By the time you are in your 40’s and 50’s, there is a good chance that you are established in your career and perhaps you have settled down and had a family. While this can be a stable time of your life in many respects, it is important now, more than ever, to ensure that you have all of your financial ducks in a row.

When you were in your 20’s and 30’s and you began planning for the future, (hopefully, that was the case), mistakes weren’t as costly because you had some extra time to spend digging yourself out of trouble. In your 40’s and 50’s, it becomes somewhat more difficult to recover from mistakes as you near retirement.

Here, you will find the top 10 financial blunders that people in their 40’s and 50’s make. Avoid these mistakes and you will enjoy a much happier retirement.

Excessive spending

You have spent a good deal of your life working and by now, you most likely earn quite a bit more than when you first started out in your 20’s. While your current quality of life is important, make sure that you are not sacrificing the quality of life you want to have in your retirement. It is tempting to buy that expensive car, that new house or take that costly vacation, but think about what saving an extra $500 per month at age 40 would mean for your future. It would mean that with a modest return, you would have potentially an additional $375,000 or more in your portfolio by the time you retire.

Failing to diversify

No matter how confident you are in a company; never put your entire future in their hands. Your risk level increases substantially when you fail to diversify. By owning a comprehensive portfolio of stocks and growth assets, including property, your likelihood of moderate and steady returns over time is much higher.

Playing it too safe

While retirement may be looming closer, even if you are in your 50’s you still have at least 15 years or more before you retire. After retirement, you may have many years beyond that. History tells us that it is extremely unlikely that we will ever have a 20-year long stretch of negative returns. Comparatively speaking, you do want to be somewhat more conservative than a person who is in their 20’s and 30’s. However, allocating too much to fixed interest investments is not a wise decision, especially in our current low interest rate environment.

Relying on a government pension

A government pension may be able to cover your basic living expenses upon your retirement, but there will not be much left over to ensure the quality of life most people look forward to when they retire. Even if you are in your 40’s or 50’s, it is never too late to start investing and saving. Let compound interest work for you.

Not modifying your emergency cash fund

Your strategy for maintaining an emergency cash fund needs to be re-examined at this stage of your life. In your 20’s you can make do with a lesser amount, but in your 40’s and 50’s, you are more likely to have additional expenses such as a mortgage and a family to support. Make sure to consider this and adjust the amount of reserves you keep in your fund. As a rule of thumb, you will want to keep at least 6 months of living expenses in a high interest savings account.

Failing to save for your retirement to fund your child’s education

If you have enough funds to pay for your children’s university and you can retire comfortably, then do it. However, not everyone is fortunate enough to be able to afford this. Of course, you want to be able to help them, but it is unwise to do so if it means sacrificing your future. Neglecting to save for your retirement will make life harder for you down the line and could even put you in a position where you need assistance from your working child. Your retirement should come first.

Neglecting your health

The reality is, as you get older, the more likely you are to develop health problems. With health problems, come significant expenses. While some conditions are unavoidable, your chances of staying healthy are much greater if you have taken care of your health when you are younger. It is never too late to start taking care of yourself. Maintain a proper diet, exercise and visit your doctor when necessary. Your quality of life and your financial health depends upon it.

Not re-evaluating your insurance policies

Your homeowner’s and life insurance policies may have served their purpose when you were younger, but they may no longer be sufficient. Inflation will increase the value of your possessions and expenses have gone up too.  Look at your existing policies and make sure they cover the current value of your belongings and that your life insurance keeps up with the financial needs of your family.

Using your home equity to fund expenses

While it could be argued that spending the equity in your home to refinance high interest debts, pay for a significant expenses or for the purpose of investment, is a viable option, taking out a home equity loan to pay for a short-term lifestyle expense is ill advised. No matter what your age, credit is a very risky form of payment and can get you into a lot of trouble for years to come.

Running scared when stocks go down

During the recent global financial crisis, when the market dropped by more than 50%, many investors went into panic mode and pulled out their investments. Of course, when the market recovered, they lost out. There is no doubt that watching your investment portfolio plummet is frightening, but if you keep your eye on the future and know that what goes down, must come up eventually (especially financially stable company stocks), you will reap the rewards of being patient and calm.

Now that you understand the common mistakes people in their 40’s and 50’s make, it is my hope that not only will you avoid them, but that you will have a healthy financial future and the lifestyle you have envisioned upon your retirement.

Find out how you can safely increase your returns, even in volatile markets, click here.