- You may be older, but you’re probably still approaching money with the beliefs you’ve had from childhood–right or wrong. It’s time to reassess.
- Creating an independence fund can help you achieve your goals.
- Commit to learning more about the various aspects of financial health, so you have a better handle on your finances.
- Plan now for the life you want in your 70s.
Your 50s is a wake-up call that perfection does not exist. When we’re young and have more time, we may aim to make things perfect. But as we grow older, we realize getting things done well is more important than delaying our actions in order to get things perfect.
Even though the perfect partner, diet or cream may not exist, there are some smart moves that you can do today with your money that can increase the chances of living an almost perfect, financially healthy life.
Investing in your financial well being in your 50s is key because not doing so will cause you stress and steal time from your quality of life in later years. And making mistakes at this stage in your life can cost you irreversible money losses that you wished you knew before. But don’t worry we got you. Read on to increase the chances of living the financial life you deserve. You’ll learn from examples of situations my clients have been in (I’ve changed their names).
Boost your financial confidence
Claudia was a doctor for an important company and even though she had an elevated IQ, she could not figure out why her high paycheck was never enough—even at the age of 50, she was living paycheck to paycheck.
It's because most of us don’t realize that emotions are the biggest drivers when making money decisions, which is what was happening with Claudia in terms of her spending. The anxiety and negative outlook she had on life translated to poor financial habits. Emotions that were formed in our early years of life need to be taken care of first to feel financially secure.
Start by asking yourself about your money history and the limiting beliefs that were taught when you were growing up. Maybe your parents told you that money is hard to make or that having a business is too risky—those values can stop you from trying to get to a healthier place financially. These may or not be correct; that is the reason you need to explore what they are now and make changes. To learn faster, commit to taking classes or reading about the latest investing trends, digital financial technology and basic behavioral finance.
These will boost your confidence to make better financial decisions. Also consider taking this quiz from FINRA to evaluate your financial literacy score.
Grow your independence fund
Paul never remarried after his wife passed away and did not want to be a burden for his family in his later years. He wanted to make sure any emergency, sudden change or financial need he had, he could take care of himself.
Paul knows that we are living longer and feeling “spiritually” younger but years don’t lie so we must be prepared. It is advisable to have more than an emergency fund; you need an independence fund, one that will avoid depending solely on the government, family or others for financial support.
It is hard to think about it, but planning for it 20 years out will pay dividends for when you need it. Some ideas are, evaluating long term insurance, getting an annuity with the monthly inflation protected amount to cover expenses, buying an investment property with a rental income that allows you to live for several months without income.
Get more specific about destination 70
Jan always dreamed of living close to her family, but work took her far from home for the first 25 years of her career. However, she planned that in her 50s, she would move states to be closer to her family so she can enjoy the younger and older members.
She achieved this in her 50s and is currently in the process of upgrading/adapting her dream house for destination 70. Her new place is close to everything she needs: hospital, supermarket, and theaters that she loves.
Like Jan, this is the time to decide where you want to live and start making those money moves, either buy the land to start building, accelerate your existing mortgage payments to have no payment at 70 or increase your savings fund to buy a property in that dream place you want and rent it out for now. Try to create a future cash flow with destination 70 in mind.
When you are deciding on a place to live, check the place’s proximity to a hospital, supermarket and the airport. Look up what the average cost per household is, and whether there are community activities you like, as well as public transportation. Once you have identified the state or country that has those, go and do an inspection trip before you buy anything, then put together a budget as if you were living there. This exercise should not only help you estimate your costs but also evaluate if buying or renting is an option for you.
Work on healthy money habits
Financial well-being is my mission because it focuses on quantitative and qualitative aspects of life improvement, but it also takes commitment and discipline to achieve. In my experience those that take a financial well-being course or program increase their quality of life, health, relationships and work by just shifting money habits.
The most important habit is to develop a healthy relationship with your budget/spending plan. When doing so, be realistic, optimistic and pessimistic to increase the odds of hitting your target. What I mean by being realistic is planning according to your current income; optimistic means thinking about how you can increase your income (by at least as much as inflation); and pessimistic means thinking about how you will adjust if you don’t hit your target or lose income.
The second most important habit is to make savings automatic. Split your paycheck/income into checking and savings, max out your 401k/IRA (it’s a good place to put any bonuses you may get from work), and pay your credit cards and bills before they are due.
Also, create a financial calendar for important periodical financial updates, such as for checking your investment allocation, your cash flow, your balance sheet, your estate planning, etc.
Partner with an ethical expert
Consider hiring a certified financial planner to help save you time and narrow your margin of error when making financial decisions. You can find one at CFP.net. The engagement is flexible—it can be for an hour, a plan or to advise you over your investments.
There are over 30,000 CFP professionals that you can work with. This is the time, dear reader, to make powerful money moves that will reap rewards while you are relaxing and enjoying the breeze in your 70s. Take care of yourself first and invest in you.