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.

OnTrajectory: Features and Functions

See Where Your Money Is Taking You

moneyEyeOnTrajectory does not seek answers to questions like, “How much do I need to retire?” or “How much do my kids need for college?” It addresses a simple, central concern: “What’s my financial trajectory?” i.e. Are you on course for economic independence – or will you financially crash and burn? Here’s how we do that:

 

  1. Enter your unique Income, Expense, and Savings/Investment Items
  2. Set Age Ranges for each item, as necessary
  3. Enter unique criteria, including Tax and Growth Rates, for each individual Item or Range
  4. Create Expense Groups for budget tracking

Interactive Modeling & Simulations

mindChangePeople are visual, and they like to change their minds. OnTrajectory supports both of these very human traits – here’s how:

  1. Visually-engaging and interactive graphs
  2. Plot your Goals on future dates or for hypothetical rates-of-return
  3. “Exclude” items instantly for easy “what-if” analysis
  4. Visualize the effects of Inflation while working in “Today’s Dollars”
  5. Compare Average Growth, ‘Monte Carlo’, and Historical analyses all at one time

Start Simple & Refine Over Time

refineOther financial tools (online Retirement Calculators, Investment Simulators, etc.) love to set your goals for you. What’s more, they lack a way to track your progress toward achieving them. OnTrajectory provides a persistent, historical view that adds value to your data the more you come back. Yes, it’s super-simple to get started, but as your situation becomes increasingly complex, so does the information OnTrajectory can provide – here’s how:

  1. Track and save a History of your total progress and project it against your Trajectory
  2. Calculate individual Savings/Investment balances for any future-date
  3. View and analyze all underlying data
  4. Store your unique scenario through a secure connection to our server

More to Come

We are constantly adding new features and fine-tuning existing modules. We hope that OnTrajectory will become an indispensible part of your financial planning and that as we grow, so will you!