The Financial Journey Part 2: Milestones for 34 – 55-Year-Olds
Key money moves to make on your financial journey from ages 35 to 55.
(Note: this is part two of a series; read The Financial Journey Part 1: Milestones for 18 – 34-Year-Olds and Part 3: Milestones for 55+ Year-Olds)
Your financial journey might seem like it’s going along pretty swimmingly once you reach your 30s, 40s, and 50s compared to the somewhat-rocky transition you likely had once you left school.
After all, you’ve probably settled into a nice little groove: a stable job, a home, a car, or maybe even a family.
This isn’t any time to neglect your financial planning, however. At this stage of your financial journey, there are many money topics people need to consider. We sat down with Nannette Kamien, a CFPTM from Inspirational Financial Planning who specializes in helping people between the ages of 35 to 55, to discuss what financial factors people should consider.
Maximize Your Income
You’ve been in the job marketplace for a few years. Are you sure you’re really earning as much as you’re worth at this point? According to Kamien, now might be just the right time to consider asking for a raise, a promotion, or even switching careers or employers entirely.
One good place to start your research is on Glassdoor, which lets you find out what people are making in your industry or working for your employer.
Another consideration Kamien often sees is people who are unhappy in their higher-paying career and who may want to transition into another lower-paying career.
In this case, Kamien advises people to “be realistic about your expenses and lifestyle, and decide what you can live without. Be objective about your budget today and your expectations for tomorrow.” This is where having a budget can help you decide how much you really do need to live on, and if you can take that more fun but lower-paying job.
Try to Pay Down Remaining Debt
Hopefully, you’ve been working on paying off your student loans and other debt for a little while now. If they’re not gone yet, now might be the best time to start trying to chip away at them a little bit more.
Sometimes it can be difficult to balance debt payoff with savings. Kamien’s advice is to “prioritize [paying off] debt over savings if the interest on the debt you’re paying is more than you can expect to earn on your savings.”
For example, let’s say that you can expect to earn a 7% return on your retirement savings that are invested in the stock market. If you also have outstanding credit card debt at 14% interest, it might make more sense to pay off your credit card debt first.
Plan for Your Ideal Retirement
“Your retirement is not going to look like that of previous generations,” says Kamien. “Because you likely don’t have much of a pension, nor can you count 100% on Social Security, saving now is vital. Be realistic about expenses and healthcare costs in retirement.”
In other words, now is the time to start forming plans about what you’ll be doing in retirement. Where will you live? Will you be taking on part-time work somewhere? Traveling in an RV?
You still have plenty of time to switch gears if your plans change, but now’s the time to start deciding what your retirement will look like. This will allow you to form more concrete plans about just how much you’ll really need to save.
Resist Lifestyle Inflation
Ah, the old enemy of increased income. It might be tempting to go out and buy a Porsche to celebrate a new raise, but Kamien says it’s a better idea to always think twice before you upgrade your lifestyle.
“Align your spending with your values, not those of others,” she advises. That money can go a long way towards making sure you really can enjoy your retirement on-point and in style.
Create Your Ideal Security Blanket
Now that you’re accumulating some wealth, it’s time to make sure that it sticks and isn’t wiped away by an inevitable emergency. To do this, you’ll need two things: an emergency fund, and just the right amount of insurance.
“I usually recommend an emergency fund of three months for dual-income spouses in separate careers, and six months for single-income households or where both spouses work in the same company,” says Kamien.
Insurance is a trickier subject, and not one-size-fits-all. The goal of insurance is to cover any gaps in your personal life, and since everyone is so different, how much insurance you’ll need will depend on your situation.
In this case, it can make sense to meet up with a fee-only financial advisor, such as from the XY Planning Network. This will help ensure you get exactly what you need and aren’t taken for a ride by an insurance salesman.
Place the Oxygen Mask Over Yourself First
It’s no secret that the costs of health care and college are spiraling ever upward. Because of this, it’s easy to be swayed by the two groups of people hit hardest by these costs—your college-bound kids, and your retired parents.
If at all possible, however, Kamien says to make sure your own financial bases are covered first before lending a hand elsewhere. At a minimum, this means making sure that you have a full emergency fund, and that your retirement savings are on track to meet your goals.
This can be the toughest tenet of all to follow. But remember the safety advice from airlines: if you don’t place the oxygen mask over yourself first, you won’t be in any position to help people at all later on.
Bottom Line in the Middle of Your Financial Journey
“The reality of this stage of life is that there may never be a time where there are more demands on your finances coming from so many different directions,” says Kamien.
These are a lot of important financial considerations to take into account, and it can seem overwhelming at first. Don’t panic, however—by breaking up these tasks into small chunks to handle one bite at a time, you can set yourself up for a bright, successful future.
Kamien’s biggest tip? “Focus on what you can control and be prepared always for the unexpected.”
Source: Nannette Kamien, CFPTM, Inspirationplanning.com/