A Mid-Career Financial Checklist

As you progress in your career, earn more and have more control over your budget, it’s time to examine your finances carefully. Here is a checklist of questions you should ask yourself during this critical time when you can shape your financial future for the rest of your life.

While the 30-to-44 year-olds are building their career, family and lifestyle, they also encounter the benefits of higher income. Since most people spend more time assessing their vacation options each year than their finances, many fail to ask themselves some important questions that have long-term consequences.

Hopefully you already answer “yes” to the basic questions of personal finance: Do I live below my means? Do I have a cash reserve for emergencies or unexpected expenses? Am I making the best use of employer-provided benefits? Is my family protected if I die or can no longer work?

After you have these basics down, you should then continue with the questions that delve deeper into your finances. If you can’t answer them on your own, consult peers, parents and advisors.

Do I take on more debt than is wise? With low interest rates, taking loans for a car, a house or your business is tempting. These big-ticket purchases are more troublesome for your budget than a latte a day or more shoes than you need.

How do I want to live in retirement, and what does it cost? Until you have a sense of your retirement goals, it’s difficult to know exactly how much you need to save now. Begin with at least a rough idea of the end in mind and course-correct along the way.

Source: iStock

Source: iStock

Am I passing up free money? If your employer offers a matching contribution to your retirement savings, you must find a way to contribute enough to earn it. This money, though a small percentage of each paycheck today, has extraordinary growth potential in your retirement accounts.

Do I have a defined investment strategy? Your investments should reflect your tolerance for market fluctuations and your expectations for long-term returns. When you look at your investments across all accounts (perhaps your spouse’s, as well), do you understand the risk versus return characteristics of these investments? Do you have methods for rebalancing accounts so that you don’t accidently stray over the roadside cliff?

Do I invest rationally? Chasing recent performance is problematic, so is panic-selling during market declines. You are likely to be more successful than those who succumb to human nature if you manage your emotions or work with an adviser to help you make better money decisions. Your behavior is more influential on your financial security than the actual returns of your savings and investments. Sound planning, not luck, provides financial security over time.

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Gary Brooks is a certified financial planner and the president of Brooks, Hughes & Jones, and a registered investment adviser in Tacoma, Wash. An expanded version of this piece first ran at his blog The Money Architects.

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