7 Critical Money Mistakes People Make in Their 40s

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The younger you are, the more time you have to bounce back from a financial mistake. As you inch closer to those retirement years, however, and as financial obligations expand, it's increasingly important to safeguard the assets you have — and to prepare for costly expenses that inevitably crop up as youth glides into middle age.

The experts agree: Even 40-somethings who feel confident about their finances are likely to make a few money mistakes. Which are the most common? Here, the financial pros tell all.

1. An expensive home remodel

The average cost to remodel a few rooms is upward of $37,000, according to data compiled by Home Advisor. It could cost even more — as much as $125,000 — depending on the size and location of the home.

Michael Frick, president of Promenade Advisors LLC, thinks that money could be much better spent by paying down an existing mortgage. "Forty-somethings need to realize that retirement is only 20 to 30 years away in most cases," he said. "Do they still want to have that large mortgage payment while they are retired on a fixed income? Will they even have enough retirement income to continue making those payments?"

Even worse, he added, is that many homeowners finance those pricey home renovations by borrowing from their existing home equity or — even worse — by raiding their 401(k) funds. The added monthly payments from a 401(k) loan can crimp the amount of money available to boost retirement savings during critical, high income-earning years.

2. Prioritizing kids' college over retirement savings

Most kids today expect their folks to pony up for the full cost of college, no matter which institution they choose. So says a 2016 Parents, Kids & Money survey released by investment firm T. Rowe Price. Most parents want to comply.

Still, midlife is "a period in which you should assess whether you're on track to fund the subsequent stages of your own adulthood," said Anthony M. Montenegro of Blackmont Advisors. As children age, "it's not uncommon for parents to continue putting kids ahead of themselves — even at the expense of their own needs."

"One way to look at this trade-off is to ask yourself, 'Am I willing to delay retirement and keep working another five to 10 years to fund my children's college?'" said Alex Whitehouse, president and CEO of Whitehouse Wealth Management. Plus, he added, a student who works to help pay for school will have "skin in the game," which can create a greater appreciation for the value of the education.

If there's an additional need for tuition funds, "money can be borrowed through student loans," Whitehouse added. "You can't borrow money for retirement." (See also: Why Saving Too Much Money for a College Fund Is a Bad Idea)

3. Skipping the estate plan

"The term 'estate planning' sounds like something old, rich people need to transfer their mansion and paintings," said Whitehouse. Still, anyone with basic assets they want to share with a loved one (or even with a chosen charity) should have, at minimum, a basic will.

No one wants to consider their own eventual demise but, even so, "lack of planning can lead to painful consequences for heirs, including a lengthy probate process, loss of control, and potentially even disinheritance," added Whitehouse.

For a straightforward will, there are inexpensive online DIY options available like Quicken WillMaker and LegalZoom. An attorney can help create a more comprehensive estate plan or set up a trust.

4. Not saving enough

"Lifestyle creep can be a major problem for those in their 40s. As they earn more, many families increase their spending on luxury items or dinner at expensive restaurants, rather than save the extra income," said Andrew Rafal, founder and president of Bayntree Wealth Advisors.

Small spending increases can be detrimental because they tend to happen slowly over time, and tend to mirror pay raises, so it's easy to not take notice.

Instead of spending those pay raises, Joshua P. Brein, president of Brein Wealth Management, suggests splitting the difference. "I always say it's a good idea to give your savings a raise if you get a raise yourself," he said. "If your savings habits don't match your increased income and instead stay small — even though your income grows — you could be underfunding retirement and falling behind inflation. When you retire, things will undoubtedly cost more than they do today, so save like it!"

Still, Brein still gives income earners carte blanche to spend half their raises. That means you can save more while also increasing your standard of living over time. (See also: 8 Money Moves to Make the Moment You Get a Promotion)

5. Being underinsured

Many 40-somethings have children or other family members who are financially dependent upon them. Even so, "many people in their 40s are underinsured," said Rafal. That means an unexpected injury, disability, or even death has the potential to torpedo even the most seemingly stable situation.

Rafal recommends taking advantage of any group life and disability plans offered by an employer, but also maintaining personal policies that are opened outside of the workplace. "That way you have the peace of mind that your family is properly insured even if you switch employers," he said. (See also: 4 Things You Need to Know About Disability Insurance)

6. A skimpy emergency fund

That three to six months' worth of expenses you set aside in your 20s may not be enough to replace your income today, if you were to need it. "Pretty much everything you own today is more valuable than it was 10 or 15 or 20 years ago," said Charles C. Scott, co-creator of FinancialChoicesMatter.com and founder of Pelleton Capital Management. "Your house is worth more. Your car is worth more. It costs more to take care of your health at this age than years ago, both because you're older, but also because health care costs are a lot higher."

Many midlife workers fail to adjust their emergency safety cushion to account for those increased expenses and earnings. If an unexpected emergency were to arise, and you haven't recalculated in a while, a meager account balance may not stretch as far as expected.

7. Paying too much for investment advice

Lower investment fees and higher performance returns go together like peanut butter and jelly. That's according to the recent research paper Predictive Power of Fees, released by investment researcher Morningstar. Still, many investors, even the most intelligent ones, don't fully understand the investment fees they're paying.

"What you don't know could be greatly hurting you," said Matthew Jackson, president of Solid Wealth Advisors. Fee information is often hidden deep within a mutual fund's prospectus or annual shareholder report. If you don't know what you're looking for, the information can be difficult to find.

Then there are the fees you're paying your financial adviser or broker. "Take the time to learn exactly how much you are paying for advice. Often, commissions and fees are obscure and not easily understandable."

The good news is that even "the worst money mistakes people make in their 40s can be fixed rather easily," said Jackson. First, he suggested, get engaged with your money. "Take the time to learn the basics. In the information age, it's never been easier to learn about asset allocation, maximum portfolio drawdowns, and portfolio volatility." In short, a little knowledge can go a long way. By learning a little, "people in their 40s can avoid a lot of pain in their portfolios," Jackson added. (See also: The Surprising Truth of Investing: Mediocre Advice Is Best)