Financial advice for Empty Nesters – 10 important questions to ask yourself

 

10 financial questionsThe following 10 questions have been compiled as a result of having to evaluate these issues myself.  You can ask yourself these questions to help you make some critical decisions when your children have left the nest.  Your answers may be revealing.

It is the start of a whole new chapter in your life. You have spent many years working to educate and care for your children as well as to maintain your home. Now that your children are grown, it is the ideal time to make some changes. If you want to have a successful discussion with your financial adviser, you really need to prepare a little ahead of time and decide what you want to address. Issues such as retirement savings, reducing debt, and downsizing are central to any financial advice for empty nesters.

    1. Do you splurge once in a while or has it become a habit?
      When carrying all the expenses that go together with raising children comes to an end, it is cause for celebration. No wonder many parents feel like spoiling themselves for a change. After all, there may be a limited period you can do this before your life changes again – your elderly parents start needing care, grandchildren arrive, etc. etc. There is nothing wrong with a once-off splurge but if you continue splurging on travel, new cars and redecorating your house, you may find that you are unable to retain your current standard of living when you stop working.  Becoming an empty nester is a significant transition and strong emotions can surface. If your emotional state is fueling your spending, you need to realize this and find other ways to deal with your emotions. One husband admitted that he was spending lavishly on his wife in an attempt to re-awaken romantic feelings between them now that the children had left. A single mother owned up to going on shopping sprees to avoid sitting at home alone. You usually have more discretionary cash and free time and this may tempt you to splash out more on eating in restaurants, going to theater, traveling etc. However, when you cut out all your little indulgences, you are setting yourself up for failure.  It is better to make provision for them in your budget.
    2. Have you created a new budget?
      Now that the kids have left home, your budget will change. In the beginning, keeping a personal finance journal will help you get a handle on your daily expenses. You cannot create your new budget with guesswork. Tracking your expenses for a month gives you a much clearer idea of how you are spending your money. At this point you can set up a written budget. Perhaps you already have Microsoft Excel and there are many free budget templates you can use.  Mint is a popular internet and smartphone-based budgeting tool that will do all the work for you if you input your information. It helps you to keep track of your spending patterns, investments and more. All your financial information is gathered in one place so you see the whole picture in a way that’s easy to understand.
    3. Are you reducing your debt?
      Reducing debt should be one of your most important goals at this stage of your life. Creating more debt at this point is extremely unwise. As you pay off debt, you reduce your monthly expenses. You may need the help of a financial adviser or receive debt counseling if you are sitting with significant debt. Click Here For Your Free No Obligation Tax Debt Relief Consultation. Otherwise, the best place to start when you are attempting to reduce debt is to begin with those attracting higher interest – such as credit cards. It is far better to be in a situation where you are earning interest on investments than paying high interest on debts.
    4. Are you saving for retirement?
      Be realistic with yourself about how much money you are going to need for retirement. You can find a retirement calculator online.  retirement calculatorRetirement savings can be depleted very quickly by chronic illness or emergencies. Do you have a way of dealing with these without dipping into retirement savings?
    5. Are you planning on downsizing and when will you do this?
      Selling your large home and moving to a smaller one or even an apartment can considerably reduce costs. The sooner you do this, the more money you save.
    6. What insurances do you have currently and do they need adjusting?
      When your children leave home,  your insurances may need to be adjusted.  For example, your children may now have access to health care through employers and they can be removed from your plan. The money you save could perhaps be used to increase contributions to retirement annuities. You also need to make sure that your will is up to date.
    7. Are your savings automated?
      If you don’t even have to think about it and savings are automatically allocated every month, you have less opportunity to waste the money. You don’t sit with a larger balance in your account than you normally see and feel tempted to spend it.
    8. Have you thought about reskilling?
      You have more time on your hands now and so you have an opportunity to reskill, particularly if you have been out of the marketplace for years while you kids were growing up. There are so many online courses available today that reskilling is not a problem. You may find that you thoroughly enjoy the stimulation. It will also give you the tools you need to continue to earn money for as long as you are able, even well into retirement years. You may even find yourself establishing a whole new career.
    9. What about creating a passive income stream?
      Many people save blindly for retirement but give no thought to how to have an ongoing income stream once they retire. Traditional investments do offer passive income in the form of dividends but there are many other ways to generate passive income. Many empty nesters and retirees are making online income with affiliate marketing. They may initially work harder than ever, but they manage to develop various ongoing income streams. Robert Kiyosaki of Rich Dad, Poor Dad fame believes that you can only call yourself wealthy once your passive income exceeds your monthly expenses.
    10. Are you still supporting your adult children?
      Empty Nesters are often tempted to help their adult children financially. There is absolutely nothing wrong with helping them unless you are enabling them to avoid responsibility. If this is the case, you are not only preventing them from becoming independent but you affecting your own financial future.  You need to be thinking about minimizing your own debt and saving for retirement.

In ConclusionEmpty Nesters Financial Handbook
For more specific advice, you will need to consult a Financial Adviser.  Once you have carefully selected the right person, you will be able to get the necessary advice. However, it is never wise to trust someone else entirely when it comes to your finances. You need to know as much as possible yourself to ask the right questions. Find someone who doesn’t mind answering even the simplest questions and ask away until you are completely satisfied with the answers.   The Empty Nesters Personal Handbook  is a book giving Empty Nesters some smart money advice and it will also help you to ask the right questions. You owe it to your children to plan financially for your future – you don’t want to have to end up relying on them in your latter years!

5 Comments

  1. wesley

    This post is close to my heart. I left my job in my mid fifties after all the stress and long hours working for someone. I thought with my experience, I could find another better job but I was wrong. Reason – my age. I now lived on my savings and cut down on my spending. I think we should do our financial planning at different phase of our life.

    Reply
    1. Erica (Post author)

      Hi Wesley,
      Thanks for your comment. So many people find themselves in the same position as you. A little financial planning at an earlier stage can really help.

      Reply
  2. Linda

    You have compiled a very comprehensive list of considerations and solid advice for empty nesters. I can point to at least three items on this list that worked in tandem for me and allowed me to retire early. Reducing or eliminating debt is huge. Downsizing can play a big role in this. Mortgages can often be significantly reduced or eliminated. A smaller home is less expensive to own and maintain. Cash can be freed up to first buy down all debt and then increase retirement savings. Not spending the extra cash is key. We really don’t need most of the things we think we need 🙂

    Reply
  3. Linda

    You have compiled a very comprehensive list of considerations and solid advice for empty nesters. I can point to at least three items on this list that worked in tandem for me and allowed me to retire early. Reducing or eliminating debt is huge. Downsizing can play a big role in this. Mortgages can often be significantly reduced or eliminated. A smaller home is less expensive to own and maintain. Cash can be freed up to first buy down all debt and then increase retirement savings. Not spending the extra cash is key. We really don’t need most of the things we think we need 🙂

    Reply
    1. Erica (Post author)

      Thanks for commenting, Linda. Yes, reducing or eliminating debt is key and downsizing can really help. I am glad that your personal experience confirms what I have suggested. I totally agree that we don’t need as much as we think we need!

      Reply

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