Your college roommate arrives at your 25th reunion with a new wife not much older than your daughter. Your eminently sensible husband comes home with a Harley Davidson and a tattoo. You find yourself taking a sweet little red convertible for a test drive, when you had every intention of shopping for a family-sized van. Or that vow you once made never to consider plastic surgery now seems like something only a naïve 20 year-old would make.
What’s going on here? What is it about middle-age that brings on a full-blown identity crisis? Just at the time in life where most people are settled – in their jobs, their relationships, their lifestyles – an irrational urge to do something different strikes from nowhere. Maybe it is just the averageness of it all. Neither young nor old, middle-agers feel stuck in the middle, longing to bust out and do something outrageous.
There are other kinds of mid-life crises – more common, and less spectacular than changing partners, profiles, or preferences. Unfortunately, these crises can be just as expensive, if not more so. These are the financial squeezes that nearly everyone in their fifth and sixth decades experiences. Between sending kids to college, financing weddings, saving for retirement, or caring for an elderly or ailing family member, there is just not enough money to take care of it all.
At a time when household income is generally rising as individuals enter their prime professional years, the demands on that income can often make 40 or 50 year-olds feel more strapped and stressed than when they were just starting out. It’s no wonder then that mid-lifers sometimes resort to the antics of their youth.
So what can be done to ease middle-aged financial squeeze?
PLAN, and plan holistically
It’s human nature to deal with things one at a time and as they come. In other words, we cope with the present and thereby risk shortchanging the future. Your daughter’s wedding is next year, while retirement is still two to three decades in the offing. How likely is it that you, as a 50+ year-old, will opt to make a catch up contribution to your 401(k) rather than adding just a few more family and friends to the guest list?
The financial planning process helps us become aware of these consequences by putting the future on the table right next to the present. It allows us to see the “opportunity costs” of each financial decision we make. For this reason, it’s particularly important the mid-lifers take a holistic approach in their planning process. Rather than doing “spot” planning, which takes one objective, such as education planning or retirement, to determine what funding may be needed, a comprehensive plan will take into account all of an individual’s or family’s goals.
One of the first and most important steps of financial planning is to identify these goals, and to determine which are more important. When shortfalls are identified in the financial plan, these priorities help determine where trade-offs may be necessary. When it becomes apparent in the plan’s projections that the goal of paying full freight for a child’s education entails a significantly reduced standard of living in retirement, it may become easier to modify the college funding goal to consider a greater role for student loan financing, or to investigate less expensive colleges.
Our life goals can put the financial squeeze on in middle-age, but an unexpected crisis can wipe us out. Addressing the potential financial costs of these sudden or catastrophic events – an early death, property loss, liability claim, need for ongoing care, or even a major meltdown in the market – is a fundamental part of a comprehensive financial plan. Getting the proper insurance coverages and employing prudent risk management techniques should, in fact, be one of a mid-lifers’ first and non-negotiable priorities. Without these steps, all other life goals may become just wishful thinking.
PUT a CFP® professional in the middle, rather than yourself
One of the hallmarks of mid-life is that we feel responsible for the financial obligations of family members older and younger than ourselves. The squeeze comes when we fully and uncritically assume those obligations, because it is just too hard to say no to our loved ones.
In such situations, the role of a facilitator in a conversation involving the entire family can be invaluable. Consider having a CFP® professional be that facilitator, to explore how family needs can be met and what each member can do or contribute to mitigate the financial burden that might otherwise fall solely to the mid-lifer.
When all is said and done, being in the middle of life can put us at the top of our game, financially and otherwise. Rather than being sandwiched between generations, we can see ourselves embraced by the full range of life experiences, and in a position now to make confident, informed choices, with the guidance of a financial fiduciary such as a CFP® professional.