Having raised kids and bleeding out cash for food, school tuition, clothes, and child care, over decades is pretty normal for most parents, but what happens when the kids move out and then they get awfully busy with their own lives. What are now the empty nester’s goals? With the kids on their own, it is time to focus on themselves, get their savings back on track and secure their financial future, as most senior citizens wisely do. It is a game of catching up for most elderly people and they must decide what to do for the remainder of their lives.
Bringing up kids causes most American families to fall short on retirement savings, as the cost of bringing up a child today, is almost $234,000 for an average American middle-income family, excluding college outlays, as per studies by the U.S. Department of Agriculture. Finances take a major hit when people are hit by lay-offs in a poor economy. The strain on family’s finances can be severe, causing savings depletion, tapping into their 401(k) for cash and paying minimum balances on credit cards. The retirement plan balance slides from first having a large account to having a small one very fast.
Any financial improvement strategy includes a long rehab list. The list topper is restarting a plan to save and reducing insurance premiums besides taking measures to rebuild credit and also rebuild a career. Going back to class to learn about computers and honing new skills could be a fresh start. The challenge that most empty nesters face is getting the monetary part of their life back to a healthy level once all the children check out of home and monthly expenses fall, say financial experts.
First things first: Reboot your financial planning
To speed up the rebooted financial plan process, empty nesters must create a new financial plan to replenish savings, invigorate their retirement funds, boost credit scores, rethink real estate requirements and repay any pending debt. The key to renewal of financial success is re-allocating the available cash in better investments, as soon as possible. This is the ideal time to review your financial life, and ensure directing some resources for yourself. The great news is that your cash flows have increased over a period of time and it requires sustained efforts to maintain the tempo and save more for yourself.
For most folks, the suggested to-do list is a lengthy one when the children love out: tally up the debts, calculate what extra funds accumulate each month-end, review all savings and retirement accounts and reassess your insurance and housing needs. Then you initiate action with a very narrow window of time as most parents tend to overspend but under-save when their children live at home. Acting fast is the key. If your exigency account is drained, replenish it with cash to tide you over the next mini-crisis. If your credit card balance is high, reduce it. If your IRA or 401(k) balances are meager, enhance your retirement contributions. If your five-bedroom house seems empty, downsizing is recommended. If your kids have their insurance policies, remove them from yours.
Money matters: Focusing on the future
Empty nesters ought to quickly re-focus on money and shift from living paycheck to paycheck to moving on to a better financial future, say wealth management experts. They need to monitor their money very closely and get the best bang out of each dollar, which they spend. Allocate all saved dollars to buying things that are vital, namely your emergency fund and 401(k). Prepare the kids to be independent without any possibility of any financial lifeline later. Train them in personal finance basics, hammering home fundamentals such as sticking to a budget, living below their means, avoiding credit card debt and saving some money monthly. It’s all about educating them so that they start on the right foot.
Letting Go
Never let your parental instincts force you to take financial decisions that are good for your children but ultimately prove bad for you. There is no reason to feel guilty when you begin to curb funding for your children. As a parent your focus isn’t on getting your kid a new home or car, but to concentrate on your personal financial needs. According to research, people may possibly live till 80 and without financial security the future looks scary. We cherish our financial independence but this has to be carefully planned out.
