How To Start Your Financial Life Midlife

For some, the realization that financial responsibility is important doesn’t kick in until midlife. You wake up one day, realize you’re in your 40s, and you have no idea where you’re going. It’s time to get started.

For others, a midlife calamity can completely reset the financial game. Issues like divorce, a career failure, a business failure or medical bankruptcy can put you in a position where you’re starting from a financial clean slate at midlife.

The most important thing to do is to never dwell on the past. Thinking about what could have been is not going to help you build a financial future. Keep your eyes on the present, as that’s where you can control your behavior, and on the future, because the future is what you can actually change.

Here are the key financial steps you should take if you’re starting from scratch financially at midlife.

In this article

    Live lean, but smart

    In terms of day-to-day spending, you need to live lean but smart. Spend time really reflecting on what spending is important to you and what isn’t, and cut the spending that isn’t important down to the bone.

    One great way to do this is to go through your bank and credit card statements from the last few months. For each expense, ask yourself honestly whether this purchase was really worthwhile. Do you feel like it created lasting value? If you can’t even remember what the purchase was, or barely remember it, or it gives you no positive feelings, it’s something you should cut going forward.

    Why is this so important? The less you spend, the more of your paycheck you’ll have left over to stabilize your financial future. With each passing month and year, stabilizing your future becomes more and more important, because there is a day in the future when you won’t be able to work or won’t have the desire to do so, and when that day arrives, you’re going to want to have the resources to step out of the workplace.

    Find work

    For many people in this situation, a good job isn’t a given. You may be changing careers or re-entering the workforce after a long break.

    As you re-enter the workforce, you need to highly prioritize finding work and getting started. When you have 40 or 50 years until retirement, holding out for a better gig might make sense. When you have half that much time on the clock, finding a job is a lot more urgent.

    While you may not have youth on your side, you do have life experience. You have many years of experience dealing with people, building relationships, and getting things done. Rely on that.

    The biggest part of success at most entry-level positions is simply showing up and doing the work well with as little fuss as possible. Pay attention and be reliable and you’ll be in a position for raises and promotions, and most people at midlife already have tons of experience in those things.

    If you need to jump into a fresh career path, find an entry-level job with lots of promotion and raise potential. Take any opportunity you get and run with it.

    Get control over your debt

    Starting your financial life at midlife is like starting a game halfway through. Every second counts, as you have ground to make up. Nowhere is this more true than with debt. The longer you allow debt to sit around, even if you make minimum payments on it, the more you’ll pay in the long run and the more years you’ll have to deal with payments. The truth is, if you’re starting your financial life over, you don’t have as many years as you once did. You have to face it now.

    This is even more important with high interest debt. You need to address any debts with double-digit interest quickly and efficiently, because high interest debt will grow rapidly and stick around for a very long time, even with minimum payments.

    What’s the plan? Make minimum payments on all of your debts each month, but make the biggest extra payment you can on your highest interest debt as long as that debt is over 10% annual interest. Keep repeating this until all of your high interest debts are paid off. This is a simple debt repayment plan.

    Build an emergency fund

    When a financial emergency strikes a younger person, it can be difficult to overcome, but they have time. If an emergency causes them to rack up debt, they have a lot of years to deal with it. For people restarting at midlife, time is of the essence. You can’t afford to get into debt.

    The most effective way of avoiding high interest debt is to have an emergency fund, which is simply a pool of cash set aside for emergencies. The easiest way to do it is to open a savings account at a new bank, then set up an automatic small weekly transfer from your checking account. Then, forget about that savings account entirely until an emergency happens, at which point you tap the savings to take care of it. Here’s a thorough guide to emergency funds if you need more details.

    Remember, an emergency fund’s main benefit is to keep you from going into high interest debt, so the “credit card” plan isn’t a good one. That just generates high interest debt, which you then have to pay off, and there are many emergencies that a credit card won’t handle anyway.

    Save for retirement, but aim a little later

    Many retirement guides assume that you’re going to retire at 65. If you’re starting over at midlife, you should really slide that age back to 70 for a few reasons. One, it gives you five more years to accumulate savings. Two, it gives you five more years for compound interest to work in your favor. Three, it maximizes your Social Security and other retirement benefits. Plus, if you’re midlife without much in the way of retirement savings, you’ll have to save a lot each year to retire well on time.

    At age 40, you still have 30 years to go before hitting 70. You still have plenty of years to invest aggressively without really risking the money you’re going to have to live on. A good simple rule to follow is to be very careful with any money you’ll need to live on in the next 10 years and very aggressive with any other savings. At age 40, you won’t be at a point where you need any of that money for 20 years, so you can be super aggressive with your investments until age 60. That’s a lot of years for growth.

    If you’re not sure how to get started with retirement savings, our retirement guide can help. In short, if your workplace offers a retirement plan, jump on it, particularly if they match your contributions. You should sign up and contribute as much as you possibly can. If your workplace doesn’t offer a retirement plan, you should sign up for a Roth IRA if you’re a relatively low income earner, or a traditional IRA if you’re a higher income earner and contribute straight from your checking account.

    We welcome your feedback on this article. Contact us at with comments or questions.

    Trent Hamm

    Founder & Columnist

    Trent Hamm founded The Simple Dollar in 2006 and still writes a daily column on personal finance. He’s the author of three books published by Simon & Schuster and Financial Times Press, has contributed to Business Insider, US News & World Report, Yahoo Finance, and Lifehacker, and his financial advice has been featured in The New York Times, TIME, Forbes, The Guardian, and elsewhere.