5 Personal Financial Rules to live by in Your 40’s



5 Personal Financial Rules to Live by in Your 40’s

Life can be very good for many in their 40’s. Often, people are firmly established in their careers, their children are maturing and establishing their own identity and the future is full of optimism. But to keep that rosy glow a reality for what lies ahead, you need to take a serious look at some personal financial rules to live by.

1. Reduce or eliminate debt:

In many instances, it is impossible to avoid debt. The impact and costs of student loans and emergency medical bills can linger for many years, but to truly achieve financial freedom, you have to strive for their elimination.

2. Accumulate Cash Reserves:

If you have eliminated debt or been fortunate to avoid it so far, the best way to not fall victim to its ravages is to have cash on hand for emergencies. A general rule of thumb suggests keeping three to six months of income in a liquid and easy to access account. It’s also prudent to regularly put aside amounts for major expenses you know are coming. Think about that roof, for example, that has been repaired once or twice and still leaks.

3. Maximize your Employee Savings Options:

Take a little time to understand the options your company offers. At the very least, you should save as much as the employer matches. This simple strategy effectively doubles your savings. As concerns the volatility of your investment choices, obviously each of us has our own risk tolerance, but keep in mind that the younger you are, generally speaking, the bolder you can afford to be.

4. Consider an Individual Retirement Plan:

Many experts caution those in their 40’s to exclude Social Security from their retirement planning. It’s not expected to vanish entirely, but there are uncertainties regarding eligibility age, means testing for tax-ability and other factors. Consider contributing as much as you can to either a traditional IRA or a Roth IRA. Many people like taking the tax write-off now with the traditional IRA, expecting they will be in a lower tax bracket in retirement. Others, however, predict a tax rate increase and feel better protected by having a tax-free income stream as provided by the Roth IRA.

5. Come to Grips with College Costs:

If you’ve got kids who are approaching college age, how you handle their college expenses can have a dramatic impact on your quality of life in retirement. Even if you are one of the wise ones who began saving when the children were young, the reality of costs today can be daunting. Consider all options to save money, including:

• A junior college for the first two years
• Opt for a state school over a private university
• Maximize scholarship and student work opportunities
• Consider purchasing a condo in the university town for your student to live in. This option, perhaps with roommates, can be less expensive that on-campus living, and maybe the equity built over four years could offset tuition costs.

Making wise choices in your 40’s can lead to long and happy retirement years.


Yorkville Advisors, LLC is a privately owned hedge fund sponsor that also provides specialty financing solutions to its clients.


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