That day has finally come. Your youngest child left home for college and you’re adjusting to an eerily quiet and clean house. In fact, there’s no laundry on the floor, plenty to eat in the fridge and no dishes in the sink.
Yup, it’s official: you’re an empty nester.
It’s a hard adjustment but your lifestyle isn’t the only thing changing: Your spending is, too. Your grocery bills are a fraction of what they used to be. Your electric and gas bills are slashed in half. And let’s not forget about dining out and entertainment. The restaurant tab for one or two is substantially less than it was for a family of three or more.
Sounds awesome, right? Well, before you get too excited about your incredible shrinking bills (patent pending), you’ve still got plenty of big ticket expenses related to your kids. For starters, you’re likely paying for college expenses. Not only that, you may be helping your child pay off hefty student loans now or in the near future.
The reality is that while your empty nest status comes with plenty of financial perks, it also has its share of large expenses and debt. That’s why it’s essential to use this time to prepare for your future. The best way to do this is to shift your priorities and re-assess your financial needs. Here are four ways to help you get started:
1. Create a new budget
With the kids off on their own, this is prime time for you to come up with a budget that takes into account all of your new expenses, like college tuition payments, as well as reduced monthly costs. By creating a new budget, you can closely track your expenses and determine how much you have left to save as well as splurge on things like vacations and new furniture.
2. Eliminate unnecessary spending
This goes hand-in-hand with creating a budget. Once you know what your necessary costs are each month, it’s time to figure out if you can further reduce your monthly overhead. For example, take a closer look at your cable bill. If you have a premium package with all sorts of channels that only your kids watched, you may be able to change plans for a lower price or even switch providers for a better deal. Other things to consider: Switching your family gym membership to a lower-priced single or couples package and ditching your lawn service altogether if you can cut the grass yourself with your newfound weekend time.
3. Downsize your house
This is easier said than done, as you may have raised your children in your home and be deeply rooted in your community. However, if your house is large and filled with empty bedrooms most of the time, you might want to consider selling and purchasing a smaller house that is easier and less expensive to maintain.
Now is a great time to have your home appraised and figure out how much money you stand to make if you were to sell (this depends on many factors including how much equity you have in your house, your remaining mortgage payoff amount, and the market dynamics in your neighborhood and city). To get started, call a local real estate agent and ask for a market appraisal. You’ll also want to figure out where you’d like to move to and start working with a buyer’s agent to look at smaller houses or condominiums. Lastly, if you want to stay in your town, you can still do this by buying a less-expensive home in the same area.
If you’re ready to sell your house but not quite ready to buy something else, you may want to consider renting. This way you can try out a new neighborhood before deciding where you’d like to put down new roots. By renting, you’ll also eliminate property taxes and trade in your homeowners insurance for a more affordable renters insurance policy.
4. Get your future affairs in order.
As you reevaluate your financial house, this is also prime time to re-examine your retirement account, prepare a will, institute a healthcare proxy, and appoint a power of attorney. You should also make sure all of your financial documents are organized and filed safely away. Along those lines, talk to your children about these financial records and tell them where to locate documents in the event that anything should happen to you.