How to fix your finances in your 40s

I’m on the cusp of my 40s, and my two main priorities for this decade will be paying down debt and saving for retirement.   

My husband and I will do that by starting an automatic savings plan and making extra payments to our mortgage.

Related: How to balance financial priorities

It won’t be easy. Since we’re planning to buy a house in the coming months, we’re poised to take on a boatload of mortgage debt.

On the positive side, since my youngest will be starting school in September, the bulk of our big day care expenses will be behind us. We can put the daycare money towards debt repayment and savings.

Your forties can be the toughest decade for your finances, says Andrea Phillips, vice president, Retail Savings and Investing, TD Canada Trust.

Many Canadians as they hit their 40s have their children’s expenses to manage, their mortgage, saving for retirement, and they may be caring for their parents.

Retirement planning often falls to the wayside. According to the TD Retirement Savings Poll, one third of Canadians in their 40s admit they haven't yet opened a RRSP, or registered retirement savings plan, even though they realize they should.

The survey also found that less than half of Canadians in their 40s contribute annually to an RRSP. Only 12 per cent say they make the maximum contribution each year.

That’s not surprising, Phillips said. Younger people may contribute more to their RRSP but they probably have less contribution room and fewer expenses that get in the way.  

My husband and I both started saving for retirement in our 20s, and I’m glad that we did, because contributions to our RRSPs have been sporadic, at best, since our eldest was born 8 years ago.

 Phillips offers this advice to getting your finances on track in your 40s:

• Understand your day-to-day expenses. Use a budget to figure out where your money is going.Start an automatic savings plan. This can help with paying down debt and saving for retirement. “Setting aside a little bit every month takes the pain out of saving,” Phillips said.

•  Speak to a financial advisor about your retirement savings – to either get started or take another look at your time horizon and asset allocation if it has been awhile. Remember that in your 40s, you still have time for growth on your side.

When it comes to saving for retirement, don’t procrastinate. Your 40s are a critical decade for building a nest egg. “The longer you’re contributing, even a little bit, the better off you are,” she said.

Also read:

Is having kids really a $243,000 question?

RRSP baby steps: The $12.50 solution