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Financial Red Flags You Need To Address By Age 40

Published February 28, 2020

5 minute read

Devon Taylor

By Devon Taylor

Turning 40 is a milestone in anyone’s life. When your forties begin, you are officially entering middle age. That means you are no longer a “young adult.” You’re definitely not a kid anymore, so time to act like it — financially, at least. You really should have your financial affairs in order by the time you hit 40. Sadly, many people still celebrate their 40th birthdays with their finances in a state of disrepair. A recent report by TD Ameritrade found that two-thirds of people between the ages of 40 and 49 have less than $100,000 in retirement savings. A study by credit bureau Experian found that most Americans enter their forties with more than $7,000 in credit card debt. Worse, by the time they hit age 50, that same credit card debt has reached nearly $10,000. Here are five financial red flags you should address by the age of 40 to ensure you have a secure future.

A Poor Credit Score

Some of us don’t pay enough attention to our credit scores. That’s a big mistake, since your credit score largely influences the interest rates you’re charged on expensive items like a mortgage or a car loan. The lower your credit score, the more you should expect to pay for big ticket items. A bad credit score can also result in higher interest rates on credit cards, which already charge high rates to begin with.

Generally speaking, you want to keep your credit score above 700 to qualify for good rates. A score above 800 would get you even better rates. Sadly, most people don’t even know what their credit score is because many have never seen their credit report. There’s really no excuse for this. It is free to check your credit score once a year from each of the three credit reporting bureaus in the U.S. – Equifax, Experian, and TransUnion. Just go to to get the free reports.

Do yourself a favor and get in the habit of checking your credit score regularly. You should also review your credit report. Address any issues on your report (outstanding or unpaid debts, missed payments, or incorrect information) to improve your score. Paying attention to your credit score is one of the best ways to help yourself financially. All it costs is a little of your own time.

No Budget

It might sound boring and tedious, but having a personal or family budget is important. A budget is the best way to track your spending. It lets you know exactly where your money goes each month. Without a budget, you are more likely to spend recklessly and then struggle to catch up.

A monthly budget is also a great way to identify other financial red flags. Maybe you’ll realize you are overspending on a certain area, like fast food. Maybe you’ll notice that you’re barely putting any money into savings. A detailed budget can help you see where you need to cut back — maybe cancel that unused gym membership or scale down how many streaming services you pay for.

While some people compare budgeting to being on a financial diet, that’s not really the case. We can assure you that having a budget is the mature thing to do. It’s a great habit to get into. Once you start tracking your money closely, you’ll probably find that you enjoy it. And even if you don’t, your future self will appreciate the effort and reap the benefits.

Carrying Too Much Debt

This is probably the most obvious item on this list. Carrying too much debt is a financial wrecker – especially as you advance in age. As mentioned previously, most Americans in their 40s have more than $7,000 in credit card debt. They also carry an average of $33,765 in student loan debt, according to the U.S. Federal Reserve. If that wasn’t enough, the majority of Americans in their 40s also have mortgage debt, car loans, and lines of credits. It all just adds more to their debt load.

This is an unsustainable situation for most people. Debt often prevents us from properly saving for retirement. Debt should be addressed at any age. However, by the time you are in your 40s, debt repayment needs to become a priority. Pay down your debts as quickly as you can, starting with the loans that carry the highest interest rates.
Once the debt is paid off, take the extra money and plow it into a 401(k), IRA, or another savings vehicle. The older you get, the less debt you want to have — especially consumer debt like credit cards. As long as you carry a heavy debt burden, you’ll never be financially independent.

No Life Insurance

You can be forgiven for not having life insurance in your early 20s. You’re young, carefree, and without many responsibilities. However, there is no excuse once you reach your 40s. You need some kind of life insurance coverage, especially if you have a spouse, children, or other family who depend on you financially.

Life insurance will protect your loved ones if you pass away. It prevents them from falling into financial hardship if they suddenly lose your income support. Despite the importance of life insurance, industry reports show that only slightly more than half (55%) of American adults over age 25 have a policy. The good news is that this negligence can be easily rectified.

Depending on your age, health, and coverage amount, term life insurance policies can be purchased for as little as $50 a month. Keep in mind that term life is typically all you need, rather than the more elaborate and expensive whole life insurance. You will likely need to undergo a physical examination by a doctor before getting a life insurance policy though.

Life insurance typically becomes more expensive as you get older. Therefore, it’s always better to secure a policy when you’re young and healthy. If you haven’t bothered by the time you hit 40, put life insurance at the top of your to-do list.

Not Saving Enough For Retirement

The number one financial red flag for anyone turning 40 is not saving enough money for retirement. Study after study shows that Social Security will be insufficient for most Americans to live a comfortable life in retirement. That means additional financial is not only recommended but required.

If you are fortunate enough to have a retirement plan at work, that’s great. However, if you are among the 54% of Americans to have no employee sponsored retirement plan, then you had better start planning for your future. The good news is that it’s not too late.

According to personal finance expert Dave Ramsay, a person in their early 40s can save $650 a month and retire with $1 million by the age of 65. But don’t delay. Start saving as much money as you can afford immediately. Increase those savings whenever you can, like when you get a raise or a bonus, or close out an outstanding debt. Transfer every cent you can to retirement savings. This is the number one financial red flag to address by the time you hit the big four-oh.

The Last Word

All kinds of responsibilities come with turning 40, including financial ones. By the time you enter middle age, you should have accepted that you are no longer a kid. You probably can’t afford to play fast and loose with your money. Do yourself a favor and get your financial affairs in shape. By addressing the five red flags outlined in this article, you’ll be putting yourself on the road to financial freedom. Trust us when we say that the peace of mind is well worth the sacrifices required to right your money ship.

Woman Celebrating 40th Birthday with Friends


Devon Taylor

Managing Editor

Devon is an experienced writer and a father of three young children. He's simultaneously trying to build college funds and plan for an eventual retirement. He's been in online publishing since 2013 and has a degree from the University of Guelph. In his free time, he loves fanatically following the Blue Jays and Toronto FC, camping with his family, and playing video games.

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