Tips for turning an empty nest into a financial springboard.
Congratulations! The little one you raised is now a self-sufficient adult, and you’ve got your whole house to yourself again. This is a significant milestone in your financial journey, marked by the end of years of hefty expenses for food, childcare, and education. It's time to reassess your financial situation and feel proud of how far you’ve come.
An empty nest could serve as a launchpad for your own financial growth. Here’s how to make the most of this transitional period.
1. Update your budget.
A thorough budget update is essential as it allows you to leverage the newfound flexibility in your finances. Reviewing your budget is the first step to ensuring you’re ready for the next phase of life while also setting the stage for long-term financial stability.
Track daily expenses to see how they’ve changed now that you no longer have the same child-related costs. Then, consider building or fortifying your emergency fund to provide a financial safety net. Finally, reevaluate your goals and priorities, assigning funds for pursuits like travel, hobbies, or retirement savings.
2. Pay off lingering debt.
If you’ve been holding on to debt by making minimum monthly payments, consider bringing those balances to zero. Never-ending payments drain your resources and hinder your wealth-building potential. By paying off credit cards and loans, you can free up cash, reduce interest costs, and pave the way for a debt-free future.
List all your debts and develop a plan to pay them off. Consider using the debt snowball method, which can keep you motivated if you’re tempted to abandon the goal. You might also explore options like debt consolidation or refinancing to potentially lower your interest rates and streamline payments.
3. Explore alternative housing options.
Be open to the possibility of a change in your living situation. As your household size contracts, so might your housing needs. Downsizing to a smaller home or moving to an area with a lower cost-of-living can significantly reduce your housing expenses and free up money for other priorities.
Assess your current lifestyle and future plans. Then, research housing options that fit your desired location, size, and budget. Alternatively, you could rent out extra rooms to generate an additional source of income.
4. Set financial boundaries for adult children.
If you aim to avoid the “boomerang effect” — a situation where kids move back home due to their inability to manage their money, set financial boundaries. It can be difficult to know what to do when your children are struggling. But by being clear about what expenses (if any) you’re willing to cover and what you expect them to handle as responsible adults, you can help them develop financial independence while also safeguarding your finances.
Designate a time to discuss your expectations and the level of financial support you are comfortable providing. Clarify any expenses you will help pay for, such as emergency medical expenses, and what they will need to take care of themselves, like daily living expenses or credit card bills.
It’s important to remember that this can be a difficult time for both you and your children. While the silence at home takes some getting used to, this new phase is ripe with potential.
