Financial Planning in your Forties

In your twenties, you are carefree and think you invincible. The thirties for most people come with the additional responsibilities; careers, families and figuring out how to juggle them. Just as you think you’ve mastered one, another one comes e.g. another child. People past forty tend to know who they are and have a clearer direction of where they want to go. Forty (and beyond) is that age that you also realise that the lessons you have learnt along the way really do have to be implemented. Money-mistakes in your twenties are not as detrimental to you as they will be in your forties. The risk and time that you could take then is different from the risk that you can take now. In your forties you are definitely coming to the realization that you cannot work at the same pace forever. No matter how physically fit you are, recovery from a twelve-hour day is just not as quick as it used to be. Here are a few insights into financial planning in our forties:

 1. Single source income is a myth. Unless you are the CEO of a huge corporation raking in millions in a monthly income, you are going to have to figure out where additional income is going to be generated. In your twenties if you lost your job, it was only you who suffered. If this happened to you now, there is more to lose. Children have to go to school and they are probably past the easier fee structure of kindergarten. Mortgages may have to be paid, loans have been accumulated. Develop a plan to get an additional source of income. You could do some consultancy work, write, sit on a board but income has got to be coming from somewhere else even if it starts with something that you consider nominal.

2. Your investments have to do more than just increase in value. The days of just accumulating pieces of property are over. If you don’t work tomorrow how are all these “plots” going to help you. They won’t, unless you are able to sell them quickly, which cannot be guaranteed. Those pieces of land should be converted to developments or leases that can earn some income.

If you own a business, it is time to prepare the business to actually operate in your absence. Once it can do that, it means that it can continue to pay you without you being there on a full-time basis. You can make calculated investments in other people’s businesses too, if you don’t want to run them yourself. You can invest in shares that pay good dividends, and so on. This is what is called passive income. Think of it as money that is being earned as you brush your teeth. (Click Here to Tweet)

       3. Save, and don’t waste credit access on consumer debt. Pay off the credit card every month. Pay off the car loan, Sacco loan, HELB etc. Buy things with cash as much as possible. Consumer loans ensure you save or invest less. Remember one day the bank will not want to lend you money. So do not use the remaining years that you have decent access to credit to buy things that make you poorer. Use your credit access to accumulate investments.

Most of us are under-saving. You need to be saving and investing 35%-50% of your lifestyle costs or income at this point. Please note that this is still a conservative estimate and based on building retirement assets that will generate the required income. The more you can do, the better. Your automatic response to earning more money should not be to spend more. Save or invest first, and then figure out how to manage your lifestyle expenditure. Don’t spend and then figure out what to save from the balance.

4. Insurance is no longer a luxury. Insurance is about protection, not about making money. By now we have observed people around us facing difficulties because of medical issues, or seen families left in problems when someone dies. Start understanding your medical cover. Even the one you have at work may not comprehensively cover everything you need. You may need to get an alternate one to tackle any future complications. If something did happen to you, who would need protection? Maybe your family. Your kids still need to be educated. Look into life insurance. Understand what you need protected, and evaluate your options.

5. You have to work smarter. In an age where people are cutting open their faces and bodies to look younger, no one wants to also talk about the benefits of growing older. I have one. You get to work smart because you have the resources to work smart. Twenty years in the workforce have got to count for something. Working smart is achieving more in less time. Remember we don’t have the energy we used to at twenty so we have to do this differently.

A friend of mine told me over the weekend that we have to take a step back, look at the results that we are trying to achieve and map out the three or four strategic steps (or whatever number) needed to get to that result. Then focus on those steps rather than the usual “busyness” (Click Here to Tweet). Your twelve hours in the office count for nothing, if you are not making real progress.

You may find that you need a certain connection to elevate you. Work on getting that introduction. You may find that your strategic move is a certain course. Do it. If you run a business and want to expand to a new market, don’t think you have to do it the way you did it ten years ago and start with one client. What is the audacious move that enables you to start with one hundred clients? That’s what you should be concentrating on. The rest at this point, are distractions. The resources you have could be networks, money, experience, ability to get information etc. Leverage on them.

It is never too late. Are you looking to spend more efficiently, save and grow your money? The Centonomy 101 Program will help you see your money differently, interact with it differently, and help to accelerate your financial growth.  Click here to learn more about Centonomy 101.

Waceke Nduati-Omanga runs programs on Personal Finance Management, Entrepreneurship and Career Success. 

Find her at waceken@centonomy.com| twitter @CekeNduati|Facebook.com/CekeNduati