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How To Put Your Financial House in Order in Midlife

Midlife is the time between the ages of 45 to 65. And it is a fantastic time to put your financial house in order. Your children are either close to leaving the nest or have left the nest, and you're on your second or third career, and possibly, on your second or third marriage.

Midlife is a time of transition. It may also be a time to start planning for retirement.

Where are you at?

  • Are you living with ease?

  • Do you have an idea of what your goals are?

  • And when would you like to achieve them?

  • Are they aligned with what you value?

  • Regarding your partner. Do you know where they are at?

  • Do you have a contingency plan for death, disability, or job loss?

  • Is your estate plan set up?

  • Do you have a budget in place?

  • Is your financial advisor aware of your values and objectives?

  • Do you have a retirement plan in place?

This article would be for you if you answered" "No" to at least three of these questions.

How to put your financial house in order

1. Have a vision for this second half of your life

By the time you hit midlife, you will have heard it all! The messages of what you're supposed to or not supposed to be. For many women, this would have meant supporting their spouses and raising their children while pursuing a career.

Midlife is a time of introspection and questioning, "what's next?" Your midlife is significant because you realize that you have already lived half of your life, and your mortality becomes a reality as never before.

Renowned sociologist Dr. Brene Brown describes midlife as a time when the universe grabs your shoulders and says, "I'm not f-ing around; use the gifts you were given."

2. Prepare a written plan

List your goals for the next 3, 5, and 10 years. How would you like to live this second half of your life? What would you like to do? Where would you like to live? Who would you be living with? These questions take on a greater sense of urgency in midlife.

3. Take charge of your finances

A UBS poll was done in 2018. Of the three worldwide, 58% defer long-term financial decisions to their spouses.

Most women would have left major financial decisions for their spouses to make. For example, 85% leave financial decision-making to their husbands because they believe their spouses know more about financial matters than they do. Yet, 80% of women will end up alone either through the death of their spouses or a divorce.

In the US, the average age of widowhood is 55. By age 56, 75% of women in the US would be widowed. Therefore, women must play an active role in their finances.

Do you know where you stand financially? Are you confident in making financial decisions on your own?

1. Keep track of your finances

If you have always left your spouse to handle the finances, you may not know where your money is going. You may have a sense of things, but it pays to know exactly how much is coming in and what's going out. Is more coming in than going out?

Do you have a budget? Are you aware of how much debt you have? Are you aware of what you have in investments? How are they allocated, and what level of risk are you at?

2. Pay off debts

Do you carry high-interest, unsecured revolving debt? Make a plan to pay it off as soon as you can. For example, double your monthly payments or cut down on your expenses. You want to avoid carrying unsecured debt into your retirement.

If you cannot pay off high-interest debt, transfer it to a low-interest alternative. Or, if you can, consolidate it all in a secured loan.

What about your mortgage? How much longer have, you got before you pay off your mortgage? Are you able to double your mortgage payments?

3. Invest Investing is the best way to keep up with the effects of inflation on your savings.

All investments fall under one of four asset classes — stocks, bonds, cash, and alternative investments (e.g., bitcoin, gold, art). What proportion of your money you invest in each of these is dependent on:

  • Why you're investing.

  • The length of time w, you're investing.

  • And your risk tolerance.

The biggest mistake people make is investing in short-term vehicles for long-term goals. Or they invest in long-term volatile investments for short-term goals. An example is investing all your money for retirement in term deposits or municipal bonds.

Your retirement years may exceed thirty years. Investing all your retirement funds in short-term vehicles providing a return of one or two percent will not allow the growth your money needs to last thirty years.

4. Health Insurance As you age, health care may, at some point, be an area of concern. Yet, it is an expense that people often forget in retirement planning. Have you made plans for a possible increase in health care expenses?

Better yet, be proactive, and adopt a healthy lifestyle. Prevention is better than cure. Don't wait till you are ill before you make the necessary changes.

If you are currently benefitting from your spouse's health insurance, read the fine print regarding the coverage once your spouse retires. Planning on changing your job, find out what the benefits are before switching companies. Intending to start your own business? Research, and compare private insurance providers.

6. Start Planning Your Retirement

No matter how far you are from retirement, it would help if you had a written retirement plan. In it, you should have a list of your expected sources of retirement income.

  • Pension (from your employer)

  • Registered Plans

  • Non-Registered Investments

  • Government pensions

  • Part-time work

  • Sources of passive income

6. You can't take it with you — plan your estate Do you have an estate plan in place? One that reflects your wishes for how you want your assets distributed once you die? A good estate plan should communicate your wishes for how you want to divide your assets. It comprises of

  • A Will

  • An Enduring Power of Attorney

  • A Living Will or Health Directive

A Will is a legal document a lawyer prepares. It states your wishes for who gets your assets when you die. It also names your executor, who will carry out the terms of your will.

A Power of Attorney

A Power of attorney is a legal document you sign granting a person (s) the authority to manage your money and property on your behalf if you are no longer mentally able to manage it yourself. This could be caused by illness or disability.

A Living Will

This document allows you to specify "end of life" care ahead of time. What kind of medical care, for example, would you want if you could no longer express your wishes? It is a way to tell your wishes to healthcare professionals to avoid confusion later on.

It also explains which treatments you want if you're dying or unconscious. Finally, when planning your estate, you need to ask yourself how you would like people to remember you after you die.

Bringing it all together

If you've never nurtured a healthy relationship with money, midlife is a good time to start doing that. Of course, a healthy relationship may mean completely rewiring your wealth consciousness. But on the other hand, it will help you acquire the tools to enter this phase of life with peace, confidence, and joy with your finances.

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