So, you're turning 40 and you want to know if you're on track financially. There is a lot to consider, but let's walk through some key measurements together and see how you're doing.

A Home:

At this point in your life, you'd like to own a home for your family. You may not have a great deal of equity in the home yet, but you should be a homeowner. If you are still renting, optimally you'd be saving for a down payment so that you can get into a home. Homes are not the world's best investments. They go up and down in value and generally don't go up too fast. That said, they provide you with a place to live and tend to make families more stable.

Credit Card Debt

Early in your family's history it was likely tough sledding. Credit cards may have played a key role in equipping the home. Those days, if they happened to you, should be past. You should have your credit cards paid off at the end of every month.


Retirement is relatively easy and still a long way off. Optimally, at this point in your career you'd have been saving for retirement since your mid-twenties and you'd have something like 2 to 3 times your current income in your retirement accounts. If you have even one year's income in your retirement account you're in pretty good shape. That should grow and ultimately represent about one third of your retirement savings. Your future contributions will fund the rest. If you have less than one year's income in your retirement savings account, you'll need to get serious. You'll need to be saving more than 10% of your income for the next twenty-five years to create a nest egg that will feed you through your retirement. You may also need to think about pushing retirement to age 70.

College Savings:

At your age, you may have some young teenagers starting to think about college. Four years at Princeton will cost about $200,000 today-more when your own kids starts college. If your student will live at home, attend the local community college for two years and then finish at a local four-year college, the total tuition bill could be one-tenth the Princeton cost. There are college options at every spot between those two extremes. For a thirteen-year-old, you'd hope to have about $6,300 for every $10,000 you'll expect to need for her college plans. For a five-year-old, you'd want to have about $1,950 per $10,000 you expect to need. You can roughly guess how much you'd need for kids of other ages by extrapolating from these reference points.


The car you drive is not important in the least. The relative merits of minivans versus sport utility vehicles is someone else's purview. Driving a car that doesn't have a car payment is, however, important. If you're driving a car with a car payment it suggests that you're spending too much money on your cars and therefore, not enough on the items listed above. Take good care of your car so it will last a long time. Focus on saving and avoiding debt.

Having assessed your situation, you likely find that you are doing well in some areas and not well enough in others. That's normal. You may now be able to shift your emphasis from the areas where you're doing well to those where you're not doing so well. If you didn't show up well on any measure, you may have experienced a setback of some kind. Shake it off. Start fresh and you'll be in fine shape. If you're doing well in every area, you should be writing about financial planning for families!

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