Reaching midlife is a turning point for most Americans. You may have achieved greater stability at home, switched careers, divorced, or hit peak earning years. The time between youth and old age can bring challenges that might strengthen your financial security or downfall. Here are some smart money tips you can follow to help you prepare for the worst.
Maintain an emergency fund.
An emergency fund is always one of the top smart money tips, regardless of age. However, it is especially crucial when you’re already at your highest earning period. There’s more at stake, and you may be responsible for more people than you were in your younger years.
It will be hard to replace this income in the case of job loss. Some high earners downsize and have difficulty getting a similar job. Save sufficient funds to cover living expenses for at least 3 to 6 months. A cushion covering up to a year of expenses is even better.
Beware of lifestyle creep.
Adults who reach middle age seem to grow their families and lifestyles quickly. An increase in salary usually leads to higher costs and demand for money. Be careful when committing “lifestyle creep.”
Think twice before booking an expensive vacation or purchasing a new home. Check your budget to see if you’re still on track for your other goals. This includes saving for college tuition or retirement.
Continue to increase your income.
You should still be open to opportunities to increase your income. You are at a stage where you will have enormous expenses. Supporting your aging parents or relocating to a new home requires digging deep in your pocket. A bigger income will make it easier to cover this kind of costs.
Some common ways to increase your income are:
- Request a salary increase at work when appropriate.
- Apply for a new job to have a significant salary bump.
- Try to learn new skills to boost your marketability. Aside from improving yourself, learning new things will also help keep your mind sharp.
- Prepare for healthcare expenses.
Out-of-pocket healthcare expenses can drain your life savings. Your money is at risk once you’re no longer working and don’t have health insurance. Data shows that a couple retiring at age 65 usually spends approximately $315,000 on healthcare.
Don’t be complacent and wait until retirement to prepare for medical care. Start filling any possible gaps you need to cover in the future. Consult a financial planner who can give smart money tips to increase your health savings faster.
Strategize ways how to become debt-free.
It’s common to have debt such as car loans, mortgages, and education loans by age 40. At this point, however, you should already have a clear plan to clear these debts.
You must prioritize paying off credit card debt since this has the biggest interest rate. Budgeting and adjusting your spending habits permits you to put more money into clearing debt. In this way, you can turn your attention to other repayments.
Grab the opportunity to catch up with contributions.
Don’t be discouraged if you only started saving for retirement later in life. The old saying, “Better late than never,” still applies. There are specific provisions for a certain age group to catch up with their contributions.
Are you turning 50 by the end of the year? You can catch up by making contributions to an individual retirement account (IRA). You can also make salary deferral contributions to a 403(b), 401(k), and 457 plan.
Study your state laws after getting married or divorced.
Marriage and divorce have a significant effect on your retirement savings. In marriage, financial projections may include your spouse’s income and assets. The amount you regularly save may be less than what you would save if you were single. However, it’s wise to save at a higher rate if you can do so.
If your spouse passes away and you don’t remarry, you are entirely responsible for saving up for retirement. On the other hand, you’re required to share your assets with your spouse if you get divorced. Consult a lawyer for state laws to determine which assets are needed to be shared with your spouse.
Learn Practical Smart Money Tips From Top Priority Financial Solutions.
Consulting an expert on managing finances is still beneficial even if you’re already in your peak earning years. A financial expert can see the big picture, take into account your goals, and provide smart money tips specifically tailored for you.
Top Priority Financial Solutions can help you go through midlife without succumbing to bad financial decisions. Book an appointment with us today!
