This content is for information and inspiration purposes only. It should not be taken as financial or investment advice. To receive personalised, regulated financial advice please consult us here at Elmfield Financial Planning in Padiham, Burnley, Lancashire.
A “mid-life crisis” is experienced by as many as 20% of UK adults between 40 and 60 years old, often triggered by events like divorce, death in the family and boredom. At its core, it is caused by a change in identity (e.g. maturation of children) and can manifest in excessive spending. As such, a mid-life crisis can have a big impact on your financial plan – possibly threatening your protection and financial stability. In the background, mid-lifers might also start realising that they have now been saving enough for retirement and other key goals. In this article, our Burnley financial advisers offer some thoughts on how to limit the risk of a “financial crisis” in mid-life. We hope this is useful to you and please contact us if you want to discuss your financial plan with an experienced financial planner in Padiham.
Preventing a mid-life financial crisis
If you can take steps to avoid financial problems later in your 40s and 50s, then you will likely thank yourself in the future. One important habit to establish is to save earlier, starting in your 20s and 30s. This helps you view pension contributions as a necessary expense (like paying utility bills), rather than optional, and gives more time for compound interest to grow your wealth. If you start to experience questions of identity in mid-life, therefore, it will help to know that you have already built up some strong savings and made good progress towards your goals.
If possible, consider investing in yourself to minimise the chances of you experiencing a mid-life crisis at all (which might manifest in excessive spending). Addressing internal negative views about ageing, for instance, can help. However, it may not be possible to completely shield from changing family dynamics, deteriorating health, career changes, biological processes and other factors that may lead to a sense of lost identity in later life. Of course, many people now experience a “quarter-life crisis” or similar experience at another age. It is impossible to predict and control the future.
How do I get out of a mid-life financial crisis?
What do you do if you find yourself in financial struggles in mid-life? Here in Padiham, Burnley, our financial planners know that even wealthier households can struggle. Perhaps divorce has cut your wealth in half, you have let debt get out of control or a recent health problem (without insurance to cover the costs) has left you in difficulty. In 2023, the higher cost of living is also reducing people’s spending power. Factors such as these can make it difficult to get out of a mid-life financial crisis. Fortunately, it is not impossible.
One of the best investments you can ever make is in your own physical – and mental – health. This can help you regain a sense of purpose, control and joy in your life. In turn, this can reduce the “symptoms” of a mid-life crisis, such as excessive spending. Yet it is also important to act and not simply wait to be “healed” of identity struggles. A key first step is taking charge of your spending and debt. Creating a realistic monthly budget is important. Building up an emergency fund containing 3-6 months’ worth of living costs is another good short-term goal. Reducing or clearing any costly debt (e.g. unpaid credit cards) will also strengthen your financial position; just take care not to do this too quickly, at the cost of your safety net.
Embrace the opportunity of mid-life
Mid-life is not the only time when you may have to contend with your sense of identity, purpose and belonging. Our Burnley financial planners also know that retirement (pre and post) can raise questions on these matters. By developing your ability to navigate life changes confidently, you can set yourself up for greater resilience in the future. Mid-life is also not too late to start investing and saving towards retirement and other key financial goals.
For instance, perhaps you are in your 40s and have realised that your pension pot is not “big enough” for your future retirement. Here, you might still have 20+ years to address a deficit in your savings and get things back on track. A financial planner can help you review your current financial position – crafting an investment portfolio (and contribution strategy) that gets you on the most efficient course. A professional can also help lay a stronger foundation of financial protection to guard against potential negative scenarios that may undermine your progress – e.g. advising on income protection, critical illness cover, life insurance and/or private medical insurance (PMI). Financial advice can also unearth issues that you may have overlooked, such as a missing will or power of attorney (to protect your estate and your beneficiaries). Overall, the result of working with a financial planner can be a cohesive, holistic financial plan which unites all aspects of your financial life towards your goals.
Invitation
If you are interested in starting a conversation about your own financial plan or investments, then we’d love to hear from you. Please contact us to arrange a free, no-commitment consultation with a member of our team here at Elmfield Financial Planning in Padiham, Burnley, Lancashire.
Reach us via:
T: 01282 772938
E: info@elmfieldfp.co.uk
