Your last young adult has finally left the nest. Whether you're wiping away tears or toasting your freedom, it's not the time to ignore your cash flow. While small treats or maybe even one big splurge might be financially fine, this is your opportunity to build your financial future.
With kids out of the house and (fingers crossed) permanently on their own financial feet, you should have more cash on hand, says certified financial planner and CPA Brian Preston, host of The Money Guy podcast, in McDonough, Georgia.
"The big savings will be in no longer funding education goals, no longer paying for clothing and getting kids' automobile expenses out of your back pocket," he says. "Parents also should experience savings in household utilities and groceries. The Dorito savings alone could help fund that next trip to the beach."
Curb the urge to splurge
The danger is you'll throw away the budget, pull out the credit cards and unleash your pent-up consumer desires.
Temptations you may not be able to afford loom:
Home improvement projects. Some new empty nesters go overboard on home improvements that don't make sense, says Jayne Di Vincenzo, president of Lions Bridge Financial Advisors in Newport News, Virginia.
"A mistake I see frequently is a homeowner who plans to sell in a year or two replacing air conditioning units, water heaters and roofs even though there is no current problem," Di Vincenzo says. "These are investments that typically don't pay you back when you sell. It is sad and frustrating when a client on a fixed income or who plans to soon retire blows through savings and real emergency money on things that don't need replacing."
Worse, some clients sign with the first contractor they talk to. "I have seen clients get just one estimate and then I almost fall over when I hear what they paid," Di Vincenzo says.
New cars. Beware the unnecessary auto upgrade every two years. "I see clients who like the idea of a new car well before the old one is worn out, clients who really can't afford the biannual luxury," Di Vincenzo says.
Need proof? The median age of a new Corvette owner is 64, Preston says, citing research from Strategic Vision.
Luxury travel. By all means, spread your wings, but keep expenses at a level that still allows you to save. "I have clients who want to do way more traveling and stay at high-end resorts more often than they can really afford to do," Di Vincenzo says.
Forget about time shares, too. "Not only are they initially expensive but there are maintenance fees and upgrades to communities that can cost thousands of dollars," says Di Vincenzo. "Save your money and instead take a nice trip wherever you want."
Savor the moment, then get cracking
You have earned a little indulgence -- just don't let it sink you financially. "Parenting is a very selfless endeavor, so it is reasonable that when that obligation is fulfilled, there is a feeling of entitlement to reward yourself," Preston says. "A reward is not an issue as long as other upcoming financial obligations have been met. Financial independence should be the focus for newly minted empty nesters."
"After a nice meal with good wine celebrating your children's academic achievements, I would meet with a certified financial planner and discuss your dreams," says certified financial planner Erika Safran of Safran Wealth Advisors in New York City.
Consider downsizing, says CPA and certified financial planner Robert Carmines of Carmines, Robbins and Company in Newport News, Virginia. "You can buttress up your retirement by selling and either going to a smaller mortgage or no mortgage," he says. "Cutting the size of the house and the upkeep can yield great savings. Go to a smaller situation while you are still able to get out and do stuff and make friends in the new neighborhood."
If you're fortunate enough not to be paying back college loans for your newly launched kids, then repurpose the payments you had been making on their room, board and books to better position yourself for retirement, he says. Carmines uses his additional cash to pay extra on his mortgage.
You should lower other fixed costs such as car payments and credit card payments, too, Di Vincenzo says. Get expensive credit cards paid off every single month. If you are in the bad habit now of carrying a monthly balance, it will likely stay with you when you retire if you don't consciously try to break it, she says.
You can also position yourself better for retirement by increasing your 401(k) savings to the maximum allowed, Di Vincenzo says. If you're over 50 you're allowed to invest more in a tax-deferred account each year than when you were younger. The maximum annual contribution changes every year, and is published by the Internal Revenue Service.
As you enjoy your empty nest, look ahead to the next stage of your life: retirement. "This is a great time to revisit your financial future and see what your retirement years look like, indentify creative options to pay off loans and see if your current assets and future cash flow can provide you the life you want," Safran says.