It’s easy to think that financial confidence would increase over time — after all, the older you are, the more you earn. But the opposite seems to be true: Recent studies suggest that financial stress, but not self-confidence, increases with age, peaking in midlife and then improving until your 60s.
This financial stress may be at the root of your midlife crisis.
The U-curve between financial confidence and happiness
When we look at financial confidence across generations, we see a U-shaped curve. Confidence and happiness are highest in the earliest and later stages of life and lowest in the middle stages. In fact, financial confidence is lowest in people in their 40s and 50s. (Learn more about the happiest ages here.)
It’s not immediately understandable why people in their 40s and 50s feel depressed — most of us have families, make money, and own homes — but it may be these very obligations that are causing us stress.
Research has found that your confidence in your financial situation is directly related to the number of obligations you have at any given time in your life, which typically peaks in midlife, when mortgages, marriage, kids, education, aging parents, healthcare, and more all compete for your time and money.
Given these costs, it’s no wonder that workers ages 45-54 are struggling financially and are the least confident about their retirement finances.
This financial stress can easily lead to a midlife crisis, as stated in an article in The Atlantic.The real cause of midlife crises. “
8 ways to achieve happiness and financial confidence in midlife
So midlife crises are real, and they may be caused by financial deprivation.
Here are eight things you can do to overcome financial stress.
1. Create a financial plan
I want to:
- Do you feel more confident in your financial decisions?
- Want to save more money?
- Make more progress towards your financial goals?
Make a financial plan! Not knowing creates stress.
researcher It has been shown that people who have a financial plan feel more confident and have better financial results.
“When you’re worried about money, you have to really sit down and look at your financial situation and make a plan. It’s tempting to put the problem off, but there are things you can do to make big improvements in the end,” says John Schierman, a financial advisor with IV Lions, LLC, a Sausalito, California-based firm that serves clients primarily in the San Francisco Bay area.
NewRetirement Retirement Planner makes it easy to create your own plan. Organize your plans and know where you stand. Find ways to make the most of your time, savings, taxes, income, insurance and more.
2. Calculate how much you need to save
As you reach middle age, retirement approaches and while you’re looking forward to it, you may also be worried about whether you have saved enough.
It’s completely normal to worry, but there are ways to counteract that anxiety and calm your mind.
Some say you should have saved about 1.4 times your annual salary by age 35, 2.4 times by age 40, and 3.7 times by age 45. By age 50, you should have saved 5.2 times your annual salary.
However, these are just guidelines that may or may not apply to you, and the only way to know with confidence how much you actually need to save is to create a detailed retirement plan.
3. Prioritize savings over other obligations
Yes, midlife can be stressful, with countless ways to spend money.
Worrying alone won’t relieve stress, you need to prioritize.
And most financial planners suggest prioritizing retirement savings.
- They have loans for college, but not for retirement.
- Weddings and vacations last only a day or a few weeks, and retirements often take 30 years or more.
- Paying off debt is important, but it’s not as important as accumulating retirement assets.
“You’re racing toward the finish line of retirement,” says Shearman, “so you need to do everything in your power to save as much as you can before you turn 50.”
4. Increase your savings when your kids leave home or pay off debt
Although your financial obligations are at their largest right now, that’s good news for the future: you will soon be relieved of financial pressure. Just think of the improved cash flow you will have once your children are financially independent and your debts are paid off.
However, instead of improving your lifestyle once you have met your financial obligations, increase your savings rate.
Learn more about how to save more when your kids become independent.
5. Choose to thrive in midlife
The beginning is exciting. The end is the goal. What about the middle? No one waxes poetic about the middle.
The mid-term is when all the work gets done – it’s also when life really happens – so it’s especially important that you choose to make the most of this time and thrive.
Explore eight ideas for navigating ambiguous in-between and transition periods.
6. Become friends with your future self
the study This suggests that our brains naturally process our future selves as other people. And let’s be honest, we’re probably not going to save for retirement or take care of someone else’s body. It turns out that visualizing and “getting to know” your future self makes you more likely to take action now to care for your future self.
Whether you’re 40 and hoping to retire in 30 years, or you’re 67 and hoping to have enough money to last you the rest of your life, here are seven ways to visualize your future so you can create and achieve a truly effective plan.
7. Try a sabbatical or mini-retirement
If you think retiring at 50 is impossible, think again.
Of course, you may not be able to quit your job forever, but you might be able to “try out” retirement to see what it’s like.
More and more people are taking a mini-retirement, a month or a year off work. Some retirees choose to spend time with their families, pursue hobbies, or even explore a different form of work or a second career.
Learn more about sabbaticals and mini-retirements.
8. Avoid cheating and expensive sports cars
Look, if you’re already feeling financial stress, I have some news for you: The cliché midlife crisis clichés of sports cars and divorce are sure to make things worse.