Do you keep contemplating long hours sitting at your desk, crunching your brows between your thumb and index finger? Do you feel like life has thrown you far from the goals you set in the past? Do you feel like your hard work did not pay you off?
Perhaps everyone reaches a point where they start comparing their present situation with “What could have been if that had been.” A midlife crisis is a period of life when you transition from young age to old age.
This is the period somewhere between 40 and 50 when you start evaluating your achievements, goals, and dreams in the past and present scenario. You start feeling midlife crisis more evidently if you have borne huge losses, you have failed to have the desired cash in your emergency funds, and you have failed to have enough money to deposit a mortgage.
Not all people face these problems. Some people reach the 40s feel in better control of their expenses and financially stronger. However, some eventually find themselves entangled in money problems.
The causes of a midlife crisis include but not limited to overspending, putting off saving goals, poor investment decisions, and not building an emergency cushion. If you have been facing a midlife financial crisis, here is what you need to do:
1. Start from scratch
You will likely have drained all your emergency savings if you are facing a midlife crisis. You cannot go back in time to get what you had lost due to your own mistakes, but you can improve your present circumstances.
Let bygone be bygone, start a new beginning, and create an emergency cushion. If you do not build the one, you will dip into your retirement funds or rack up debt.
Here is what Anna did during her midlife crisis:
“Having spent years in arranging funds for a mortgage deposit, my husband got diagnosed with cancer. Despite having medical benefits, I had to dip into those funds for the treatment of my husband. Of course, I was upset that I had to put off taking on a mortgage, but I was happy that my husband healed. Since I had got to know the crisis could pop up anytime, I started building an emergency cushion. It took me eight months to have a sufficient size.”
2. Cut your coat according to your cloth
Undoubtedly, you cannot continue to live the same lifestyle as before the midlife crisis. Now you will have to take a more in-depth look into your financial condition. You will have to take control of your spending as per your goals.
For instance, if you have to set aside a mortgage deposit or have to settle all your debts, you will have to cut back on discretionary expenses. The more economical you are, the sooner you will reach your goals.
In addition to cutting down on spending, you will have to make a weekly, bi-weekly, or monthly budget to ensure that you are not overspending. This approach can be ideal if you have a worse financial situation.
For instance, suppose you have to take out CCJ loans with direct lenders in the UK, you will have to create a lean budget that will cover only your essential expenses. Otherwise, you will have to borrow money again.
3. Have liquidity
Budgeting and whittling down discretionary expenses may not be enough. The essential concerns that people often face during a crisis is the need for liquidity. You can lose your job or come up with a medical condition out of the blue.
Under such circumstances, you will need money to ensure your day-to-day expenses. Of course, you will dip into your emergency cushion, but that may not be enough. Here comes the role of downsizing.
If savings are running out and you need ready cash, shifting to a smaller house provides enough liquidity. Some people prefer borrowing money as they are more convenient, and you will not have to downsize, but this is not an ideal option if you do not have cash coming in. Instead of solving your problems, this will push you into a debt quagmire.
4. Prioritize your goals
You cannot pursue the same goals you had envisaged before facing a midlife financial crisis. Look over your financial condition and reset your goals. Instead of buying a car, you may need to think about your retirement funds, or you will have to be more careful about saving a deposit to take out a mortgage.
You are not alone who has faced a midlife crisis. You can quickly get out of them if you carefully monitor your financial condition and rest your goals. Do not repeat mistakes that you did in the past because a crisis can come up anytime. If you keep committing those mistakes on and on, it will be more challenging to get out of it.
To get out of the midlife crisis, you will have to reconsider your financial condition and reset goals.