It's a sad moment when the last of your kids leaves home. You had decades of baseball games and sleepovers and school dances and memories that you'll carry with you forever. While that can be emotional, you should also remember that you no longer have to pay for braces or broken arms or feeding growing kids, which means your finances will be freed up a bit. If you find yourself with an empty nest, here are some financial tips to help you adjust to the new phase of your life.
Make the necessary adjustments.
Your kids have been living with you so long, it will be a big adjustment when they leave, especially when it comes to your finances. Make sure you are making the right adjustments so you are saving more. You may have your routine at the grocery store, but you won't need as much food, so make sure you are buying less. If your kids were always the ones watching TV, cut back on your cable bill by getting rid of unnecessary paid channels. If your kids are over 25 when they leave, make sure you are adjusting your medical coverage at work. Bottom line, there are many different adjustments that you should be making once your kids are no longer living with you, so make sure you sit down with your finances and find out where you can make those adjustments.
Think about downsizing.
Leaving the house where your kids grew up may seem like a big step, but if your kids are done with college and have truly moved out for good, having a four-bedroom house for just the two of you might not make financial sense. It might be time to look for a smaller place. Of course, before you decide to sell your house you should factor in things like current interest rates and the strength of the housing market. If you are forced to sell your house for less than it's worth or have to pay extra in higher interest rates on your new home, it might be smart to wait until the time is right. Weigh the emotion cons with the financial pros to figure out if downsizing could equal a much easier and happier retirement.
Take on some extra income.
If one of you wasn't working while taking care of the kids or even put parts of your career on hold, now is the time to pick up some extra work. You'll have the extra free time, and it will help with the transition to empty nest. You can take classes to advance your career or start your own business with something you are passionate about. Working will not only fill your life with something meaningful but will also let you earn some extra income going into retirement.
Pay off your debt.
With the extra money that should hopefully be coming in, it's a good idea to take on some of your debt. First, take care of any high-interest debt, like credit cards. Here are some good tips on how to pay off your debt.
Second, look at your mortgage and other loans to see if it's a good idea to pay them off. It may make sense to pay off all your debts, but make sure you check which debts are beneficial to pay off and which are not. Some loans will penalize you for paying off early, while others have low interest rates, so it would make more sense to invest the money at a higher interest rate than paying off that debt. If you need help deciding which debts are beneficial to pay off, talk to a financial planner.
Put more money aside for retirement.
If you can adjust your spending, pay off your debts, downsize and earn some extra income, you will have a lot more money coming in than you used to. So what should you do with that money? Invest in the next phase of your life: retirement. The very first thing you should do is max out your retirement contributions at work, especially if there is a match program.
The second thing you should do is look for other ways to invest your extra income. Putting it in a savings account will give you the smallest return on investment, so consider other options. Money market accounts have low fees and low risk, but also have lower return. You can invest in an IRA to supplement your 401k. Or you could get heavy into investing and play the stock market. Whatever you choose, just make sure you are educated on which path is best for you. Here are some investing sites that are best for beginners.