October, 2021 - Jacob Parker-Bowles

Success can be measured in many ways, including taking an account of one’s life and deciding if you are truly living the life that you want to live. An important corollary to living the lifestyle you want is to have a stable financial life, as this is what allows you to pursue your dreams and goals. By the time most adults reach their 40s, they have many years of experience with financial matters. An audit of your monetary life can lead to making decisions that better support your aspirations. In your 40s, the following financial tips can help you to create your life:

Create a budget and follow it: Knowing where your money is going is critical. A budget can help you to balance needs and wants, and it can help you to remember to put money in your retirement account and emergency savings account. It can also help prevent overspending in certain categories, such as vacations or fancy restaurants.

Increase your income: Increasing your income is a vital component, as more money ultimately gives you more freedom. You might choose to pursue a side gig such as tutoring or dog-walking, or you might rent out your basement apartment. Any extra money that is brought in can then be used to pay off credit card debt or a mortgage, both of which will be beneficial.

Eliminate high-interest consumer debt: Debt happens. It is an unavoidable part of life for many people, especially when they first enter the workforce and have entry-level salaries. However, it is essential to get out of high-interest consumer debt when you are in your 40s. Pay off those credit cards and car loans. Try to pay off your student loans. Consider debt consolidation if it will help you rid yourself of debt faster.

Save, save, save: This is the decade to fully fund your emergency savings account, as well as any retirement accounts that you may have, such as a 401(k) or an IRA. You can automate your savings so that a portion of your paycheck is automatically deposited without any effort on your part, which makes it easier to save. While much of the future is uncertain, enough savings will help you to create the lifestyle you choose in your later years.

Planning for your retirement is a little different when you own a small business because there are more issues that can affect your ability to build the wealth you’ll need. While it may be a more complex and require strategic planning, you can retire on time with the resources you’ll need to enjoy your senior years. This will involve making sure you have enough wealth, and it will involve planning for the succession of your business.

Determine How Much You’ll Need

The first step in this process is to calculate how much money you’ll need to fully fund your retirement. If you own a home, estimate when you expect to repay your mortgage in full. Calculate your monthly expenses and create a plan for having your credit card debt fully repaid by the time you reach retirement age. Don’t forget to include entertainment and leisure expenses, such as the cost of vacations, dining, and other forms of entertainment you enjoy.

Decide How You’ll Handle Your Business

You should already have an exit plan that will establish what will happen to your business when you retire. If you want to continue earning income from the business, you may want to take on a more active partner. If you plan to fully retire, decide if you’ll pass the business on to an adult child or sell the business. If you create an exit strategy now, you can make the arrangements in advance for initiating your exit strategy.

Choose a Retirement Plan

As a business owner, you have a variety of options for retirement plans. You can start saving immediately with a traditional or Roth IRA plan. An alternative is to start a SEP IRA plan, which acts as a pension plan for freelancers and small business owners. In a SEP IRA, your contributions are tax free until they are withdrawn at retirement age. Another option is to start a solo or individual 401k plan. You can use your 401k contributions to create either a Roth or traditional IRA account.

Above all, you should create a retirement strategy early to ensure you are prepared when the time comes. Even though you may have just started your business, it’s not too early to determine how you’ll retire and what you’ll do with your business. Creating this plan now will give you peace of mind well into the future.

Financial Technology

Month: October 2021

Financial Tips to Know in Your 40s

How Working as a Small Business Owner Could Impact Retirement