How to manage money in your 40s

Previous blog articles have seen us talk about managing money in your 20s and managing money in your 30s. It’s no surprise then, that we’re keen to support singles, couples and families in their 40s and provide them with some ideas about how they too, could manage and plan ahead with their hard earned income.

Your 40s might see you managing a young family, or nearing the end of your parenting journey (with dependent children leaving home and becoming more financially independent). You may be single, or a couple that has chosen fur babies over the two-legged kind. No matter your situation, it’s still important to have strong financial habits. You’re likely to still be paying a mortgage or have other debt you’re trying to manage, or finally reaching your goal of having a house deposit for your own four walls. 

You’ll certainly have a solid understanding of your household income and expenses, but might want to tweak your current spending habits, or improve your savings habits. Maximising income and savings can be a key theme for people in their 40s as they kick bad habits and have a better understanding of the retirement they’d like to have, as they observe their parents, older family members, friends and colleagues navigate retirement.  Your 40s is a great time to kick start your retirement or savings plan, if you haven’t prioritised this previously.

Your 40s is also a great time to reflect on the past few decades of working life and you may choose to prioritise a family overseas holiday or finally renovate the kitchen if you’ve put this on hold for the last 10 years. A job promotion can  justify ‘treating yourself’ to that new car, or upsizing your home for growing teenagers. Your high spending years aren’t behind you just yet, as you may choose to support your children in private education, pay for their university fees or have older family members such as parents to financially support.

managing money in your 40s nz

How to Spend Less

Perspectives on spending less can evolve in your 40s, as your priorities and life goals change. You’re likely to be earning more than you ever have before, and with that can be a temptation to ‘treat’ yourself or your family. Whether that’s a holiday, a brand new car or new furniture or whiteware items. This is a decade that you should laser focus on your financial goals. Can you afford to overpay on your mortgage and pay that off sooner? Could a small renovation help make your family home fit for purpose, rather than committing to selling up and moving to a larger, more expensive to run home? Can you take advantage of work benefits to support your personal financial goals – make use of a work vehicle, tie in holidays with work trips to save on costs and so on?

A household budget is still important, but if you’re not saving up for something specific like a house deposit, you may be able to be a little more relaxed in what you spend – opting for inexpensive ways to treat yourself – dinner out, a new outfit, a day trip with friends.

Without goals and rules around spending, your expenditure can slowly creep. Make sure you share your goals with your partner to make you both accountable, and if you’re single, share your financial goals with family or friends and update them regularly on your progress. You’ll need to see that your sacrifices are ‘worth it’ so make sure your budget surplus is redirected quickly towards your financial goals. 

How to Save More

Remember, saving can take all shapes and forms. If you’re overpaying your mortgage, you’re saving on future interest payments. If you’re directing surplus income to an online share portfolio like Sharesies or a managed fund account offered by your bank or Kiwisaver provider, you’re also saving – for the future. 

Consider ways you can save in the short and long term. Short term savings could be regularly reviewing your utility provider to ensure you’re getting the best deal on your insurance, power or phone. Long term savings could be investing in solar panels for your home to decrease the cost of your power bill in the long term, or topping up a managed fund account for a special holiday or your retirement.

Contingency planning by having an emergency fund is also important in your 40s when you tend to have a lot of outgoings. In an unsettled economy, you may lose your job for a period of time, or need to take extended leave for a health concern. Make sure you provide certainty for yourself and your family by having a cash buffer or safety net, should the worse happen.

A recent Financial Services Council Report stated that 28% of 40-59 year olds have savings for less than a month of their current expenses, should they lose their income. 36% of the same age group have 1 to 6 months of savings. 

Ways to Start Investing

If you’re in your 40s but haven’t started investing yet, or don’t know where to start, there are some great online resources that can help you understand Index Funds and ETFs, and sort your Managed Funds from your Term Deposits. Remember that if you’re contributing to Kiwisaver, you are investing – in your retirement – and it’s good practice to check any investment, especially your retirement accounts such as Kiwisaver every year. You may want to increase your retirement contributions if you’re earning a little extra money, or at least check your portfolio. Your 40s is still a long way from the retirement age of 65, so it makes sense to continue opting for long term growth investment options rather than conservative fund options.

If you’re unsure about your next financial steps, or how to best make use of your pay increase or inheritance, you can seek financial planning advice from a financial advisor. They can help with best planning for your retirement, and with any financial goals you may have between now and then.  

How do singles in their 40s manage their money?

It’s never been easier to seek advice online, or upskill on financial management by reading relevant articles and listening to podcast experts. This is a great strategy for self-motivated singles to take charge of their financial affairs. There are always some personal finance basics to get across and chatting with family, work colleagues and friends is never a bad option providing you fact check well meaning advice!

Your 40s is a time to focus on repaying your debts – whether that’s a credit card or student loan. Your next target should be your mortgage, or if you choose to rent then actively investing money for a retirement nest egg is a great use of your resources. If you intend on staying single, you’ll want to maintain an independent lifestyle into your later years – sensible financial planning now can make all the difference.

How do couples manage their money in their 40s?

Couples in their 40s often have the benefit of two incomes contributing to household expenses, paying down debt and investing for the future.  Communicate regularly on your financial goals (house deposit, paying off the mortgage, upsizing your home  or investing in your children’s education). What changes might you have to make to achieve those? 

This is a great decade to pay down debt and ramp up savings plans, while enjoying life, good health, family and friends at the same time.

Kicking into your retirement savings now will pay dividends in your mid 60s, where you can relax and enjoy the efforts of your hard working younger years. Remember the effects of compound interest can really make a difference when you start investing in your younger years. Starting additional savings routines or plans in your 40s will pay off far more than if you don’t start until your 50s.

Personal finance advice

Unsure of how to manage your money? You can access free personal finance services or pay for professional personal finance advice.

How much can you borrow with a personal loan? 

With Nectar you can borrow unsecured up to $30,000, or as little as $2,000. Use our loan repayment calculator to find out how much you could get. We offer debt consolidation loans to simplify multiple debt repayments, and emergency or urgent  loans to meet your cash flow needs.

Getting started with Nectar

Do you need a great rate on a personal loan? We’d love to help with your personal loan requirements. Find out how much you could borrow and learn more about our personal loans. You can get started with Nectar and get a personalised loan quote online which will include your interest rate, maximum borrowing amount and repayment options. Borrow better, faster today!*

*Nectar’s lending criteria and responsible lending checks apply.