Approaching midlife can mean many things: greater stability at home or upheaval from divorce; shifting careers or hitting peak earning years; preparing for retirement while still feeling far from ready to leave the workforce.
It’s this in-between time – sandwiched between youth and old age – that can raise unique financial challenges. How you respond to them can set you on a path toward great financial security or downfall.
Here are some of the more common pitfalls that hit people at their midlife and how to overcome such threats.
Protect Your Nest Egg From Your Adult Children And Aging Parents
Today’s college graduates are known for their predilection to boomerang back home and take up residence in their childhood bedrooms. While there’s nothing wrong with helping your adult children transition to financial independence, Bart Astor, author of “AARP Roadmap for the Rest of Your Life,” warns against digging into your retirement savings to support children – or aging parents, for that matter.
Astor observes that as individuals reach middle age, they may suffer less work-related responsibilities or even job loss, which can be difficult to bounce back from. “When you face something significant, like losing a job, there’s no easy answer,” he says, But you have to try not to allow your ego be too bruised by it and just keep going.” Rather than mindlessly mailing out your resume, he recommends deliberately marketing yourself using networking.
Consult With Your Partner
According to Astor, many couples wind up sharing household management responsibilities, so while one person may be an expert at paying bills, the other may be clueless about the couple’s money. He proposes that you talk about your overall money management approach on a frequent basis and that you consider working with a financial advisor to ensure that everyone understands the joint finances.
Carefully Consider Your Values
According to Nancy Anderson, author of “Job with Passion in Midlife and Beyond,” people in their forties and fifties are generally overburdened with work and family commitments and fear aging. Then, when something unexpected occurs, such as illness or divorce, they are taken aback.
“Knowing that these reversals are supposed to wake them up so they can figure out who they are, why they are here, and what they want to do with the remainder of their lives can help,” she says.
Simplify Family Life
Anderson notes that by this age, many people have amassed a household’s worth of trinkets, paperwork, and other unnecessary goods. She recommends clearing out clutter and streamlining your life as much as possible. “In the future, commit to buying only what you need so you don’t amass too much stuff,” she advises.
Save at least 10% of your earnings
Even with many demands on income, such as adult children and aging parents, it’s critical to prioritize retirement and emergency savings, as well as a general savings account. It is recommended that you have at least six months of spending saved up in case of job loss or an unforeseen expense.
Organize Your Debts
Experts advise evaluating your credit report for inaccuracies and devising a plan to pay off any high-interest loans as quickly as feasible. If your budget is limited, you should take a careful look at your budget and see where you can cut costs. It may make more sense to rent rather than buy a property.
Improve Your Technical Knowledge
Because so much financial management can now be done simply online, it is critical to ensure that your computer skills are up to date and that you are familiar with online banking and budgeting. You should also understand how to safeguard your privacy when using social media or purchasing online.
Downsize Your Residence
If you own a home and your children have grown and moved out, it may make sense to downsize, which is what many people do. Such individuals and couples prefer to rent before purchasing another home. You can simply take your time. This is a new period for such people, when their lives will alter dramatically and their requirements will change.
Assist Your Children in Becoming Financially Independent
Helping your children get their finances in order will benefit your personal cash flow because your children will be less inclined to rely on you. As their first careers begin, their 20-something sons and daughters must consider their budgets and retirement plans. When a child leaves the nest, [you] should offer to sit down with them, go through their benefits, and assist them in making financial decisions.
Consider Hiring a Professional
Finances can get so convoluted throughout the middle years that hiring an expert to help can be beneficial. Divorce, for instance, is commonplace and can create issues such as whether to liquidate a family home and share the revenues, how to divide college tuition costs, and how to manage other previously shared obligations. The solutions to these inquiries are not always evident, and they [often] necessitate a detailed examination and analysis by attorneys, financial planners, and tax accountants. Professionals can also provide objective, unemotional opinions on potentially contentious issues.
Play catching up
If you haven’t yet saved enough funds for your retirement, right now is the time to get started. The only option is to reduce wasteful spending as much as possible and save as much as possible in retirement accounts. Work should also be planned for as long as possible. Consider deferring social security benefits until age 70, relocating to a lower-cost-of-living locale, or even living communally in retirement. The good news is that if the deficiency is discovered in middle age, there is still time to make changes.