For many people, middle age is a time for soul-searching and reevaluation of their hopes, dreams and goals. Some people wallow in regret over missed opportunities, while others focus on doing everything on their “bucket list” before they get too old to enjoy it. For many of today’s mid-lifers, however, missed opportunities and bucket lists aren’t the only concerns. The growing ranks of people in their forties and fifties who are struggling with financial worries such as rising debt have lent a whole new dimension to the concept of “mid-life crisis”. In short, if you’re suffering from middle-age doldrums, exacerbated by financial stress, you’re not alone.
But mid-life doesn’t have to be a time of stagnation and despair.
Financial security is not a given
We’re not going to sugarcoat it: there is some justification for a dour outlook. At one time it was generally accepted that overall living standards would steadily improve from generation to generation, and that the members of a given generation would become more financially secure as they aged. This expectation of steady progress, of hard work justly rewarded, was simply part of our cultural narrative. But the economic meltdown of 2007-2008 altered that narrative rather sharply, although the factors leading up to the meltdown were actually decades in the making.
Today the UK, like many other affluent nations, is experiencing record income inequality, and along with this inequality comes the sense that life is no longer continually getting better. Certainly it seems that Britain’s middle-class escalator has gone into reverse, as columnist Alex Proud wrote in the Telegraph in February 2016. Wages have fallen, job security isn’t what it used to be, house prices have risen, and pensions are shrinking.
And a study released in July 2016 by the Institute for Fiscal Studies (IFS) noted that middle-income working families are the “new poor”, as the gap between Britain’s poorest households and those on medium incomes has fallen to the lowest level in twenty years. The IFS study also noted that the incomes of the bulk of working age people – those aged 31 to 59 – have only just returned to pre-crisis levels. Slow wage growth and benefit squeezes, as well as rises in the cost of living, have resulted in a “shamefully high number living in poverty in the UK today,” according to Julia Unwin, chief executive of the Joseph Rowntree Foundation, which sponsored the IFS research.
People in their forties and fifties may be especially vulnerable to financial stresses, as they’re often juggling expenses such as the cost of raising a family, possibly caring for aging parents, and paying a mortgage. Many are unable to pay their bills on time, and some have problem debt. They’re also facing various barriers to saving for retirement.
When financial woes are factored in with normal midlife angst, it’s little wonder that a study released by the Office for National Statistics (ONS) in February 2016 reported that people aged 40-59 are the least happy and most anxious of all the age groups surveyed.
Credit challenges on the rise among mid-lifers
Another survey published in February, this one by the Notthingham Building Society, revealed a sharp rise in “mid-life mortgage ageism”. Two in five brokers reported an increase in people over forty who because of their age are struggling to be approved for a mortgage or remortgage. (Many lenders are reluctant to approve a mortgage that will last well into the borrower’s retirement.) But even if getting a mortgage or remortgage isn’t an issue, many mid-lifers are hampered by poor credit. Rather than enjoying a comfortable lifestyle during what are supposed to be their peak earning years, they are in a state of chronic financial distress.
Even something as basic as getting approved for a personal loan can be a challenge. In general, personal loans have been harder to come by since the credit crunch, and even people who once had a good credit rating are being rejected by banks and building societies. People with bad or spotty credit often have very limited options from traditional lenders. If you’re facing this problem now, know that you have options.
There are various types of small short-term loans for people with bad credit, but if you need a more substantial loan and/or more time to pay it off, a guarantor loan might be a solution. This is a loan in which a family member or trusted friend with a good credit history vouches for you. A guarantor is not the same as a co-signor; you are considered the primary borrower and are responsible for repayment of the loan. The lender will first attempt to collect payment from you, but if you default, your guarantor is responsible for the loan.
Needless to say you should never consider a guarantor loan unless you know you can afford to pay it back, and/or you know you will not be putting your relationship with the guarantor at risk should you not be able to meet the terms of the loan. It is also important to shop around for the best deal, as all lenders are not alike. Be sure that you and your guarantor understand the true cost of the loan, including interest and any other applicable fees.
There’s one more essential point: Though a guarantor loan can help you in the short term, you need to focus on long-term improvements. Better management of your personal finances can help you make the most of the money you do have. While your earnings may be limited right now, you are still in the prime of your life with time to turn your finances around. It isn’t just about rebuilding your credit, but also perhaps reinventing your financial life.