The phrase “stuck in the middle” isn’t just a familiar refrain for 40-somethings, it’s also an apt description of this decade of life that belongs to the sandwich generation—middle-aged people who are responsible for the care of their children and their parents. Some may still be paying off their own college debt while planning for their children’s college years. Others may be trying to maximize their retirement savings while filling in the gaps of their parents’ savings.

It’s a balancing act—one that can easily lead to stumbles. According to financial planners, here are the seven most common financial mistakes people make in their 40s and how to avoid them. 

1. Not understanding your cash flow

In this potentially tumultuous decade, Cristina Guglielmetti, CFP and president of Future Perfect Planning, coaches her clients to focus on things they can control—and that’s not the stock market or the federal interest rate. It’s understanding their expenses. 

She advises doing a cash flow analysis over a two-year period, which shines a light on seasonal ebbs and flows (such as bonuses or paying for kids’ summer camps). It’s also important to separate fixed costs such as housing, from recurring charges like gym memberships and groceries. 

This helps illuminate disposable income and leads to conversations about how to best use those funds. “It’s not to say, ‘Can you eliminate expenses?’ It’s to see: What is your reality right now?” Guglielmetti says. “Is the money serving you? Is it aligning with your values and goals?”

2. Failing to plan for and adjust as circumstances change

As clients consider how they’ll reach savings goals, Guglielmetti recommends they look for pivot points. Families with young children may reach a junction where they’re no longer paying for childcare. Forty-somethings may earn a raise. At moments like these, budgeting, expenses, and income change—and the opportunity to redirect money emerges. 

For example, some clients may want to delay retirement contributions because cash flow is a concern today. In the long-run, this can lead to underfunding retirement funds. Guglielmetti recommends setting a threshold, such as age or income level, to cue change. “I would want there to be some automation and systems in place once money is coming in. There needs to be a mile marker and a system for capturing the income,” she says. 

3. Putting all your retirement eggs in one bucket

Carleton McHenry, CFP and founder of McHenry Capital, advises his clients to diversify their savings, particularly in this decade when minor changes can make big impacts by the time retirement arrives. “I like to see money in all different buckets—tax deferred, traditional qualified [employer-supported retirement] plans, tax free plans. In your 40s you still have a long runway. Having money in tax-free assets can be an advantage down the road,” he says.

With diversified investments in place, try to be patient. “If you’re investing for the long term, try to tune out the noise. The market can be volatile for reasons that make sense and that don’t make much sense,” Guglielmetti says. 

4. Falling into the trap of lifestyle creep

McHenry says people in their 40s often find themselves hitting their strides in their careers and making more money. However, the proverbial race to keep up with the Joneses can turn more income into more expenses. “They move into a neighborhood. They see a neighbor get a new electric vehicle and think, ‘It’s time for me to get one,’” McHenry says. “I see them buying toys like boats or recreational vehicles. They might even buy too much home. Their expenses go up dramatically from where they were before.”

In the long-run, that can add up to debt or underfunded savings. McHenry advises funding savings then considering how to best use disposable income. 

5. Not considering the future, now

This misstep is particularly prevalent among women. The life expectancy for women is six years longer than men’s—79 years compared to 73 years. Whether women are single or partnered, they can expect to spend more years caring for themselves and require more savings because of it. 

Although they need larger retirement and emergency funds to cover these years, women also often spend more time out of the workforce to care for children than men do. This time away from paid work means women lose out on income, employer-supported retirement funds and Social Security contributions. 

These factors can make a large impact on women’s abilities to support themselves in retirement. Guglielmetti has two adjustments to make now. First, if women are partnered, they should make sure their partner has adequate life insurance. Second, if women decide to stay home, the household should account for retirement savings contributions for the partner working in the home. (Of course, the same advice also holds true for partners of any gender.)

6. Not tapping into disability insurance

Disability insurance policies insure a person’s income against the risk that there’s a barrier to completing that work. Many people have a small policy offered through their employer. However, as McHenry points out, many of those group insurance policies are limited in the amounts covered, the monthly benefit amounts dispensed and/or can be slow to pay out. Instead, he recommends taking out a private policy to insulate earnings during prime earning years. And there’s this: “If you own your own DI policy, it’s yours. You take it with you,” McHenry says. 

7. Compromising your future for children or parents

“The two biggest financial headwinds [my clients are facing] are retirement and putting their kids through college without going into debt,” McHenry says. Sometimes he sees people in their 40s tapping into their retirement savings to help their parents who haven’t adequately planned for their needs. While there are no easy choices or solutions, McHenry advises against people “blowing up their own retirement plans to provide financial support to parents” and suggests creative solutions that don’t rely on drawing upon those funds. 

He’s also quick to remind parents there are a variety of ways to fund college, including merit aid for students. He recommends shopping around. “It’s a buyer’s market. Unless you’re looking at the elite institutions, there’s a lot of other schools out there that would like to have your kid attend,” he says. “You shouldn’t make the financial mistake of paying sticker price. Focus on what schools your kid is interested in and then start to look at financial incentives.” 

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