Navigating Finances in Your 40s: Essential Financial Strategies for Mid-Life

Overcoming job loss, family pressures, and retirement anxieties.

I was in Cleveland when I learned I was losing my job. As a Cincinnatian, that just added insult to injury.

At 42 years old, I found myself in a position I never thought I’d be in: Out of work with two elementary school-age kids, a mortgage, a spouse who just started back to work, a big dose of embarrassment, and a large income hole to fill.

I have yet to see a personal finance book that tells you what to do in that situation.

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The fact is there isn’t much financial advice targeted to people in their mid-life (age 35-50) phase. Most personal finance books tell you how to start saving in your 20s and then magically fast-forward to preparing for retirement in your 60s.

That leaves a large portion of the population in their prime earning years wondering what to do next.

One of the reasons it’s hard to give blanket personal finance advice to the mid-life cohort is that there’s such variability between individual cases. This person may not have kids and inherited family wealth, that couple may have five kids and is struggling to make ends meet on two incomes, and another person may have a special needs child.

What each of these cases usually share, however, is anxiety. Anxiety about the accelerating pace of time you feel in mid-life.

Retirement, which once seemed like forever away, is suddenly 20 or 30 years from now. You were probably in college 20 or 30 years ago and think about how fast that time went.

The questions in this phase are unceasing:

• Do I have enough saved?

• What happens if one of us loses a job?

• Who’s going to take care of Mom and Dad if they get sick while we’re trying to take care of our own kids?

And social media doesn’t help. Everyone else seems to have figured it out on there.

If this sounds familiar, you’re in good company. Most of what you see on social media is different priorities on display. One family may prioritize travel, another may like fixing up their home, for example, but no one has figured it all out.

I set up KNA Capital Management the way I did – as separately managed accounts rather than a hedge fund or partnership - in part because I wanted to be able to help family and friends in my age cohort who were increasingly turning to me with these kinds of questions.

With a huge population of millennials approaching their late 30s and early 40s, these topics will only become more widespread in the coming years. A lot of people are going to need help.

Here are seven tips for navigating your mid-life finances:

• Boost your cash savings. General personal finance advice either suggests a small emergency fund and invest the rest into retirement accounts or save six months of expenses. The former is unwise for someone in their 40s with high-risk of large, one-off expenses and the latter seems unachievable to many. My suggestion is to err on the side of having more cash savings. While your cash savings won’t have the growth potential of a stock investment, cash has option value. Even if your cash is earning 4%, for example, if it saves you from having to put a big expense on a credit card with a 20% APR, it will prove to have been the wise investment. There’s no price on peace of mind, either.

• Learn about investing. If you don’t know what a stock or an ETF is, there’s no shame in that, but it’s time to get started. If for no other reason, it will help in your conversations with financial advisors. (Your advisor should welcome tough questions!) I would start with Vanguard founder John C. Bogle’s book The Little Book of Common Sense Investing and Morgan Housel’s The Psychology of Money. Listen to Chris Hill’s new podcast, Money Unplugged.

• Hire trusted advisors. Yes, this is self-serving, but hiring an accountant and an independent insurance agent has saved me time, hassle, and money. Trying to do all these things yourself – and do them well - in addition to your other responsibilities in this busy phase of your life is a Herculean – and frankly, a futile – task. It’s important to do your research on these advisors, of course, and that means checking credentials, verifying references, understanding their financial incentives (e.g. do they charge hourly, as a percentage of assets, flat-fee, etc.), and trusting your gut if you notice something fishy.

• Avoid get-rich-quick schemes. Successful wealth creation is as much about avoiding activities with low-upside probabilities and large downsides (gambling, speculation, day trading, etc.) as it is about saving and earning solid investment returns. Remember, you can only compound capital if you have capital to compound. Let’s say your speculative bet somehow pays off. If you lack the knowledge and emotional control to manage a large sum of money, that “win” may prove to be more trouble than it’s worth in the long-run. There are countless tales of lottery winners falling into this trap.

• Give yourself some grace. Budgeting in your mid-life phase is challenging. Expenses like kids’ activity fees, hospital bills, and car repairs can come out of nowhere and derail your plans. If you can only put $10 into savings this month, that is still a small victory. Don’t beat yourself up.

• Stay employable. It will be important to aggressively save for retirement again once you have fewer dependents. This means keeping your professional skills sharp through your 40s and into your 50s and 60s so you can continue to earn a good income. If your company covers certifications and education expenses, take advantage. Earning the right to use the CFA designation, for example, helped me qualify to teach college-level finance and build my own firm. Keep reading - widely and regularly. Learn how to use AI to augment your productivity and output. Cultivate your professional networks by adding value for those you meet.

• Have a plan if things don’t work out. As I learned the hard way, job security can be a fleeting thing. Having a plan can reduce anxiety and provide clarity of purpose during an emotional time. Will you start your own business? Great. What steps do you need to take to get it launched and how much money will you need to have set aside? If you lose your job, which discretionary budget items are the first to go?

• Prioritize obligations. Being sandwiched between caring for kids and caring for aging parents can take an psychological and financial toll. Every family situation is different, but a good rule of thumb is that you’re most helpful to others when you’ve first helped yourself. Kids can get student loans, if necessary. Elderly parents have government benefits and their own assets to use. No one is going to finance your retirement or bulk up your emergency savings except you.

This list could go on, but it’s a start.

Our mid-life phase is full of big events. Some good, some bad. It would be nice if we also didn’t have to think about financial questions like those above. But alas.

If you're struggling to navigate this complex stage of life, know you're not alone.

One of the silver linings of setbacks, which we’ve all had by this phase of life, is that it increases our ability to sympathize with those going through similar challenges.

Reach out if you'd like to talk or post your thoughts in the comments below. Sometimes, just sharing your story is the first step on a better path.

I’ll be back soon with more investing-focused content.

Stay patient, stay focused.

Todd

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Todd Wenning is the founder of KNA Capital Management, LLC, an Ohio-registered investment advisor that manages a concentrated equity strategy and provides other investment-related services.

At the time of publication, Todd, his immediate family, KNA Capital Management, LLC and/or its clients do not own shares of any company mentioned.

Please see important disclaimers.