Midlife Money Matters

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Money. A topic that many of us don’t like to talk about. Unless of course, we have tons of it and like throwing it around. And in that case, you shouldn’t talk about it. It’s not classy.

Did you know that the richest 1% in the US own more wealth than the bottom 90% combined? And that bottom 90% has 73% of all debt. 

Does that surprise you?

If you pay attention to the pros and cons of the different generations, you will see that a consistent con of Generation X (people born 1961-1981 or thereabouts depending on what article you read) is we have the most debt and are the least prepared for retirement.

Baby Boomers are doing marginally better while my research said Millennials are savers (who knew). They outpace Gen X and Baby Boomers in retirement savings (comparatively to age). However, we corner the market on homeownership. When it comes to debt we’re all pretty equal. In that, we all have too much of it. At least us bottom 90%.

Oh to be that 1%. 

To be honest I never thought about these things until I started researching for this post. Then not only was I depressed because the information sure isn’t inspiring but mad at myself for not knowing. I mean I wasn’t at all shocked but seeing it in black and white was eye-opening. 

It motivated me to take a harder look at what I was saving for retirement. After this post, I hope you’ll feel the same way.

Speaking from personal knowledge of myself and friends in my age bracket I’m sad to say the above stats prove out. Not 100% but then nothing is 100%. If I look at my friend circle it’s evenly split. Half are doing their finances right regarding their kid’s college and retirement and half are one emergency away from OH SHIT now what do I do.

Myself, I’m about 2 emergencies away from OH SHIT now what do I do and I know I need more in my kids 529 and my 401k.

I blame competitive cheerleading. Not sure what that means? Stick around the blog long enough, and you’ll find out.

Seriously though, it’s scary. Many of my friends aren’t prepared for retirement as their focus is putting their kids through college. This is the stuff that keeps me up at night. Worried that in 20 years when I don’t want to work multiple jobs or even worse can’t physically do it anymore I won’t have the savings I need to enjoy my golden years the way I want to.

If I work, which right now I want to as I enjoy what I do, I want it to be my choice not out of necessity.

When you’re worried about how to pay for your sweet little angel’s college and retirement at the same time. It adds up to a lot of stress. The stress you don’t need. The only way to reduce that stress is to create a plan. Then execute it. 

I’m no financial planner, or guru, or even a model of financial health but I do have experience. I’ve weathered the ups and downs from having everything one ‘needs’ to keep up with the Jones to divorce, bankruptcy, and foreclosure. Then working hard to climb back out again.

I also know how important it is to not stick your head in the sand and think you have plenty of time to start saving for a rainy day or retirement. You don’t. Even if you’re 20, it’s not too early but especially if you’re over 40.

The first step is to have an accurate picture of your financial health. Not an ‘I think” picture but a real eyes wide open scary as hell picture of the basics.

What you make.

What you spend.

What you owe.

What you need.

Are you cringing already? I know I do every time I do this. This isn’t a one and done. You should minimally review your financial health once a year. Just like you get a yearly physical and your teeth cleaned. And if you’re not doing those things then make an appointment right now.

You hear me? RIGHT NOW!

Once you’ve made those appointments, have an accurate picture of your financial health, and have downed a bottle of wine. It’s time for the next step.

Actually, you might want to sober up before the next step.

In this second step, you have 2 main focuses. Debt and retirement That is getting out of and saving for.

Most financial planners, at least the ones I’ve worked with over the years, will say you want to pay off debt first if the interest rate is higher than the rate of return on your retirement portfolio. Not completely cut your contribution to zero but it’s not prudent to max out your 401k with an 8% return if you have 50k in credit card debt at 15%.

Make sense? Please know this is strictly food for thought. I would advise you to consult your financial planner or hire one, before making any major changes.

Now the problem with paying off debt at the expense of contributing to your retirement is many people lack discipline. They will charge those cards right back up, and end up in a vicious cycle. Don’t be ashamed if you lack discipline. You’re not alone. But you don’t want to put yourself in a position where you still have the credit card debt and have reduced your contributions for a time period just to be right back where you started.

There are several ways to get yourself out of debt. I have used, more than once, Dave Ramseys snowball method. It creates the momentum needed to stay the course. 

You also need to create a budget.  More importantly, stick to it. For years my budgets lasted as long as my commitment to not eat nachos.

There were two reasons for this. It made me uncomfortable, and I felt bad to say no we can’t afford it to my family.I would have those times were I needed a pick me up and spending money did that.

I finally realized I had to get over those things if I were ever going to dig us out of debt. 

You need to track your spending, know how much you have to spend, and learn to spend within those means.

I recently read a line by Ruth Soukup from Living Well Spending Less that said.

Sticking to a budget forces me to tap into creativity I never knew existed.

I wish I would have seen that sentence a long time ago as it would have motivated me. It’s what finally got me to be able to say no. Or rather I give my kids options. 

Options like these:

Sure, honey, you can have a new Xbox game, but we can’t eat for a week.

New cheer shoes? Of course but I won’t be buying hamster food for 6 months.

While those are slightly exaggerated, you get the point. More importantly THEY get the point. I’ve made them part of the sticking to a budget, and it can be fun.

Determining how much you need for retirement is a step you should take before you figure out how much you need to save and what you can afford to save. Don’t let yourself get too stressed about not being able to save as much as you should be saving. It is what it is and as long as you’re moving in the positive direction worrying won’t solve anything.

The key is taking action. Don’t wallow in self pity case you’ve gotten yourself in debt and don’t have savings. 

Just move forward. 

Start today.

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