“Route re-calculation.” I hear it nearly every time I use my GPS. More often than not it’s because I accidently missed a turn, but sometimes it’s because I think I know a faster, better way. It was the Sunday after Thanksgiving in California. We were driving north on the I-5 in the Los Angeles area, and then she spoke. “Take the next right”. Wait… What? That doesn’t make sense. And so I did what any other typical male would do in my position. I ignored her, because I knew a better way. Why would I get off the highway? Well it only took about 5 minutes for me to realize why I should have changed course. Traffic was backed up for miles, and now I was going to add about an hour onto my travel time, all because I thought I knew better. Lesson learned? Sometimes.
Just as a GPS will reroute you to help you reach your destination in the most efficient way, we often need to reroute our financial journey. Now, hopefully, when you were younger, you were able to tuck a decent amount away for retirement and your nest egg has been able to grow steadily. Back when you were in your 20s, time was your friend; but unfortunately, as we get into our 40s and 50s we start to feel time slipping away and we start to panic. Unfortunately, this is about the time your children are driving and entering college and the money is flowing out far quicker than it is flowing in. This is why saving early is so important. We don’t see these times coming. We figure our income will go up over the years, which will then allow us to save more. The truth is, our income does go up, but so do our expenses. Plus, life happens.
So is all hope lost if we didn’t save early and often? No…. but, there are some decisions that will need to be made either way – some harder than others.
Change Your Budget
We often think we will get to do more as we get older. We assume we will have more money, which will allow us to buy more things, or travel more. In my family, we have found the opposite to be true. We better understand the importance of taking the time to enjoy life, but our vacations and expenses are little more strategic than we thought they would be. A couple of our kids are grown and mostly out of the house, and so our family of 5 has shrunk to a family of 3. Our financial priorities have changed, and so should our budget. It’s best to make sure we understand where our money is going, and if we are hitting our target.
Change Your Life Insurance
If you have been saving over the years, the amount of life insurance you need should be less. The life insurance policy is meant to help look after your loved ones should you pass on. The combination of increased savings and the less years the money would need to last should allow you to lower your life insurance need.
Update Your Will
Hopefully you have had a will in place for years now. This allows you to state where you want your assets to go when you pass away, and your wishes should you become incapacitated. However, circumstances have changed since you originally set it up. The kids are now becoming legal adults, and therefore you may want to appoint one of them as a trustee of your estate. If you have any that are still considered minors (I have one), then you may prefer a different legal guardian (like an older sibling), than the one previously named.
Change Your Retirement Portfolio
As your life stage changes, so should your retirement portfolio. When you were younger, you were able to be aggressive because you could ride out the ups and downs of the market. Time was on your side. Time is a little less on your side in midlife. Therefore, your riskier investments should be a smaller portion of your portfolio. You should still have some higher risk investments, but you should be gradually moving towards more conservative investments. Also, if you haven’t talked to a financial advisor and mapped out a plan, do not hesitate. Find someone you can trust and schedule an appointment.
Change Your Income
We were fortunate enough to have my wife, Nora, stay at home as our kids grew up; but now that our last is leaving for college in a couple short years, and with the college expenses adding up, we decided it was time for her to reenter the workforce. It has been a difficult transition for her, but a necessary one. We can’t let debt build up now. We want to help our kids, but not at the expense of our retirement. We must continue to rake through the thick brush of expenses until we can weather this financial storm. These teenage years are relatively short, but if we are not careful, they can be the most financially damaging.
Even if you feel you are too far down the path, it is never too late to make things better. You know the saying: “the best thing you can do if you find yourself in a hole is to stop digging.” You may not be able to help your kids as much as you would like, or retire as early as you like, or do the traveling you had always hoped to do; but hopefully you will be able to live modestly and be happy. Plus, at least the inheritance to your kids would not be a load of debt.
The truth is, our life stages have been changing, but often we are too busy to notice just how much. We need to step back every now and then, evaluate and determine our course of action – heeding the “route recalculation” in order to end up at the proper destination.