Tips for planning your finances in your 40s

woman sitting and planning your finances

Savings

MoneyPlus Features Team

27th February 2017 at 4:00pm

A personal story on facing up to the financial challenges of major life events such as divorce and redundancy from one of our MoneyPlus writers. (Picture shown is not the writer.)

For many people, their 40s is the prime time for building up wealth and focusing on their career, often while juggling childcare and caring for aging parents.

But life can become complicated and unexpected life events, such as redundancy and divorce, can throw almost anyone off course.

It happened to me. Children, redundancy and a marriage break-up followed in rapid succession. And the fall-out from those things had much bigger financial consequences than I could ever have anticipated.

Relying on luck is definitely not a plan

The reality is I hadn’t even considered that things could take such a downturn, so quickly. And I was one of the 27 million in the UK, according to Financial Capability, without the savings buffer to allow them to cope with a significant income shock.

I don’t have any good excuses, although it’s certainly true that I was brought up in a family which never practised good money management.

I’d spent years in good jobs and I’d been incredibly fortunate to be able to live a comfortable life: one of the fortunate generation who had built up property wealth due to the sheer luck of rising prices.

The reality of life as a 40-something

But that all changed when I reached my mid-40s. The job market tightened following redundancy and working freelance for a time meant it was impossible to predict income levels (much as it was a great experience).

Once part of a couple sharing the bills and expenses, I became the breadwinner with young children to care for and took on a larger mortgage on my own, using up most of my savings.

Separation and divorce costs, of course, can be pretty expensive as anyone who has been through it knows. Finally, all my savings were gone.

I needed to change things so that I could to get to a position where I could start saving again.

The debt I’d been more than happy enough to carry over the years needed to be cut and refinanced and spending shrunk.

It’s not something I’ve achieved overnight, and I have more to do, but I’ve made great strides with a bit of planning, time and effort.

More importantly, I’ve learned an important life lesson: Trying to sort things out when you’re in the middle of a crisis just makes things harder.

Trying to sort things out when you’re in the middle of a crisis just makes things harder.

I took out a new, cheaper mortgage

Getting a mortgage on my own meant taking it over the next 20 years, due to  lenders’ affordability tests. It’s the biggest mortgage I’ve ever had but, on the plus side, interest rates are low with repayments reasonable at just 1%. (Compare this to when I bought my first flat in the early 1990s when rates were around 14%.)

Saving: None. Taking on a much bigger mortgage on my own is £250 more expensive than I used to pay a month, but it’s affordable.

At last, I moved my credit cards

I moved my balances onto a new credit card with 0% interest which will save a considerable amount of interest, depending on how quickly I pay the balance off. Why didn’t I do it sooner?

Saving: What I do know is I’m currently saving at least £120 a month, or £1,440 a year. And I’m reducing the debt.

Change my bank account

I’m happy with my bank but I don’t need the packaged account that comes with benefits I am either not eligible for, or don’t use. I had it because I thought it would give me free travel insurance but it turns out that it doesn’t cover my children.

Saving: Taking the unused ‘extras’ off my account saves me £18 a month, or £216 annually.

Move to a better energy tariff  

This is the one that really started the ball rolling. An alarming letter from my energy supplier told me I’d need to pay an extra £100 a month on top of the £160 I already paid. It turned out that their estimate didn’t reflect the information I’d sent them.

They adjusted the figure but before I rang off I asked:  “Am I on the best energy tariff?” Actually, they replied, I wasn’t and I could be on one which is 25% cheaper. I switched, of course.

Saving: The demand for £260 a month turned into just £100 – plus an overpayment of almost £400 returned to me. In one year, that’s a welcome £2,320.

Cancel the Netflix

I already have Prime and rarely have time to watch it as it is (the children think they own the Kindle), so I cancelled my Netflix subscription.

As I couldn’t find my details, I had to phone them up. In a nice, customer-friendly gesture, they spotted I hadn’t used their services for a while and gave me three months’ fees back.

Saving: £5.99 a month, plus £17.97 as a one-off repayment back into my bank account.

A better phone and a better deal

My old phone didn’t allow me to use internet banking or book anything online. It also had a limited data allowance that I breached, resulting in bills on top of my regular monthly fee.

I upgraded to a new phone that is one of the best on the market – thankfully not the one known to go up in smoke.

The upside is I now have a phone that works properly, and I can plan my diary, carry out banking on the go and download all the apps I’m ever likely to need.

Saving: An average of £10 a month, sometimes more. That’s upwards of £120 a year.

What does this mean for my finances?

Tightening my finances means I’ve saved at least £3,767 this year on my bills alone (give or take a few pence), plus one-off repayments of £417.97.

It more than balances out those higher £3,000 mortgage costs.

While, it’s not a ground-shaking amount, it puts me on a better financial footing for 2017, and means I can start saving again.

More than that, it’s a lesson in taking control and not sitting back, fingers crossed, and hoping for the best.

And with that in mind, I’m in the middle of updating my Will so that I know that everything is in good order.

What’s next? That’ll be my pension…

With my day-to-day finances in better shape, I’m going to spend the early part of 2017 planning to make sure I might actually have enough saved to retire in 15-years, when I hope to finish working.

But one step at a time. That’s next on my list.

Information correct in December 2016.

Join the conversation on twitter @StandardLifeUK and Facebook.