward 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, neglecting to prioritize your needs can jeopardize both your long-term financial security and that of your loved ones.”
It’s important to understand that taking care of yourself will ultimately benefit those you care about as well.
“If you prioritize saving for your kids’ 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 that your children do not have to care for you in retirement.”
Overlooking Sustainable Investing as an Option
“People in their 40s sometimes hesitate to invest in the stock market due to concerns that their investments may not align with their values,” Keihn said. “However, with the rise of sustainable, responsible and impact investing options, you can still create a diversified portfolio that focuses on the industries you want to own.”
This is a win-win.
“You can build 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 resonate with you.”
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This article originally appeared on GOBankingRates.com: I’m a Financial Advisor: These Are 4 Money Mistakes People Make in Their 40s
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