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Personal Finance Issues in Mid Life


When I first graduated from college, the key money issue that concerns me was the student loan that has to be paid. But as I approach my late 30s, my financial situation is very different than when it was years ago.

How so? Well, firstly, I have a family. I have to think of college education savings. I have a monthly mortgage payment. Insurance needs becomes an issue once you have a family or a partner. Retirement planning becomes increasingly important. Finally estate planning is now an issue.

How am I juggling all these competing needs? Afterall, saving for college takes away the money you could save for retirement and other insurance needs. How should one approach personal finance when you have these competing needs? This is how I am presently looking at my own finances.

Survivorship Needs and Plan

Let’s face it, the best portfolio in the world will mean nothing if you predecease your family. Do they have enough to maintain their present standard of living? The way I figure this is to look at how much I need in after tax dollars a year for your family to maintain their present standard of living? I then have to figure out the amount you need to pass to your family that will give them an annual cash flow (interest, dividend, whatever you want to call it) that will maintain their present standard of living. Subtract the amount of assets that you will leave (post estate taxes). This shortfall is the amount of insurance you have to purchase.

Other Personal Risk Insurance

As I am the sole bread winner in the family, I had to make sure I have enough disability insurance in case any thing happens to me. Some of my previous company had them, some don’t. Long term care insurance is something I eventually have to look at, but haven’t. I know people who have parents needing long term care. Trust me, it ain’t cheap – a live in nurse can cost up to $10,000 a month! To qualify for medicare requires that you run down your assets, or have them properly structured in a trust. Eventually, I have to take care of this.

Juggling College Savings and Retirement Savings and Paying off my Mortgage

This is the toughest thing that is occupying my mind right now. Firstly, how do you fund and save for your kids’ college education. Use current cash flow? Save now? Enroll in 529 plans? How much do I need to save for my retirement? This is actually not an easy answer because I have different ideas of how my retirement should be and when I want to retire. What I have done is to set a minimum standard on how I want my “worse case scenario” to be and how I want my “ideal scenario” to be. At worst, my plan has to have a high probability of letting achieve my “worst case retirement scenario”.

How to really boost my wealth?

The irony about personal finance and financial theory is that while portfolio diversification is touted as an essential element in your portfolio building and construction, most of the really wealthy people accumulated their wealth by taking massive risk or by concentrating their portfolio or time in building one successful business. Their portfolio was totally undiversified when they were in the phase of building wealth. Yet, we are told all the time to build a diversified portfolio. I have given this issue some thought and my conclusion and view is that unless you are a superstar in the place you work and are given tons of company stocks and options, you have to set aside a certain portion of your savings to either invest, improve your career prospects, or attempt to build a business that will eventually build you faster wealth than your present career.

This is just a brief introduction on some of the things going through my mind right now. I will be updating these thoughts going forward.


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