Note: This article is courtesy of Iris.xyz

By The Sense

Many 40-somethings have responsibilities for both growing children and aging parents.

It’s no wonder that the majority haven’t saved much for retirement and lack some important financial basics such as an emergency fund or insurance.

It’s tough, but this is the decade though that you must start making your financial life, and particularly saving for retirement, a priority. The great news is that you’re likely earning more than ever, have some financial and life experience under your belt and still have enough time to get on track before you’re knocking on retirement’s door.

Here’s a list of a few priorities for you in your forties. Like all big projects, we recommend breaking this punch list into parts and tackling one every few months or so. While retirement planning is the focus of this decade you’ll note that there are a few priorities you must tackle even before planning your retirement, especially if you have a family that depends on you.

1. Create a Back-Up Plan for Your Family

You owe it to your family to make sure that they are properly cared for if something happens to you so it’s time to get life insurance and an estate plan.  You’ll never forgive yourself for not having enough insurance if the worst happens and you didn’t have insurance, particularly since term insurance is relatively inexpensive in your forties.  If you don’t have enough insurance to replace your income during your working years in which you are responsible for loved ones, it should be your number one priority before even saving for retirement.  An estate plan is the other vital piece of your family back-up plan as it sets out the instructions as to your wishes of how funds should be used to provide for your family and nominates guardians to care for them.  While the plan is likely to cost a few thousand dollars, allocating resources to put this plan in place should, like insurance, come before saving for retirement or even thinking about something lower on your priority list like a vacation.

2. Create an Emergency Fund

Unexpected emergencies arise and you want to cover them without going into credit card debt or relying on family.  If you think your home equity line of credit is your emergency fund, think again as many lenders froze lines during the recession given dropping home values. You will want to set aside 20% of your after-tax income until you have built up enough cash reserves to cover three to six months of expenses. It’s only after you have built up your emergency fund that you should reallocate savings towards retirement. If you don’t think it’s possible to save 20% of your take home pay for financial priorities such as creating your emergency fund, you need to take a closer look at how you prioritize where you spend your money (see the below Aligning Your Resources to Your Priorities).

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