TIME TO ELIMINATE DEBT, TWEAK LIFE INSURANCE

So far, we have looked at what needs to be done in your 20s and 30s. Today, we look at what you need to know in the 40s.

The 40s can be a time of financial urgency for many. People may be dealing with lingering debt, taking care of aging parents, putting children through college, and worrying about meeting individual financial goals.

We offer some suggestions:

• Eliminate debt. Keep an eye on debt in your 40s. Debt can be crippling at a time when you should be really focussing on your future.

• Build an emergency fund. Typically, you’ll need three to six months of salary to handle possible mishaps.

• Maximise employer retirement savings plans. Employer-sponsored savings vehicles offer great opportunities to save for retirement. You should try and increase your retirement plan contributions at work, maybe from five percent to ten percent.

• Reassess priorities. Personal and family goals may need to be adjusted to make room for saving for retirement and other important concerns. You may need to redirect the $800 - $1200 per month you now pay for their children’s private school education and invest it toward their college education.

• Re-evaluate your retirement plan. You may have $100,000 to $200,000 or so saved for retirement by now, so it’s important to track investments more closely. See how your assets are allocated and whether it’s time to make course corrections and adjustments, particularly if you haven’t touched your portfolio in a while.

• Adjust life insurance coverage. Higher insurance levels may be needed to take care of the mortgage, the children’s college education, and other living expenses.

• Open additional tax-sheltered investments. Saving outside your employer-sponsored retirement plan is always smart.

• Keep spending under control. As you become a higher wage earner, you become more vulnerable to layoffs. You also have to guard against illness more often as you get older. "You don’t want to overextend yourself, assuming you will always be able to keep up your current lifestyle," said one analyst. "You need to leave yourself breathing room, so if you or your spouse lose a job or get sick, you will better be able to handle the change."

•Don’t refinance unless necessary. A lot of professionals run up $30,000 to $40,000 in credit card debt then refinance their mortgage to pay it off because the real estate market has been strong. However, they run the risk of running up their credit cards again. "You have to be careful of re-stripping the equity out of your house. At some point you stop refinancing and pay off the mortgage," said another analyst.

• Prepare for the possibility of divorce. Divorce can be financially devastating. Design a plan to regroup, to get back on track, and be prepared to make adjustments, whether it’s moving to a smaller place or whatever you need to do. Don’t get depressed, take action.