I’ve already reached the age when mentioning numbers is impolite. But I’d like to share a secret: I couldn’t care less. I’m 52 and I’m proud. More importantly, I’m 52 and I have come to realise that there are some urgent money actions I ought to take if I don’t want to reach the ‘point of lost hope’ in my finances. And so should you if you are in your 50s and 60s.
I know there are a lot of us around. It is time for us baby-boomer to stop being part of a big problem by finding our own solutions. The big problem is mostly about money: pension funds are diminishing, the health care system is getting ready for an influx of poorly old people and our kids are having nightmares about paying for our care when we start needing it.
And even if there are robots to look after us when we reach the winter of our lives, we still need to make sure that we don’t run out of money before we run out of live. This means, taking some inevitable and urgent money actions. And no, these are not the same as the money actions that everybody should take. The rules of money – and the money actions we need to be taking – are very different during the different seasons of our lives. Here are the ten money actions I’ll be taking in the next weeks.
Action One: Take Stock
Sounds very basic but you’d be surprised how many of us have absolutely no idea what their real financial situation is. I know; I was like that myself! To take any action you need to begin by taking stock of your finances. (Don’t be discouraged if your finances look worse than you thought they would. If you know that, you are already ahead of the game.) These are some questions that will help you:
- Do you have consumer debt? How much?
- Do you have a mortgage? How much?
- How much is your house worth?
- Do you have savings? How much?
- Do you have investments? How much?
- How much is in your pension pot? How much annuity this will give you?
- How much is your cash flow?
When taking stock, you have to be very precise; after all, the answer to these questions is a number.
Action Two: Pay off Your Debt
Yes, you heard this one right: pay off your debt. When you are in your 50s you can no longer afford to have – or to build – consumer debt because this steals from your future retirement by increasing your monthly bills and reducing your cash flow. I suspect that my age had a lot to do with the speed with which we paid off our consumer debt. Now we can focus on building wealth for our retirement.
Action Three: Get Rid of Your Mortgage
It is best if you can pay your mortgage off when you are in your 50s. This, however, is not always the case: in the UK, one million home owners are still paying off their mortgages in their seventies. I believe it is important to have no mortgage by your mid to late 50s even if you have to downsize. Remember, in retirement it is important to keep your regular monthly bills low. Getting rid of your mortgage in your mid to late 50s is one way to achieve this. John and I are working on a financial programme where we won’t have mortgage by October, 2018. One option will be to downsize.
Action Four: Save and Invest
Saving and investing is important at any age. The difference is that when you are in your 50s, time and compound interest are not really your friends. One thing that is on your side, is that you are likely to have more spare cash than someone in their 30s. You are likely to earn more (on average) and you also have fewer expenses since your children are likely already independent. Put most of your spare cash in savings and investments. Be aggressive with your savings and cautious with your investments.
Action Five: Give Your Pension a Boost
How you do this will be very different depending on the pension scheme you’ve been investing in. It is still worth looking for other vehicles. I, for example, am looking at starting a SIPP.
Action Six: Take a Look at Your Life insurance
Looking again at your life insurance when you are in your 50s is very important. If you don’t have life insurance, do buy some. Bad stuff can happen and you probably have dependents. There are three exceptions: a) you don’t need to buy life insurance if you are completely on your own; b) you don’t need to worry about life insurance if your pension scheme offers sufficient cover; and c) you are already so wealthy that it doesn’t matter. If you have life cover that you took twenty years ago you should look around again. Yes, you have got older but the insurance industry has become so much more competitive that you are likely to be able to find a better deal.
Action Seven: Develop New Skills
Learning new things and developing new skills is always handy. It also keeps you young, engaged in life and included in different communities. Developing new skills can also help you build side income (or even build a business) and save on services. Win-win all around.
Action Eight: Organise Your Finances
This is the one I’m very concerned about. We have a will but it was made 14 years ago. Even I don’t know where all the documents and deeds are; they are somewhere in the filing cabinet. I just about keep track of the different life insurances I have. John and I have a spreadsheet for our investments; I’m not convinced it is very well kept. And so it continues. Over Christmas we’ll sit down and get it all sorted and neatly filed.
Action Nine: Tell Your Kids About It
This is rather obvious: once we put some order in out financial documentation and records, we’ll need to tell our sons. I know how important this is from experience. My Dad was a wonderful man but keeping track of his property and documentation was not one of his strengths. So when he passed, we spent two weeks sorting through stuff. At the end, I ended up getting duplicates for some of the property, which was a bother. I don’t want our sons to be in this position one day. Thinking about it, I don’t want John to have to do this if something happens to me.
Action Ten: Do All on Your Bucket List
Yep! When you are in your 50s, regret starts creeping in. You wake up in the night and think ‘why didn’t I do that?’; or ‘I wish I could do this’. I really don’t intend to make these regrets and supressed desires my constant companions. I’ll write them down. I’ll rank them in order of how much I really want them. I’ll select the top five. I’ll do them with the abandon of a 52 years old woman.
Finally…
I believe that these are ten urgent money actions that anyone in their 50 should take. These minimise expenses, optimise retirement income and maximise the joy of life. I’ve already done – or am doing – many of these and intend to get on with actions one (this is an action one needs to do regularly) and eight.
This list is so important and honest. Each age we “fear” comes sooner than one would expect. I remember being 17 years old and going to college on my own. Now, I’m NOT 17 anymore! I’ve decided to be pretty audacious about my financial situation. Why be audacious? Because that’s when the magic happens.
@Michelle: Thanks, Michelle. I’m glad you decided to be audacious – you know that this is the spirit here on The Money Principle. I’ll never stop (I hope).
Great checklist Maria and I completely agree.
Its incredible that a million people in their seventies are still paying off their mortgages.
Getting your finances and succession planning is also very important (for people of all ages) and again is all too often overlooked.
@Moneystepper: Hey, glad you think the list is okay. I was also rather shocked that this is the case – I hope not to have to pay mortgage much earlier than my 70s. As to your last point, I rememeber a friend of mine telling me that one of her friends grew up very poor because her dad died in a car crash and had no life insurance. So, this girl’s mum was left to look after three kids with no help from anywhere. It always seemed to me this is irresponsible. Just like it is irresponsible to leave your investments and property in such a mess than your kids will spend months and years figuring it out.
These steps are great advice and I’d also add that anyone in their 40’s should be looking at these as well. 😉 The mortgage one is tough, though. I’m thinking we’ll have a mortgage into our 60’s even with downsizing.
@Little House: You are probably right – people in their 40s should do these as well. It is just that when you are in you 50s there is more sense of urgency.
That’s why I like Quicken so much, it lets me know exactly what my financial position is. I’m 52 also Maria and loving life!
@Paul: Yep for the early 50s :).