Your kids have packed up their childhood bedrooms, bound for college, careers, or homes of their own. In their wake, it’s easy to be swarmed by a number of emotions, like pride, gratitude, fear, and loneliness. But you’re not alone. Approximately 22 million Americans currently fall into the “empty nest” category: parents between the ages of 40 and 60 whose children have reached adulthood and moved away.
Regardless of what personal plans you may have in mind for this new chapter, your finances are bound to look different with fewer family members living in your home. That’s why now is a great time to evaluate how you’re managing your money and take stock of your future needs. We’re here to help, with four considerations to keep top of mind.
Give Yourself a Financial Health Check-Up in 4 Steps
1. Economize your budget
As a parent, you’ve become a pro at scaling your budget to fit your family. From your cell phone plan to your meal planning, you’ve thought about how to get everyone they need without breaking the bank. Now, it’s time to take a deep breath and go back to your budget with new eyes. Where are places you can cut back on spending, and where are the areas you can afford to indulge a little bit more?
It’s important to approach your empty nest budget after making a few things clear, however. How much financial support are you still providing your children? What about your own parents or in-laws? Is that support a regular part of your budget, or only in case of emergencies? Having a conversation with your family about where those boundaries lie will help all of you as you navigate the financial choices ahead.
2. Review your retirement plan
Saving money can feel difficult when you’re navigating the day-to-day needs of your kids. There always seem to be unexpected medical bills or school fees, not to mention the turnover of clothes and shoes that somehow no longer fit! When those everyday expenses are no longer your sole responsibility, you can direct your money toward longer-term plans and goals, like retirement.
It’s time to take another look at your 401(k), IRA, or other long-term savings or retirement accounts. You’ve already looked at your income and expenses and know what you can afford. Even increasing your contributions by a nominal amount can make a big difference, so discuss your options with your financial and tax advisors.
Bonus Tip: If you have yet to consider a Health Savings Account (HSA), now is a great time. HSAs are tax-advantaged savings accounts that allow individuals to earmark money specifically for medical expenses. Plus, HSAs can be used both while you’re earning an income and during retirement. Learn more here!
3. Determine if your home still meets your needs
One of the most common tips that empty nesters are likely to hear? Downsize! And it’s not bad advice. In all likelihood, you’ve accumulated years’ worth of old clothes, sports equipment, school memorabilia, and more. But once you’ve cleared the clutter, moving into a smaller home may not feel like the right step.
There are plenty of ways to tailor your home to your new life, even if you want to keep some of that extra space for when the kids (or grandkids) visit. Maybe it’s finally time for that kitchen renovation you’ve always wanted or to update a cramped bathroom. Perhaps your ideal empty nest includes a pool or hot tub! With the help of a HELOC or home equity loan, you can make updates to the home you already enjoy and potentially add value to your property for that future time when you are ready to sell.
4. Confirm end-of-life decisions
The way your family grows and changes can have unforeseen financial consequences. As you shift how you file your taxes, don’t forget to consult with your legal and financial advisors about how to best update the beneficiaries on your will, life insurance policies, and other key legal documents.
How would you want your health, home, or estate to be handled if you weren’t there to call the shots? As uncomfortable as it may feel, it’s crucial for the sake of everyone involved to come back and confirm those decisions every few years, especially as your children grow up and build families of their own.
Final Considerations
Depending on the size and needs of your family, you may find that giving your empty nest finances due consideration may require a few more steps. That’s understandable! We simply want to encourage you to take the time to do so now, since being prepared can often save you time, money, and headaches down the road. You don’t want to find yourself in six months (or six years) angry at yourself for not canceling that unnecessary subscription or having a tough conversation about medical costs.
Bottom line: enjoy this time! Making your money work for you during your next chapter as empty nesters will help you put your mind at ease and appreciate the perks of having come so far. And, when you have questions or concerns, your local SouthEast Bank branch is full of friendly faces ready to help!
