How to avoid a financial mid-life crisis?

They may say that the 40s are the new 20s, but in our youth-adulating culture this might just be
another myth. A mid-life crisis is simply the sudden realization of age, responsibilities and most importantly, mortality. It always feels like we have a long way to go until it suddenly doesn’t. And it is normal to panic. Although this thought is normally associated with men, it is true for both men and women alike.

When it comes to the financial aspect of it, there is a realization that you haven’t planned for your retirement enough or the kids’ colleges are costing more than you thought or you haven’t yet got around to buying a property. The catch here is that youth lost can still be restored to some extent, but the damage a 20-year loss of time causes to your money is quite noteworthy.

Nonetheless, it is never too late for damage control. If you think you are nearing one such situation, here are a few ways to avoid it effectively-

Invest here, Invest now!

This can not be stressed on enough. The importance of investing early on in life is best glorified by the effect compound interest has on your money. With top mutual funds providing rates of return upwards of 15% (equity), each day that your money spends uninvested is a lot of pennies lost!

If not started yet, we would urge you to start right away. We, at WealthApp, would be happy to assist you in your financial planning.

Pay off Debts

Home-loans, Car-loans, Credit card spill-over bills etc are simply the power of compounding working on your money negatively. If you often find yourself in a situation where you feel the interest rates are eating up most of your income, you’re not alone. However, the relevant thing to do here is to close all your debts before or within your ‘40s. Your yearly bonuses or a recently matured fund can help you out with this.

The money being paid as interest will find a safer haven in a fund that helps grow it constructively.

Retirement Outlook

It might look like there is a long time for you to retire still, but it hits us hard in the ‘40s that this amount will be our only source of income after all. Realistically speaking, the investment portfolio decided right at the beginning of your career must have a retirement aspect to it. Remember, inflation is working against us in this respect and we need to plan ahead of it.

It will be wise to invest in an equity mutual with an aim to plan for the requirement, rather than a pension scheme that comes with a lock-in and provides you with much lower returns.

A Portfolio Rejig

Perhaps, it is time to re-look at your financial portfolio according to a change in priorities. You might have designed the earlier portfolio more bent towards debt than equity to avoid risk. But you may realize that the lower returns might not meet your requirements in the long run and it’s better to move towards a comparatively higher risk portfolio that provides you with better returns. This will depend on your financial goals and how much money will be needed when. Be it for better returns or better funds, a portfolio rejig is always advisable when you’re approaching middle age.

A financial crisis is something no one looks forward to. Allow us to help you to avoid such a situation. WealthApp’s financial advisory services are designed to make your journey easy with our expertise. Do reach out to us for further information.

 

 

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