Financial Checklist for Your 40s: Optimization Mode

By the time you hit your 40s, your financial picture becomes clearer and more complex. You could be juggling a mortgage, kids’ expenses, aging parents (this is the sandwich generation after all), and your own retirement savings. It can be a tough balancing act but also an important time to stay focused. 

This decade is alllll about protecting what you’ve built so far from your 20s and 30s and making smarter and strategic decisions. Adjusting your investments, monitoring your retirement planning like a hawk, and keeping your debt in check is essential.  You still have time to catch up if needed, but the window is getting smaller, so every move counts! And if life happens and you’re starting from scratch, that’s OK, too. Refer to this checklist when you need help looking or referencing back at the big picture to get you on track.

1. Maximize Retirement Savings

Hopefully, you were already doing this in your 30s, but if not, this decade will be crucial for maxing out your 401(k) and IRAs now. You can start catch-up contributions at age 50, but you want to grab onto compound growth as early as possible.

If you can’t max them out, contribute as much as possible.

2. Diversify Investments

Now’s the time to reevaluate your investment portfolios to make sure it’s aligned with your retirement timeline as well as risk level because nobody wants to stress over market dips. Consider adding REITs (Real Estate Investment Trust) for passive income, bonds for stability, or international funds to hedge against U.S. market drama and diversify further. 

Automation is also your friend, so set up recurring deposits into diversified ETFs so you can “set it and forget it” while your money grows.

Need a refresher on investing? Check out the Beginner’s Guide to Investing here.

3. Aggressively Pay Down Debt

If you have any remaining student loans, car payments, or credit card debt, this is a great time to pay them down and get rid of them. Freeing up cash will allow you to invest more to help drive that monetary growth, or even just add to your travel funds or home improvements. 

You can start with the highest-interest debt first and work your way through it with every spare dollar you have to free up financial space for more fun things.

4. Evaluate College Funding (If Applicable)

If you set up 529 Plans before for your kids, check on them regularly to see how they’re doing. If you haven’t started yet, talk to your kids about realistic expectations for college costs and potential options. Even if your child is in high school, you can still open a 529 plan for them to start contributing. 

Funds from a 529 plan can be used for tuition, trade schools, studying abroad, room and board, books, supplies, and any qualified education expense accredited schools in the U.S. and internationally. 

If your child decides not to go to college, you can transfer the beneficiary’s name to another family member who also wants to use it for education.

5. Increase Net Worth Tracking

Every year, review your net worth to keep track of your progress. How to calculate it?

It’s your assets minus liabilities. Basically, what you own (savings, investments, car, etc.) minus what you owe (student loans, credit card debt, mortgage), and you can figure out what your net worth is here using an online calculator. Think of your net worth like a fitness tracker for your money. Watching your progress/growth climb, even slowly, is a lot more satisfying than not knowing.

Aim to grow your net worth every year and celebrate the small wins like paying off a loan or finally maxing out your Roth IRA.

6. Protect Your Assets

Now is a good time to review your home, auto, umbrella, and life insurance policies since you have things worth protecting. An umbrella policy is like a safety net that kicks in if you ever get sued and your regular insurance doesn’t cover the full amount. It’s definitely not the most exciting thing to think about, but having the right coverage will help you and your wallet down the road.

7. Plan for Mid-Life Career Moves

Your 40s are a prime time to pivot if you’re thinking about it. If you’ve always wanted to start that Etsy side hustle, switch industries, or learn a new skill, now’s the time. Upskilling through online courses like Coursera and Skillshare or networking on LinkedIn can open doors. 

Explore freelance gigs or passion projects that could turn into full-time income if that corporate life starts to feel stale and unfulfilling.

8. Revisit Estate Planning

Another “boring-but-necessary” thing to think about. It’s time to double-check your will, power of attorney, trust, and healthcare directives, especially if you’ve had kids, divorced, or moved states. For any beneficiaries listed on your bank accounts and 401(k), make sure it’s updated! You don’t want an ex-partner getting access to those funds. A quick review now can save your family the nightmare later.

The Money Move

Adulting is hard, but by tackling these checklist items, you’ll maximize your retirement, plan career movies, aggressively handle debt, and more to build that financial cushion for the future. 

Financial planning isn’t deprivation; it’s making smart moves now to stress less later. Not to mention the enjoyable perks of having more money with less anxiety. Your 40s are important for staying on track, and remember, it’s all about making any form of progress, not perfection!