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Mastering the Midlife Crisis: How to Protect Your Retirement Savings

FinanceMastering the Midlife Crisis: How to Protect Your Retirement Savings
The midlife crisis is a phase of life we often associate with a time of personal turmoil, but it’s rarely as dramatic or obvious as portrayed in movies or TV shows. It may be triggered by significant milestones like turning 40 or 50, or as children leave the nest, leading to feelings of uncertainty and prompting changes in spending habits. Nathan Astle, a financial therapist, emphasizes the influence of feelings on behaviors during this period, which may lead to impulsive or excessive spending. However, it’s crucial to ensure that your retirement savings and investments are not jeopardized during this phase. ###

Beware of lifestyle creep

As individuals progress in their careers, their income typically increases with age and experience. This financial stability often leads to the temptation of indulging in a more lavish lifestyle, a phenomenon known as lifestyle creep. Paco de Leon, author of “Finance for the People,” warns about the slippery slope of continuously elevating expenses in alignment with increased income. Setting financial boundaries and redirecting additional income, such as a raise or bonus, towards retirement savings can help counter lifestyle creep and secure your financial future. ###

Trick your brain: Use a ‘buy list’

The midlife crisis may manifest a “here and now” mentality towards money, making individuals more susceptible to impulsive purchases. Creating a buy list and imagining the items on it can trick the brain into experiencing the pleasure of spending without actually making the purchase. This tactic allows individuals to reconsider their spending decisions and evaluate whether the desired purchases are essential or could potentially jeopardize their financial security in the long run.
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‘Stress test’ your bank account

Before making major expenses, such as a milestone birthday vacation, consider stress testing your retirement plan with the assistance of financial planners. Stress testing uses different return scenarios to analyze the impact of a significant purchase on your retirement savings. Understanding the inherent risks associated with different financial choices can provide clarity and confidence when making big-ticket purchases during the midlife crisis phase. ###

Find support

Seeking professional help is crucial if the midlife crisis leads to financial mishaps. Overindulgence or impulsive spending patterns can be addressed with the guidance of a financial therapist, while a fee-only financial planner can offer assistance in regaining financial stability after withdrawing from retirement accounts or accruing substantial credit card debt. Overcoming the shame associated with financial mistakes is vital, and taking small steps to rectify financial missteps can make a significant difference in securing your retirement savings. In conclusion, navigating the midlife crisis while safeguarding your retirement savings requires mindfulness, discipline, and seeking professional support when needed. By implementing strategies to counter lifestyle creep, resisting impulsive spending through the use of a buy list, stress testing major expenses, and seeking financial guidance, individuals can fortify their financial security during this potentially tumultuous phase of life. Remember, your financial well-being should remain a top priority even as you navigate the emotional complexities of midlife.
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