Middle age can bring on more than just a desire to buy a fancy sports car or take an exotic trip. It also presents some unique circumstances that can greatly affect your finances.
While you may be at the peak of your earning power, you also have numerous expenses that eat into your budget. In addition, there’s a whole litany of unexpected possibilities that could put your finances in a precarious state. However, with some advanced planning, you can deal with many of these changes and keep your finances intact.
An Empty Nest
You are not the only one getting older; your children are also rapidly coming of age and college will be right around the corner. Given that the average annual cost of tuition, room, and board at a four-year public university is $21,000, your children will remain one of your largest expenses well after they have moved out of the house.
If you want to help them avoid massive amounts of student debt, you need to start saving for their education as soon as possible. Fortunately, state governments provide many benefits for parents who are saving for their child’s education. For instance, 529 college savings plans provide a tax-advantaged account that can be used to stash away large amounts of cash for educational purposes.
Approximately 30% of all people between the ages of 40 and 49 have suffered the pain of a divorce. In addition to its psychological toll, divorce can wreak havoc on your well-prepared financial plans. Alimony, child support, and the necessary liquidation of assets can drastically reduce your disposable income and force you to delay your retirement.
A properly written prenuptial agreement can help to avoid costly legal battles during divorce proceedings. For those without a premarital contract, mediation can be a cheap way to reach an agreement on communal assets, saving you thousands of dollars compared to hiring an attorney for a legal battle. Regardless, a divorce could compel you to seek extra income to help pay your higher living expenses – you will no longer be able to share costs with your spouse – and to rebuild your retirement accounts.
New Professional Endeavors
After several decades of work, you may be ready for a career change. Perhaps you want to take that nonprofit job, start your own business, or go back to school. There are few things that are more exhilarating than reorienting your life in order to chase a dream that you have had since your youth.
Unfortunately, most career changes involve a decrease in pay – following your dreams is not cheap! In addition to an uncertain or temporarily nonexistent salary, many people fail to consider the many additional benefits from a more stable job, such as health insurance and 401(k) matching funds. You need to be prepared for such changes by saving a cash cushion and creating a budget to help cut unnecessary expenditures. You are going to need every penny as you begin your new career.
Although you may have felt invincible when you were young, those days are long gone. As you age, you are more susceptible to a variety of ailments and diseases that can slow you down and put a serious strain on your finances. In fact, more than 60% of all bankruptcies are due to the inability to pay medical bills…and the majority of these people had health insurance.
Now is an excellent time to review your coverage before your health costs become prohibitively expensive. If you are already suffering from certain health problems – or if you have a family history of such issues – you may want to consider more comprehensive coverage that limits your annual deductible and co-payments.
Expect the Unexpected
When it comes to your finances, it is always wise to expect the unexpected. Whether you lose your job, your spouse, or your ability to produce insulin, life can throw you a lot of midlife curveballs. However, you can prepare for these possibilities. By reviewing your finances now, you can save enough money to fortify yourself for whatever life brings your way.
Pathway Financial Planning can help you prepare for these and other midlife changes that can impact your finances. Please give us a call at 248-567-2160 or send an email to email@example.com to schedule a complimentary consultation.