If your children have left home, you might be suffering from empty nest syndrome — or itching to book a trip to Bali to celebrate your newfound freedom. Either way, have you considered how this major change could affect your finances?
Now could be a wonderful time to reassess your financial plan, lifestyle and goals as an empty nester. Life changes once the chicks leave the nest, and shaking things up financially could help put you on the right track for tomorrow.
Adjusting Living Expenses
You may have fewer living expenses now that your children are out of the house. Now is a great time to talk finances. You could make a date with your spouse to go over your household budget and identify areas where you could cut back. For instance, do you really need that pricey cable bundle or video game streaming service? Could you spend less every month on groceries? Are there any other expenses that are no longer necessary now that the kids have left home?
You might also find that you need less space once the kids have moved out. Downsizing to a smaller home could be a better fit for your new lifestyle. This adjustment could help you save more money for your financial goals — and give you back the time you previously spent on things like cleaning and home maintenance.
Factoring in Financial Support
You may be adjusting to an empty nest, but that doesn't necessarily mean that you will stop helping your children financially. Whether they're going away to college or heading straight into the workforce, they may still need your support. And this is an important consideration when adjusting your financial plan.
Have a candid discussion with your children about how much you can comfortably afford to give or loan. Setting boundaries and expectations about financial responsibilities could help teach your children to be self-sufficient. Making your children responsible for things like car payments or living expenses could help them become more independent. And could also help you make some headway on your own financial goals.
Planning for Tomorrow
You might still be thinking about that trip to Bali. Whether you would like to head out on a dream vacation, move to a new city or start ramping up your retirement savings, now could be an important time to set financial goals. How much do you want to save — and when do you want to reach your goals? Answering this question could help you determine how much you may need to sock away every month.
If your employer offers a retirement plan, such as a 401(k) or 403(b), you could think about increasing your contribution now that you have additional funds as an empty nester. You could also consider an individual retirement account (IRA) to help bolster your retirement savings. The 2017 contribution limits for both the Roth and traditional IRA are $5,500 — and if you're 50 or over, there's a catch-up contribution of an additional $1,000 for a maximum annual contribution limit of $6,500.
Now could also be a good time to reassess your insurance needs. Does your current life insurance policy provide enough coverage to support your spouse, children or other loved ones financially if the unexpected happens? Do you have a long-term care insurance policy in place if the need for additional care arises? Do you a have a critical illness insurance policy in place if you ever develop a chronic or long-term illness? These policies could help protect your loved ones from future financial burden and help you prepare for the uncertainties of tomorrow.
It may feel like only yesterday that your children were uttering their first words or heading out for their first day of school and — even after all these years — you still want to provide for them. Establishing a strong financial foundation could help you reach your goals, and, in turn, help you provide for your loved ones long after they've left the nest.