Financial Goals for Mid-Life

As one transitions from early life to mid-life, goals begin to shift. In your twenties you’re probably worried about landing a good job and choosing a career path.  Buying a house and starting a family are also probably on your mind.  You financial goals should be things like getting an emergency fund together, working your way into a reliable used car that will allow you to go several years without a car payment while having reliable transportation, starting an investment account and starting to buy a few stocks or mutual funds, and starting a 401k and an IRA and funding both as much as possible.

By mid-life, defined here as around 40-50, you should have accumulated a fair amount of wealth if you started in your twenties.  You should have somewhere between $100,000 and $250,000 in your retirement savings (401K and IRA).  You should also have maybe $50,000 to $100,000 in your investment accounts.  You should also have $1o0.000-$200,000 built up in equity in your home.  This puts your net worth somewhere between $250,000 and $550,000 (Note that in his book, The Millionaire Mind, Stanley defines individuals who are prodigious savers as those who have a net worth of their income times their age divided by 10.  For someone making $60,000 who is 40 years old, this is at least $240,000.)

The goals for someone in middle age should be the following:

  1. Paying off your home. Hopefully when you bought your home you got a 15 year fixed loan with a payment of less than 25% of your take-home at the time you took out the loan.  You should therefore be close to paying off the loan even if you were only making the standard payments, and your income should have increased to the point where making extra payments should be easy.  With kids going to college, it would be nice to have an extra $1000 per month to put towards books and tuition.  You might even consider buying a home for your children at the college, building up equity in it while they go to school, and the selling it when they graduate.

  2. Shoring up your retirement savings.  If you have not been saving and investing as religiously as you should have been, now is the time to do everything you can to make sure you have enough to carry you through your retirement years.  You will need to have, at a minimum, $100,000 for each $10,000 worth of income you will need to replace.  It would be better to have $200,000 for each $10,000.  Look for overtime, think about selling things or services on the side, and see if there are things you can but in your life to allow you to save more.  There will come a time when you are not able to work, and having enough savings will make all the difference in your quality of life.

  3. Starting to enjoy life more. If you have done a good job of saving and investing, including putting plenty away for retirement, you should start to enjoy the fruits of your labor.  You can start to take some of the vacations others around you were taking with credit cards in their twenties, except you can pay cash and not come home to an onerous credit card bill and end up paying two or three times over for the same vacation.  You could look at buying a beach house or a cabin in the woods, putting in a pool or a hot tub, or maybe finishing a basement or an attic to add a game room or a movie room.  This all starts through budgeting, where you allocate some of your investment income each year to supplement your income from working.

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Disclaimer: This blog is not meant to give financial planning or tax advice.  It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA.  All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

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