How to Have a Better Mid-Life Crisis

(Note: All calculations and charts rendered with OnTrajectory.com)

It doesn’t matter if you’re happily married or in the throes of a brutal, debilitating divorce. You may have been a conscientious saver, you may have formed wise money-habits – able to navigate narrow budgets with ease. But one morning you’ll wake up and feel the need to buy something – something stupidly significant and attention-getting, and in mid-life that can be expensive.

So, how do you choose which silly thing to buy?

boat

Since we’re talking about stupidity, simply opening your wallet for whatever flashy car/boat/jewel/timeshare catches your eye might seem proper, but there’s a better way to make such a massive and financially burdensome mistake. Because the question is not, can I afford it, right now, in this moment? Rather, the questions are these: What are the long-term effects of this bad decision? How much damage am I really doing? And most importantly, how can I minimize the damage while sating my urge to spend good money on what I don’t need (and will likely under-use)?

Now the tricky thing about a mid-live crisis is that it’s happening mid-life. These are your prime salary years and also when you have the most demands and commitments laid upon you. So even if you can afford the extra payment for whatever ludicrous purchase you’re itching to make – you should judge the impact not only against your 5-10 year plan, but also against the far future of your final years.

We’ll look at 2 scenarios which compare the impact of purchasing a 2016 Convertible Corvette versus a 2011 29′ Sea Ray Sundancer. Our individual has a previous baseline Trajectory concluding at age 90 with approximately $65,000 in assets. As you’ll see, he currently has a spouse, two children, two cars, a mortgage and various other expenses typical of “mid-life”.

The screenshot below illustrates the financial effects of purchasing the Corvette:

Midlife_Corvette

As you can see, the result is a $40,000 decrease in overall Trajectory to about $26,000. Note that we assumed use of the Corvette as a regular car, if a different “daily driver” was required, the financial impact would be considerably greater.

Now let’s look at the “boat scenario”:

Midlife_Boat

Although the monthly payment is lower (because one can finance a boat over a longer period of time) the financial impact is far greater. The first problem is that boats can’t be driven to work, so we’re including a car purchase at age 55. And since a 29 foot water craft doesn’t fit in most driveways, we have marina fees that continue until age 70.

In addition, our individual is projected to run out of cash around age 86, creating a shortfall > $90,000 by age 90. OnTrajectory calculates that to make up this shortfall about $100/month additional savings is required.

Of course these illustrations confirm the obvious – buying more expensive toys has greater financial impact. What OnTrajectory let’s us do is more easily quantify the destructive power we’re releasing on our “retirement years” – and, one hopes, help us make poor decisions slightly less poor, whether in a mid-life crisis or during any other period of our lives.

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The Complicated Mess of Your Financial Life

(Note: All calculations and charts rendered with OnTrajectory.com)

Let’s say you’re 25 (pretending is fun, right?)…

If you place a quarter a day into a tax-deferred, moderate-risk-jar and because you’re awesome, you give that jar to your favorite great-grand-nephew upon your eternal “rest”: How much is in the jar?

About $43,000, here’s the chart…

quarterPerDay

Or how about something a little trickier to calculate. Let’s say you replace your car about every 10 years (until you turn 70), how many extra years of retirement can you afford if you pay $400 per month versus $500?

About 6 years — here are the charts…

carPayment_400 carPayment_500

Or a latte per week? About $100k of inheritance.

Or a bachelor/bachelorette party in Vegas? About a semester of college for your unborn daughter.

Or not taking the 401k match at your job? You don’t even want to know.

And we’re not saying you shouldn’t do these things (except the 401k thing, please do that). Not only because financial models are built on assumptions and assumptions are uncertain, but because lattes are delicious. Wouldn’t it be nice, though, to see the information – to easily adjust various criteria, and display the results all in the context of your own situation?

Consider this scenario:

You’re a middle-aged adult with 2 young kids. Your house/apartment is too small and maybe the schools aren’t so hot. You’ve got a decent job and a growing 401k. But now you also have to think about 529 Plans and maybe an IRA for your spouse who only works part-time – perhaps an HSA too, maybe? How do you know ‘how much house’ to buy, or whether you should buy one at all? Is it better to put the cash in the HSA, the 401k, the IRA, or the 529?

How can anyone do serious planning with so many variables to consider? How can you map the interplay of these choices and run scenarios to clearly see the results?

Well, that’s why we exist – so give us a try at OnTrajectory.com.

Press Release: Financial Technology Startup OnTrajectory Launches

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PRESS RELEASE

Contact: Founder & CEO, Tyson Koska

410-530-3646 – Questions@OnTrajectory.com

Financial Technology Startup OnTrajectory Launches

 

By Carl Potak – New York – OnTrajectory.com is a financial technology startup offering an easy-to-use, high-fidelity financial planner that maps users’ income, investments, and expenses in an interactive graphical display.  Users can easily aggregate their financial data to visualize a simulation of their financial future.  The free option is suitable for most users, however, the Power Plan offers users the ability to define their plan more ‘granularly’ and is also free until July 1, 2016.

Sign-up is easy and requires users to answer only four quick questions to get started.  From there, users can continue entering monthly and yearly data.  The more data they enter, the more accurate their future trajectory will be.  

Most investment and retirement calculators are standalone and  focus on a specific data point, however OnTrajectory allows dozens of different data points to be calculated together for a more inclusive view of how these aspects can affect your finances.  For example, OnTrajectory can help people with college payment calculations, retirement planning, or mortgage planning, and see how they affect their overall financial standing.  Of OnTrajectory’s largest competitors that are focused on multiple data points, a large proportion of them are complex to use,  don’t offer a free option, and/or require time-consuming signup processes. OnTrajectory differentiates itself from these competitors and addressed those key issues by providing an easy-to-use, high-fidelity, free option with a quick and simple signup process.

The software is friendly to folks with families and allows for the additions of spouses and/or dependents to their trajectory. Additional features allow people to create savings plans, goals for future purchases, designate unexpected emergency funds, and run different financial simulations for any “what if” financial questions they think of. For more advanced simulations, OnTrajectory also has Monte Carlo and Historical analyses.

OnTrajectory encourages people to become financially knowledgeable and successful so they can retire on time or even have an early retirement.  This is promoted through their blog Money Matters by OnTrajectory.

Since launching in November 2015, OnTrajectory has grown to over 1,100 users and is catching on quickly.  In fact, OnTrajectory was just featured in a February 9th 2016 article called “These Are The Best Retirement Calculators” in Time.com’s Money Magazine.

OnTrajectory‘s team currently consists six people. Of the six, CEO Tyson Koska and two other technical co-founders from the financial industry are the software engineers working behind-the-scenes.  The team also has a serial entrepreneur, Director of Marketing Carl Potak, Director of Community Relations Daniel Kahn, and Video Producer Christopher Yeiser.

Financial journalist Darrow Kirkpatrick from CanIRetireYet.com had this to say: “The initial setup was simple. The user interface is very attractive and intuitive. It feels like they’ve achieved a low barrier to entry… OnTrajectory is in the sweet spot that appeals to me. The site has a slick look and many nice touches.”  Barbara Friedberg, another financial journalist, is the founder of Barbara Friedberg Personal Finance and author of “Invest and Beat the Pros.” She endorsed OnTrajectory saying: “[It’s a] very consumer friendly and useful tool… Concept is great… I like that it’s not necessarily just a retirement tool… graphs, charts easy to interpret.”

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