Life takes many twists and turns.
Some would say that’s what makes it interesting. We try to plan and predict, but we have limited control over the future. However, there are decisions we make today that will impact our future, and I have often said that the most important financial decisions are made in mid-life. Here’s why.
In mid-life our careers are on an upward trajectory. We are often stable in our roles at work and can rely on our salary or commissions. This is a time when reliance on our income helps us feel ready for bigger decisions like buying or refinancing a house, but…
Moving too quickly can create big problems.
We learned from the mortgage crisis in 2008 that we should only borrow what we can afford. Even if the bank is willing to approve you for a bigger mortgage, be realistic about what you can pay. When there are two income earners in the household, I encourage my clients to consider purchasing a home that you can still afford if one person loses their job. That way you can avoid foreclosure. This advice applies when you refinance as well. With home values as high as they are, many of us are tempted to tap into our home equity for special projects around the home or to pay off other high interest debt. Be careful how much you borrow. If home values drop you may end up owing more than your home is worth.
Mid-life is also a time when we like to have fun!
We buy new cars, take vacations, and have a growing desire to experience life. Sometimes this leads to unhealthy financial decisions like overusing our credit cards. If you have a pretty stable financial history, that credit card you opened when you were 18 years old probably has a 5-figure credit limit. It can be tempting, but remember, just because you have it doesn’t mean you should use it. If you can’t pay off your credit cards right away, keep the balances below 30% of available credit. Anything more will have a negative impact on your credit score.
As income increases, so should your retirement savings.
Many of us have our retirement contributions on auto-pilot and haven’t reevaluated our strategy in years. Mid-life is a great time to help your future self have enough money to live on when you don’t want to work anymore. We all dream about the free time we will have when we retire, but if you don’t have the resources to support the lifestyle you are dreaming of, you’re bound to be disappointed.
Mid-life is a great, and critical, time to create the future success you hope to achieve. Let’s work together to ensure you are on the right path.