How to strike the balance between saving and spending in midlife

Working as a personal finance journalist, it sometimes feels like there are pretty much two financial goals: getting on the housing ladder and saving for a comfortable retirement.

Building a deposit to buy your first home and saving enough to fund your years after work are typically the biggest financial challenges we face and so it’s little wonder there’s so much demand for content on the subjects. But, in the race to reach these milestones, are we forgetting there might be other things we want to plan and save for too?

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I’m in my mid-40s (I refuse to say late, just yet). We’ve ticked the first home box and are now in our second (and hopefully last) family home. But retirement is still 20 years away at best and there’s a whole lot of life to be lived before then.

As a woman – and a self-employed one at that – I know I’m on the back foot with my retirement saving and I really should be paying as much as I possibly can into my self-invested personal pension (SIPP). However, as I get older, I’m becoming increasingly aware of a need for mid-life financial guidance too, especially as our ideas around work and retirement become more fluid.

One of my favourite TV shows at the moment is Mortimer and Whitehouse: Gone Fishing. I was rather late coming to the party on this one (the show is now six series in), put off I suppose by the fishing bit. But that’s not really what the show is about. It’s much more about the friendship the two comedians share and the conversations they have, spanning their careers, their health and their well-being.

It’s also about escaping the busyness of life, getting back to nature and revelling in the quiet. As such, it’s a fantastic advert for retirement and it often ends with my husband and I mulling over the trips we’d like to take when we have the time, debating the merits of buying a camper van of our own.

But perhaps the biggest thing I take from the show is the need to savour the now and make the most of what you have. The pair aren’t afraid to talk about death, ageing and their own health – Bob Mortimer himself, married his long-term partner less than an hour before he underwent triple heart bypass surgery in 2015.

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I’m not about to say, don’t worry about your retirement planning, you might not make it that long. But with life progressing at a now frightening pace, I am frequently reminded that life is short and that our plans for retirement shouldn’t be at the expense of the years that proceed it.

It’s why I’m not a massive fan of the whole FIRE movement (Financial Independence and Retire Early) – who wants to suck the life out of their 20s, 30s or 40s, for a future that can’t be known?

But striking the right balance between saving enough for the retirement you want and enjoying the life you have now (and the less-distant future) is no mean feat.

So, what can you do?

I can’t pretend to have easy answers or to suggest that we are anywhere close to nailing it, but here are some of things I’m thinking about to get a better balance.

1) Spend money on the things that matter to you…

Until you start to face an inheritance tax (IHT) problem, spending sometimes feels like a rude word in the world of financial planning. Spare cash should be saved or invested, not spent. But while me ordering a takeaway pizza for dinner, when we have a fridge full of food, wouldn’t be a prudent use of our cash, we shouldn’t dismiss the value of spending on the things that matter to us.

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For example, my appetite for spending on the house is waning and I’ve long hated spending a penny more than necessary on cars. What I do want is enough money for a summer holiday and the odd day trip, or evening in London. We’ve got two teenage boys who are perfectly happy in front of a screen – getting them out and about and seeing new places gives us better-quality family time than we ever get at home.

I know it’s not essential spending, but it won’t be long before they leave home and I want to make the most of these last few years. The house can wait. As for the car, if I had my way, we’d drive it for as long as we possibly can.

2) Cut your spending on things that don’t…

While I’m an advocate for spending on things that nourish you and give you something to look forward to, the sensible part of me is at pains to stress that spending shouldn’t be at the expense of your financial future. Taking the family to the theatre should never trump paying into a pension.

It’s much better to try and reduce your spending on the things that don’t enrich you in quite the same way. Here I’m thinking about taking the time to get a better deal on things such as your mortgage, your car and home insurance, even your phone, TV and broadband.

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There’s also a lot to be said for going through your bank statements, looking out for spending that isn’t necessary or benefiting you in any way; streaming services you no longer use, subscriptions you’ve forgotten about or free trials you forgot to cancel.

3) Think ahead

I’m not a planner and tend to take life as it comes, but I’m increasingly recognising the benefit of thinking more specifically about the challenges of the next few years as well as the things we would like to do. Whether that’s saving for a special trip before the kids leave home, a fundamental lifestyle change, or what we would do if our parents needed more help.

It’s also never too soon to start thinking about how you want to retire. For my part, I’m not opposed to working into retirement and winding down gradually – so long as I’m healthy enough and still have enough time for regular trips in our (albeit hypothetical) camper van.

4) Get your savings sorted

It’s also important to think about your saving strategy and where you’re putting your spare cash, spreading it across short-, medium- and long-term goals.

You should always have money for emergencies and known expenses in an easy access account – rising interest rates mean you can a pretty decent rate on your money, for the time being at least.

But for money you don’t have a specific goal for and have no plans to access within the next five or so years, it’s often worth opening or topping up a stocks and shares individual savings account (ISA), to work your cash a bit harder. With no tax to pay or restrictions to access, an ISA can be a great way of adding flexibility to your financial planning in your pre-retirement years, whether you use it to help a child with a house deposit, or to celebrate an empty nest with the holiday you’ve always wanted.

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Money in ISAs can also be a boon when you do eventually retire – providing a helpful complement to pensions. That’s because money taken from ISAs is tax-free (unlike pensions which, with tax relief up front, are subject to tax on withdrawal) enabling you to boost your tax-free retirement income.

5) Think about protection

If you want to enjoy the life you’ve got and plan for the future, it makes sense that you should protect it too.

To ensure your savings and future financial plans aren’t impacted by illness – or death – it’s worth ensuring your family has the protection it needs and explore products such as life insurance, income protection and critical illness cover.