If the greatest threat to your wealth in your 20s was yourself, and in your 30s was your partner, what do you believe it will be in your 40s? That’s right, your kids.
Welcome back to the Staying Debt-Free at Any Age series (20s, 30s), where I discuss how to stay debt-free and build wealth against all odds.
Kids are expensive. There is no doubt about it; your children will be costly. There is nothing you can do about it except prepare for the costs.
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In my article, “The American Dream Costs $5 Million,” I proposed that each kid would cost $500,000 (including a college education).
I’m telling you that this is a gross underestimation; the price skyrockets when you calculate food, vacations, clothes, larger homes, and private schools.
You can’t go into parenthood without having a plan. Sadly. Most of us think that having two working parents is the answer.
Live on one salary. If you want to understand the dilemma most American find themselves in, read “The Two-Income Trap.” Elizabeth Warren spells out why having working parents leads to high-stress levels, divorce, and bankruptcy.
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The main idea is that you both live up to your income levels, leaving no room for error. Not only is work stressful, but so is parenting and paying bills.
Before you know it, an emergency takes a person from their job, and the cookie crumbles. Or the relationship buckles under the pressure of the costs. Either way, it’s not a healthy way to run a household.
The better option is to live on one salary. It may seem harsh, but you need to move to a lower cost-of-living area. However, just because you live on one salary doesn’t mean that’s the only income stream.
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Create multiple streams of income. The stay-at-home parent has never had this many options to make money from home. In fact, I wrote an entire series about starting a business from your house.
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If you were on the correct path, you should have started a home business well before kids. It takes time to build an income stream, so plan as soon as possible.
More options. If a business is too busy for you, there are other ways to make money while you sleep. The most passive of all income streams is dividend investing. You can also own a couple of rental properties.
Avoid overspending on your children. Even if you have multiple income streams, you’ll need to avoid overspending on your kids.
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I see it all the time. New parents buy brand new toys, cribs, strollers, fancy baby rooms, clothes, and gear for their kids.
My wife and I shopped for used items as best we could. Sometimes, it was best to buy new; however, that was not too often.
Don’t forget; you have a long way to go with your kids’ lives. It’s a marathon, not a sprint. Kids get more expensive as they get older. Eventually, you may be funding their cars and trips.
Keep the budget tight for your children. You can help them by starting a brokerage account and investing in index funds. Doing this will significantly reduce the amount of money they need to invest for retirement.
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Beyond the children. Outside of raising kids, your 40s will change your view of the world. If you take life seriously, you’ll be grinding during this time.
However, you’ll notice that most (if not all) of your friends are enjoying their lives now. They are trying to be their best selves.
Your friends will be going on trips overseas, remodeling their homes, and going to fancy dinners. Remember, our 40s are the prime earning years for males.
When you see people spending all kinds of money in their 40s, you can assume two things.
- They are not investing in stocks for their children.
- They plan on working until they are 65+.
If you want to fall into those two categories, please spend your life away. If you’re going to travel a different path, you’ll have to save and invest.
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Why do I save and invest? I do not want to be working when my kids have their children (my grandchildren). I never want to go to work as a newborn comes into the world and joins the family.
I want to be present for my grandkids, as I was not for my own kids. I made the mistake of working for money before (not assets), and I won’t make it again.
Your 40s will show you who is thinking long-term and those who just want to have fun. The long-term thinkers will have decades to relax and enjoy their families a little later.
The short-term thinkers will watch their children struggle through life, trying to get a foothold in an unfair employment system. Which type of parent do you want to become?
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Conclusion. Hopefully, you enter your 40s with passive income coming into your accounts. If not, you’ll have to double down on your income streams.
The kids are coming, and they will eat away at your energy, attention, time, and money. You need to have money coming in while you sleep to offset the costs of children.
Don’t try to keep up with the Joneses with parents around the neighborhood. You will lose because they are willing to go into debt to win. Let them have these shallow victories knowing you will win in the end.
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Avoid the social media trappings in your 40s as well. Everyone will “look” as though they are living their best lives, but they don’t have a plan for their kids’ futures.
They are “hoping” that their kids get full academic or athletic scholarships. The hope strategy does not work, so do not try it. Plan for the worse; pray for the best.
Even though you are saving and investing throughout your 40s, you can have a fantastic time. Doing the right thing is always rewarding. Living on a budget draws the family closer together. Good Luck.
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Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. I am an Amazon Affiliate. Please research any investment vehicles that are being considered. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. All Right Reserved Military Family Investing
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