7 Dumb Mistakes Nearly Everyone Over 40 Makes

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Once you’ve hit the age of 40 you might think you know everything about finance. However, no matter your age or experience, there will always be financial lessons to be learned. 

Even the most meticulous financial planners are susceptible to making mistakes. Here are seven of the most common money mistakes the 40+ set make.

1. They drown themselves in debt

The total household debt in the United States rose by $312 billion to $16.15 trillion in the second quarter of 2022, according to the Federal Reserve Bank of New York. Too many people over 40 allow their household debt to get out of control, spending hundreds of dollars a month on interest.

Consolidation and debt relief are two popular debt solutions. If you’re buried in debt, seek help and assistance. 

You can combine your debt into a single, fixed-rate loan using a debt consolidation plan. If your financial troubles require debt relief, find ways to negotiate with your creditors and cut what you owe.

2. They leave their family’s future vulnerable

Most of us know that it’s smart to buy life insurance and protect your family. However, it can feel like an unnecessary expense for healthy people in their 40s and 50s.

While you may feel like you’re a long way from worrying about dying, tragedies do happen. If you die unexpectedly without life insurance, your family will have to find money to cover everything from funeral expenses to debt payments.

If you’re the sole financial provider, life insurance is even more important. The payout from a life insurance policy will provide a safety net for your family to get back on their feet.

Hot Tip: Be sure to be taking care of your retirement investments and funds as well! It’s always better late than never.

3. They don’t generate wealth with real estate

Investing in real estate is a great way to make your money grow. According to Harvard’s Joint Center for Housing Studies, apartment prices increased by nearly 18% in 2021.

Do you think it requires a lot of money to start investing in real estate? Wrong. You can get started for just $10 with most top real estate companies. In fact, real estate investors may increase their profits by 25% or more within three years if they hold on for five years.

4. They let home repairs drain their savings

Don’t struggle to pay for costly home repairs! Protect yourself by making reasonable monthly payments for a home warranty plan.

Think of it as health insurance for your home. No matter what issue arises, a home warranty gives you access to a large network of reliable service providers who can fix the issue.

5. They waste thousands on auto repairs

The average U.S. automobile now has 12.1 years of usage. Unfortunately, most cars won’t need repair work until years after the warranty expires.

Instead of shelling out thousands of dollars for car repairs, consider a vehicle protection plan. These plans charge a small monthly fee and in return, your car repairs are covered if the work is completed at a licensed repair facility.

6. They let medical costs empty their nest egg

The US Department of Health and Human Services estimates that 7 out of 10 people that are 65 and older will require long-term care. Consider purchasing long-term care insurance; it guarantees that you’ll be able to receive the health care you need during retirement. 

Medicare does not provide for long-term custodial care. Paying for long-term care out of pocket could gobble up a huge portion of your retirement savings.

7. They don’t hire professionals to manage their money

Vanguard reported that, on average, a $500,000 investment over 25 years would grow to $1.7 million if managed by yourself, but more than $3.4 million if working with a professional. In other words, an adviser-managed portfolio averages 8% annualized growth over 25 years, compared to 5% from a self-managed portfolio.

Bottom Line

Financial success isn’t just about how much money you earn. In fact, how you spend the money you make has a lot more to do with reaching your financial goals. Avoid these seven common mistakes to get the most out of your hard-earned income.