Every song, movie, or show has a beginning, a middle, and an end – and they are all important. You can say the same for a financial strategy. But unfortunately, most people forget about the “Mid’.
Generally, many people make the same mistakes; saving everything in cash in fear of financial markets, others investing all their nest eggs on a long shot, some over funding their 401k and those that haven’t started planning until their 50’s. All with one thing in common. None of them have planned for the “Mid”.
Even society has neglected to talk about the “Mid”. Make sure you have a strong emergency reserve the world tells you. You never know when your truck will need a repair, or your roof will begin to leak, and your told to put as much as you can in a 401k. 401k’s create these projections on their websites of how much you will have if you continue to save and how much income you will be able to generate at different retirement.
But in all of that…no one is talking about nor preparing you, for the “Mid”.
So, what is the “Mid”? The Mid is that period 5 years from now that you have created goals and visions for until the 5-year period before you retire. It’s that boat you have always wanted at an age where you can really enjoy it. That 40th birthday trip to Thailand with your best buds. The dream home for you to raise your family in. It’s everything you work for while you are still working, instead of everything you save for, so you don’t have to work one day.
It is one of the most important parts of strategic planning and many advisors overlook it. Because of that oversight you may run through your emergency account to buy that dream home that goes on the market, you may borrow from your 401k when the markets about to take off because you want to take the family on a summer vacation. You may make financial mistakes repeatedly because you over looked this part of your plan.
So, what does proper mid-term planning look like? Well, that answer is somewhat complicated as you build wealth, have children, and buy assets and requires a thorough review and strategy. But there is one simple rule of thumb for you to remember. Everything above 10% of savings can be allocated for the “Mid”. Once you have built a strong emergency reserve you may want to consider allocating your savings towards the “Mid’ or investment vehicles that serve multiple purposes such as helping you with the “Mid” and retirement goals. As you create budgets and allocate among three buckets; Short-Term Goals, Mid-Term Goals, and Long-Term Goals, work with a professional to make sure you prioritize the importance of each one.