11 Common Money Mistakes People Make in Their 40s

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Your 40s represent a unique period in your financial life. You’re older, wiser and well-established, but there are still a few things you have yet to figure out — like how to afford your children’s college education and where you’re going to retire.

Though you might feel settled, becoming complacent could impact your financial well-being. Don’t fall prey to these common money mistakes that people often make in their 40s.

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1. Not Having a Plan for Your Money

The bar has been steadily rising for 40-somethings who are working to maintain their place in the middle-class pack, notes economist William Emmons of the Federal Reserve Bank of St. Louis. On top of that, many Generation Xers took a financial torpedo during the Great Recession right at the time they were stretching to afford housing and establish careers. “That’s the group we feel maybe doesn’t get enough attention for having suffered a great deal in this cycle,” he said.

Forty-somethings who are just now recovering from losing a house or a job need to make a plan for their money now and stick to it. “If you’re reeling from this blow financially in your 40s, there’s not a lot of time to recover,” he said.

Read: 10 Immediate Steps to Start Planning for Retirement in Your 40s

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2. Not Maintaining Enough Liquidity

A lack of access to cash in an emergency sends many Gen-X families to predatory payday lenders, Emmons said. “It should be a high priority to have enough cash reserves so that you don’t have to go to a high-cost lender or to sell off assets or pass up opportunities when they arise,” he said.

If you don’t have an emergency fund by this point, you might need to make some aggressive moves to establish one. The short-lived sting will pay off big over the years.

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3. Letting Your Emergency Fund Fall Behind Your Growth and Expenses

If you’ve had an emergency fund in place for years now, don’t pat yourself on the back too hard. Many people realize in their 40s that their emergency funds now fall woefully short of supporting their larger incomes and budgets.

Whether your cash reserves have kept pace with your budget or not, when you’ve reached your 40s, it’s time to invest your emergency fund for maximum growth while keeping your funds liquid.

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4. Getting Complacent About Carrying Consumer Debt

It’s easy to get too comfortable when you’re tucked into a good job and cozy home. Don’t get complacent about carrying consumer debt. “Not that everyone that has borrowed has trouble, but people who have trouble typically have borrowed,” Emmons said. Limit your exposure to debt, and don’t use a current position of strength to justify putting yourself in precarious position.

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5. Prioritizing Paying Off the Mortgage

Some people crave the security of owning their home free and clear, but putting your mortgage ahead of other financial obligations is almost always a bad idea. Before you pay off your home, Dave Ramsey recommends paying down all your other debt, establishing your retirement savings and setting your children’s college funds into motion.

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6. Assuming Remodeling Will Add Value to Your Home

The luxurious bathroom remodel you feel brings a little slice of heaven to your humble cottage-style home may be exactly the thing a potential buyer will want to rip out and redo. Don’t count on others to value remodeling and renovations the same way you do. Overcustomization can lower the value of your home.

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7. Putting Kids’ College Ahead of Retirement Savings

When your family, friends and neighbors are putting their kids through college, the pressure’s on to do the same — but if your retirement savings aren’t already on or ahead of target, funding the kids’ education is the wrong move. Your children can take out a loan for their education, but you can’t take out a loan to live on during retirement. Treat this like putting on your own oxygen mask first in case of an airplane emergency and don’t help the kids until you’ve helped yourself.

Related: Why Homeowners Are Paying Off Their Mortgages Before Student Loans

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8. Dipping Into Your Retirement Funds

The power behind retirement savings is time — time for interest to work its magic, time for the market to lean your direction over time. When you dip into your retirement funds, even with the best of intentions, you take away the very time that makes long-term savings so effective. Cashing out your 401(k) before you are 59½ means not only an ugly 10 percent penalty on top of federal and state income taxes, but also zero in reserve working its magic over time.

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9. Not Diversifying Your Investments and Savings

The reason boomers came out of the recession in better shape than Gen Xers is that they had diversified their savings and investments. “It’s true, the stock market crashed at the same time as the housing market did — but the stock market came back,” Emmons said. “Older people tend to be more diversified, so they have done very well in that regard.” Don’t throw all your eggs into one basket, he advises, whether that’s your house or a particular investment.

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10. Considering Being Risk-Averse a Bad Thing

“It doesn’t get glamorized the way entrepreneurs and risk-takers [do], but being risk-averse is a very good strategy for most people,” Emmons said. “And by that I mean keeping your checking account stocked so you have emergency cash, having a very diversified portfolio and keeping your borrowing very low. … Control the things you can control — so reduce risks and be boring and conservative and prudent.”

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11. Assuming Your Best Earnings Are Still to Come

It’s easy to assume that your income will always grow the way it has so far in your career. “Incomes rise in their 20s and 30s and a little bit in their 40s, but peak earnings are usually around 50,” Emmons said. For people with more education, that peak comes a little later but is generally stronger, with more of a peak and more of a fall-off.

Forty-somethings should plan not only for a flattening income curve but increasing concern for job security. “There’s more risk as you get older,” Emmons said. “It is a little more difficult if you lose your job, the company shuts down or you lose your job for whatever reason. … It’s illegal to discriminate against someone based on their age, but we know that there are some difficulties.”

It’s easy to become complacent once you’ve reached your 40s, but don’t set your finances on cruise control just yet. Keep your head up for what’s just ahead, to prevent poor assumptions and common mistakes from tanking the financial security you’ve worked so hard to build.

Related: 10 Ways to Take Charge of Your Financial Future in Your 30s and 40s

This article originally appeared on GOBankingRates.com: 11 Common Money Mistakes People Make in Their 40s

This article by Lisa Poisso first appeared on GoBankingRates.com and was distributed by the Personal Finance Syndication Network.