At a time when household income is generally rising as individuals enter their prime professional years, the demands on that income can often make 40 or 50 year-olds feel more strapped and stressed than when they were just starting out. Whether it’s because of children (with college expenses or because they’ve come back to the nest after graduating), parents (needing care or other financial assistance) or your own needs demanding attention, something seems to always swallow up the extra cash.  

So what can be done to ease the “middle-aged financial squeeze?” Here are a few recommendations to alleviate the pinch.

PLAN, and plan holistically
It’s human nature to deal with things one at a time and as they come.  In other words, we cope with the present and thereby risk shortchanging the future. Your daughter’s wedding is next year, while retirement is still two to three decades in the offing.  How likely is it that you, as a 50+ year-old, will opt to make a catch up contribution to your 401(k) rather than adding just a few more family and friends to the guest list?

The financial planning process helps us become aware of these consequences by putting the future on the table right next to the present.  It allows us to see the “opportunity costs” of each financial decision we make.  For this reason, it’s particularly important that mid-lifers take a holistic approach in their planning process. Rather than doing “spot” planning, which takes one objective, such as education planning or retirement, to determine what funding may be needed, a comprehensive plan will take into account all of an individual’s or family’s goals.

PRIORITIZE
One of the first and most important steps of financial planning is to identify these goals, and to determine which are more important.  When shortfalls are identified in the financial plan, these priorities help determine where trade-offs may be necessary. When it becomes apparent in the plan’s projections that the goal of paying full freight for a child’s education entails a significantly reduced standard of living in retirement, it may become easier to modify the college funding goal to consider a greater role for student loan financing, or to investigate less expensive colleges.

PREPARE
Our life goals can put the financial squeeze on in middle-age, but an unexpected crisis can wipe us out.  Addressing the potential financial costs of these sudden or catastrophic events – an early death, property loss, liability claim, need for ongoing care, or even a major meltdown in the market – is a fundamental part of a comprehensive financial plan. Getting the proper insurance coverages and employing prudent risk management techniques should, in fact, be one of a mid-lifers’ first and non-negotiable priorities. Without these steps, all other life goals may become just wishful thinking.