Dear SoFi, I’m 41 years old. Where do I start at my age?!

Dear SoFi, I’m 41 years old. Where do I start at my age?!

(submitted by Tina L. via the SoFi’s Ambition Group on Facebook group)

Dear Tina,

This is a broad question, but it sounds like you’re feeling late to the party. And you should know that plenty of people get overwhelmed by their financial situation and worry that they aren’t doing what they “should” be doing at a certain stage in life.

Thankfully, it’s never too late to take charge of your finances, and there are several good places to start.

Now, we don’t know your circumstances, but being in your 40s may mean you’re adapting to — or anticipating — some new responsibilities, like owning a house, having children or earning a more established income. Maybe you’re feeling behind because you have debt, lost a job, haven’t been building a savings, or just hadn’t thought much about managing your money before now.

No matter your situation and why you’re asking, don’t beat yourself up. Nearly half of Americans surveyed by Bankrate last year said their finances were negatively affecting their mental health. And as a country, we’re not where we need to be with financial literacy: On average, U.S. adults can only correctly answer basic financial knowledge questions about half the time.

Let’s begin with some simple steps that can give you (or anyone) more direction.

1.    Start by taking a financial inventory. This should include what you have (any savings or investments) and what you owe (through credit-card debt, auto or student loans, a mortgage, etc.) Also check your bank statements to figure out what your total expenses are, on average, each month.

2.    Use your inventory to set and then prioritize goals for yourself. Defining the things you want will help you to stay motivated. Maybe you’re tired of that relentlessly high credit card balance or worried about being unprepared for retirement. Maybe you want to take a vacation, renovate your bathroom, or make sure another major car repair doesn’t set you back like the last one. Whatever your goals, keep these two general rules of thumb in mind. If you don’t have a safety net — savings equal to one month’s worth of expenses — tackle that first. And if you have what we call “bad” debt (like a balance on a high-interest credit card,) work on paying that down second.

3.    Set up an emergency fund. Now that you’ve got that safety net, start building a bigger emergency fund. Generally we suggest setting aside enough to cover your living costs for three to six months, but there are emergency savings calculators to help you determine the ideal amount. (Here’s ours.) This should be established before you look into saving for long-term goals like retirement or your kids’ college education because the last thing you want is to be forced to put a large one-off expense on a high-interest credit card.

4.    Track your spending so you can create a budget. Mark what is a need versus a want. Ask yourself how much income you can free up by cutting back on your wants. This will help you determine whether you have wiggle room for saving or paying down debt faster. If there aren’t many wants, and you’re in the red most months, you’ll want to consider bigger, harder changes such as moving or trading in your car for a lower-cost model. But if you do have non-essential expenses, maybe you decide to eat out less frequently, make coffee at home, or take on some DIY house projects. (You might even discover that you’ve got streaming services or subscriptions you don’t use.) It all adds up.

5.    Start thinking about the rest. Once you’ve got your arms around these first four steps, start thinking about things like saving for retirement, choosing life insurance, and using a financial planner. But don’t feel pressure to tackle these immediately. The first priority is establishing good financial hygiene in your day-to-day spending and saving. Then build on that success.

6.    Stick with it (and whenever possible, make things automatic). Just like losing weight or learning a new language, being proactive about your finances requires repetition. One way to ensure consistency is to leave as little to willpower and memory as possible. Schedule regular deposits into a savings account, set up text alerts or recurring payments to get bills paid on time, or use a budget planning app (like SoFi’s Relay) to track your spending.

Lastly, don’t let yourself be discouraged by comparisons with others your age. People get their arms around their money at different stages of life, and having more life experience can give you a leg up. And, don’t be hard on yourself if you have a misstep. That will only derail your progress further. Just get back on the horse, as they say, and give yourself credit for taking this on. You’re on your way to a solid financial footing, and from there, anything is possible.

In financial health,

Kendall Meade,
CERTIFIED FINANCIAL PLANNER®

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