by It’s easy to make fun of a midlife crisis, especially if it’s someone else’s.
The stereotype, as portrayed in movies and on television, is familiar: a middle-aged man collapses on his 40th birthday and abandons his wife for a younger woman and a sports car. Or maybe just the car.
However, in real life, a midlife crisis is rarely so obvious or dramatic, or is the sole province of men. Milestones like turning 40 or 50, or becoming an empty nest, can cause uncertainty about your life and future. And this uncertainty can influence the way you spend.
“Feelings drive behaviors,” he said. Nathan Astle, financial therapist in Kansas City, Missouri. If he feels dissatisfied with his life, he may buy a new wardrobe or spend on cosmetic procedures. Or if you’re looking for excitement, you can splurge on big-ticket items like travel or expensive wine.
Of course, there’s nothing wrong with treating yourself occasionally, especially when you consider the expense. The problem is that a midlife crisis can occur just as retirement becomes more real. So if you’re going to treat yourself, you should also make sure your retirement savings and investments are on track, experts say.
When it comes to investing, time is more important than timing, he said Ashley Agnew, a financial therapist. In other words, saving for retirement early in life is more important than entering the market when stock prices are low and exiting when they are high.
For example, with a 6 percent return, an investment of $5,000 each year (for 40 years) will grow to more than $800,000 by the time you are 65, Agnew said. But if you invest the same amount of money for 30 years, you will have $400,000.
As the path to retirement gets shorter, there is less time to save. “Short-term thinking can have a long-term impact,” Agnew said.
Marti Awad, a Denver financial advisor, said signs that a midlife crisis might be in full swing include withdrawing money from your 401(k) or individual retirement account, or borrowing against your home for purchases that They are wants, not needs. Racking up credit card debt or hiding purchases from loved ones are also warning signs.
But because shopping often improves mood (even if temporarily), spending is not seen as a problem, but instead mistaken for a solution, Astle said. That’s why it’s important to make a plan before a problem arises. To prevent a midlife crisis from impacting your financial goals, consider these safeguards.
Be careful with changing lifestyle
If you’re lucky enough to have consistent employment over the years, earnings generally increase with age and experience.
TO survey 2022 A study by the U.S. Census Bureau found that the median household income for people ages 45 to 54 was $101,500 a year, compared to $80,240 for people ages 25 to 34.
“Usually, people enter their highest-earning years between ages 40 and 50,” said Paco de León, author of the book “Finances for the People.” With a higher income, you may be able to afford more expensive restaurants, more luxurious vacations, or a larger home.
However, buying these things can trigger a phenomenon called lifestyle change, which occurs when your expenses increase with your income.
“It’s a slippery slope,” Ms. de León said. For example, if you make $80,000 a year and her salary increases by 3 percent, some extra expenses like dinners and weekend getaways (not to mention inflation) can quickly eat up your extra money.
Even a one-time splurge can be precarious, De León warned. If you buy designer shoes, for example, you may decide that your wardrobe looks drab. Or if you order a hand-woven rug, your Ikea furniture may look dated. This mindset can make previous luxuries seem like necessities, causing you to spend more.
To avoid lifestyle changes, try setting financial boundaries. For example, if your salary increases, invest the additional income in your retirement account. If that’s not possible, try following general financial advice, which is to put 20 percent of your raise into savings. And if you receive an annual bonus, spend a small amount and invest the rest, Ms. de León advised.
Trick your brain: use a ‘shopping list’
A midlife crisis can trigger a “here and now” mentality about money, Agnew said. And this can make you more vulnerable to impulsive spending.
To avoid this, De León recommends creating what she calls a shopping list. Write as much as you want and imagine buying the items, she said.
Like browsing social media or drinking alcohol, shopping provides a dopamine rush. The shopping list, however, can “trick your brain” into thinking you’ve spent the money, she said, offering the same reward.
If two weeks go by and you still want the item, think about the disadvantages before doing anything. Ms. de León suggests answering this question: “Will this put me in a more financially fragile position?”
Just as eating too much doesn’t cause weight gain right away, spending a little more may not hit your bank account right away, but it’s important to calculate the long-term cost.
For example, parting with an extra $50 each week turns into $200 at the end of the month. If you’re a decade away from retirement and you keep up that pace, you’ll have spent $24,000 by the time you retire.
As we age, unexpected expenses can increase. Health care costs can increase and caring for sick family members can lead to greater financial burdens. When saving for retirement, don’t forget to take these potential costs into account, Ms. de León said.
‘Stress test’ your bank account
If you’re considering a big expense, like a dream vacation on a milestone birthday, Ms. Awad suggests reviewing your retirement plan first. Financial planners have software that can run a “stress test” to analyze the effect of the purchase, she said.
A stress test analyzes different performance scenarios, revealing the risk inherent in your financial decisions, Awad said. Looking at the range of potential returns can help you determine if your savings can withstand the expense.
Find support
Financial setbacks can be embarrassing, which may prevent you from taking action. “Shame is the enemy of change,” Astle said. Therefore, if he has spent too much, he is not afraid to ask for help.
For example, if stress fueled your splurge, a financial therapist could teach you healthier ways to manage your emotions. Being able to name your feelings can help you respond differently, she said.
If withdrawing money from your 401(k) is harming your financial health, meeting with a fee-based financial planner could help you get back on track. And if you’ve racked up credit card debt, a professional can create a plan to help you pay it off. If you need free or low-cost credit counseling or budget management, there are resources on the Financial Counseling Association of America and the National Foundation for Credit Counseling; The foundation offers free courses.
Even if your savings have taken a hit, the results of financial mistakes are rarely set in stone. “Taking small steps to correct mistakes goes a long way,” Astle said.
