Changing Financial Priorities As We Get Older

When I speak to friends of my age group (hint: we’re not in our 20’s), one consistent theme that comes up often is that we tend to be more realistic rather than idealistic in our approach to finance and life in general. Financial attitudes and priorities changes as well. Here are a few examples :

Attitude Towards Investing

1. How we invest our money – as we older, we tend to be more conservative. No longer are we “aggressive growth investors” because we have been through the Asian crisis in 1997, the Russian Debt Default in 1998, the Internet and Tech Bubble of the late 90s and the subsequent burst in 2000, 2001 and 2002. 90% invested only in domestic equities makes your temperament go yo yo like a diet on sugar!. When we are in our 20’s, we think we are smarter than “professionals” because Peter Lynch told us so. We though “low cost index funds” were the best because Suze Orman said so! That was until we realized that the “market index can be overvalued!” and that outperforming the index when it is down 40% in the early 2000s makes the term “outperformance” meaningless!. As we get older, we are more inclined to hire a wealth manager and pay a reasonable fee to managers who have done well in a market down cycle. We tend not to demand massive performance, but are more content to have consistent modest performance.

Kids College Education is Nearer Around the Corner

Another common conversation topic is our kids’ education. While we read about saving for retirement and kids college education in mainstream media, it doesn’t actually hit you until your kids goes to middle school! And you realize that your kid is actually “very smart” but does not excel in any sport! How do you fund his future college expenses? Current cashflow or sacrifice now and sock away a chunk of money every month? Tough question, but certainly a common party and dinner topic as the clock ticks away.

Start thinking whether the $30,000 kitchen renovation makes sense?

Do you remember the time when you first bought your first home. Inevitebly, things go wrong in the house and you have to spend money to fix things. After a while, it becomes more of you wanting to enhance the value of your house and the “quality of your life” by upgrading certain things – a new bathroom, a new kitchen etc. You probably took a home equity line of credit and anticipate that your renovations will “add value” to your house.

As you get older, especially when retirement is not far away, things like renovating your house takes a back seat. Think about it : If you are 50 and plan to retire at 60, splashing that $30,000 on a new kitchen is a different decision than when you are 32 and earning the big bucks.

Starting your own business

Another familiar topic among my friends is that many want to leave the corporate world and start their own business. Many approach this differently. Some still keep their corporate jobs while still pursuing other avenues. I have met a couple of people who are doing this. I recently met a lawyer who is doing network marketing at the side. Yet, I know others who have quit their corporate jobs to start their own business. Or in the case of a couple, one quits while the other still has a job.

Whatever the route may be, saving and financial planning for a mid career change has seldom been mentioned in the press. What if you know you want to start a business a few years later, do you save for the start up cost now or try to get investor funding.

I find that most people actually do not plan (at least financially for this possibility or event). I honestly think that not only is financial planning important, but planning to be an enterpreneur is also very important. The mindset, the ability to delegate, marketing skills and general business skills are certainly not skills you will necessarily develop in your present corporate job.

More Open Minded to Getting Long Term Care Insurance

Let’s face it. When we are in our 20s or 30s, we would hardly ever think of long term care insurance. We would simply brush aside any attempts by insurance agents to sell us that product.

It is only until we have parents who have to be admitted to nursing care and we have to help financially that it suddenly dawns on us that long term care insurance (or at least planning for any potential nursing care situations) is important. But for those of us who either have been or have friends in this situation, you will know that sending your parent into a nursing home may not be the ideal solution. They may be drugged too often. You may want them at home with your other parent. But all these cost money (which is sometimes not covered by insurance). You will also realize that simply getting long term care insurance is not the end all or be all. It is only when you have a parent in need of long term care or if you know someone in this situation that you realize how important planning for such events are.

Change from Reward Credit Cards to Cash Back Credit Cards

Another phenomenom is that I find my friends looking to get rid of their reward credit cards and get a cash back credit card instead. Many of my friends have cards like the American Express Gold Card that was useful early in their careers when they were travelling a lot. But I guess after a while, travelling takes a back seat and family and kids come first. Paying $150 in annual fee for the gold card while not using the air miles just does not makes sense anymore. When my friends find out that I review credit cards, they often ask my suggestions as to what card to get. I often point them to the Blue Cash. Many are surprised that they can earn 5% rebates on gas and supermarkets.

Can’t be bothered with 0% Balance Transfer Arbitrage

I honestly cannot think of anyone I know in their late 30s, 40s or 50s who “play the 0% BT game”. The one where you borrow 0% from the credit card through their teaser deals and putting them in an online account like ING or HSBC and earn a higher interest rate. Lots have been written in personal finance blogs (including me) about this topic and how to do it. I have friends who have done this in their younger days. But let’s face it, going through the hassle just to make a couple of hundred bucks is not as appealing as simply getting a cash back credit card! I think this is certainly a young person’s game. As you get older, you are too busy to try things like that.

Anything Else?

These are my observations on how priorities change as one gets older. Do you have anything to add. I would appreciate your comments.