Yahoo Finance No Kids? You're Not Off the Hook for Financial Planning
Most financial planning for people in their 30s and 40s follows a fairly standard checklist: Save for retirement. Sock away funds for kids' college tuition. Build an emergency account.
With the U.S. Department of Agriculture projecting that middle-income families will spend $245,340 to raise a child born in 2013 to the age of 18 (not including college costs), planning for such things is key for parents. But if you're one of the many people putting off having kids or opting out altogether, you're not off the hook for being proactive about your finances. In fact, you might have more reason to take an active role in planning your future.
Here are some of the financial steps you should be taking in your 30s and 40s if you're child-free.
Get your debt ducks in a row. If you're not socking away rainy day funds for braces, piano lessons or class trips, use that extra money to eliminate debt. By this time in your life, you should either have paid off your student loans or have their payments under control. This is also the perfect time to re-evaluate the financial plans and goals you created in your twenties (or create them for the first time, if necessary). "A financial plan helps you put in perspective the lifestyle you envision," says Niv Persaud, a certified financial planner and managing director of Transition Planning and Guidance, a boutique financial advising firm. "It's not something you create once and leave it alone, because life changes." She says you'll come back to this plan again and again as the decades pass. "The goals you have in your 30s and 40s, they change as life goes on," she says.
Max out the basics. "When you don't have to work the balance between college savings and retirement saving, you can focus on retirement," says Jean-Luc Bourdon, a certified public accountant and a member of American Institute of Certified Public Accountants' personal financial planning executive committee. "It makes a much cleaner agenda to do what most people know they should do but don't do that well, which is planning for retirement."
Ilyce Glink, a money and real estate expert, advises contributing the maximum to retirement accounts at work and any others you're entitled to, paying off your primary mortgage and then looking into second homes or investment properties.
Revisit what you want to be when you grow up. Without the financial pressures of providing for a family, Bourdon says many people without children have more freedom to make career moves that other people who may put it off until the kids are in college.
"When they're not focused on getting the kids educated and situated, they get to a point sooner where they ask themselves, 'What do I really want to do when I grow up?'" he says. "They're able to get off the work treadmill sooner and make more value-driven career moves for their own benefit rather than meet family obligations."
Such moves might require going back to school, downsizing a home in favor of more travel or taking a lower-paying job, and they should be factored into your financial road map.
"Let's say you're in your 30s and 40s and not planning to have kids," Persaud says. "You can really push the boundaries out of what you want out of life."
See the world. Many people may be plagued by wanderlust but put off travel until family obligations are met, they retire or they wait until what they consider to be the perfect time. But Bourdon says such a time may never come, and he encourages those who are able to travel now.
"Generally people start having the opportunity to do long-term travel when the kids are grown," Bourdon says. But long flights or extensive trips can be physically taxing, and many people in their 50s, 60s or older might not up for it. "A lot of clients plan to do a lot of travel in their retirement years, and then can't because one of the two spouses isn't able," he says.
Make arrangements for long-term care. Planning now for long-term care can help ease a tremendous burden, if you or your spouse has serious health needs, if you never marry, or if you dramatically outlive your partner.
"Some people assume that if they have kids, they will provide for your care, whether that's realistic or not," Bourdon says. "For people without children, saving for long-term care insurance early on will make something that's not very affordable a little bit more affordable."
Prepare your legacy. If the goal of financial planning is not only to determine how you'll spend your money but how you'll spend your life, taking time to envision the legacy you'll leave behind will help inform both. Whether you'll spend your last dime or leave a charitable contribution, make clear arrangements for what you'll want to leave behind.
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