The Money Squeeze in Midlife

If you are in your 40's and 50's, you may be starting to feel some financial pressure. By now, we are fairly set in our careers or businesses and making more than we did say 10 years ago. Yet why do we still feel like we can't get ahead or save appropriately? We have more financial stress than ever before. Financial anxiety and stress can come from a multitude of sources.Aside from the fact that the cost of living has increased annually on the average about 3% the past few years, many additional responsibilities have created a financial burden. Many of us are trying to pay for college, take care of aging parents, save for retirement, pay off debt, all while maintaining our standard of living and sanity. Although I have always been one to stress and worry about money, it is even more paramount now as my son prepares for college and our financial focus has shifted to this expense for the next 8 years.So how do we manage it all?First, determine your priorities at this season in your life. Look at short term and long term goals. Is your priority to be debt free or to pay for your children's college education? Do your ill parents need assistance immediately or can the burden be shared? Would it be beneficial for your parents to move in with you? For me personally, getting our of debt so I am able to assist my children with college costs within a year is my goal. Luckily there is a bucket to help with some of my son's higher education, however he will have to incur a few loans his final year or two. By setting priorities we also instinctively set boundaries so we don't get derailed or bulldozed by other people's agenda.Secondly, make sure you and your spouse are on the same page. Even if one party "handles the books", both parties should know the finances including budget, outstanding debt, any investments and agree on saving and spending habits. It's also a good idea for both parties to know HOW and WHEN to pay the bills in case one is sick, out of town or a tragedy happens. I have personally encountered several widows who didn't have a clue as to their financial state nor how to pay bills and were left feeling helpless. Both parties should be educated and on the same page.Thirdly, develop a system to save for your future. If you have already implemented some type of savings and a retirement fund, then you are doing well. If you are not prepared for the future, it's not too late. Yes, there are additional financial burdens right now but if we get creative and eliminate unnecessary expenses, we can slowly put money aside. Three separate "buckets" or savings accounts should be established. One for "emergencies", one for retirement, one for pleasure/vacation. Emergencies would consist of household appliances breaking down suddenly, unforeseen car repairs or unemployment. Eventually this fund should have enough for 3-6 months of living expenses in case of a job loss plus $1000 for a true emergency. The second bucket would be for retirement into a 401k or IRA. The third bucket would be for vacations. Ideally, you should save at least 10% of your salary every month and split among these three buckets.For example, let's say you make $5000 a month. Ten percent of $5000 is $500 which split into 3 savings buckets equals $166.67 per account. Over time these accounts will start to compound interest and could be invested to produce a higher yield of return.But how do we save when we're in debt and every penny of our income is allocated for current living expenses? I completely understand and have spent the majority of my life living paycheck to paycheck. Be creative with reducing expenses. Pack your lunches daily and cutback on eating out. Eliminate unnecessary memberships such as Netflix or that gym membership you never use or magazine subscriptions, etc. Start using coupons.Be creative in discovering ways to increase your income. For example, sell items around your house that you don't use or love anymore. Pick up an extra job or use your talents to make some extra cash. If you like kids, offer to babysit for cash or are you good at planning events, doing photography? Find small odd jobs or use your expertise for consulting.Don't let the money squeeze of midlife hold you captive. Set your priorities with clear boundaries. Communicate with your spouse on your financial state. Devise a method to save for the future while continually paying down debt. We will make it to our "senior years" better prepared and hopefully stress free.