Introduction

Andrew and Rebecca are typical of many of the people who come to see me for financial advice. They're both in their 50s and have two kids: a son, Oliver, who's in the final year of a university degree, and a daughter, Maddie, who's in Year 12.

Andrew and Rebecca have always seemed to have enough money while never really getting ahead. Both have good jobs on decent salaries and they've been able to cover the mortgage payments on their suburban Sydney home, private school fees for both their children and the occasional overseas holiday, while maintaining what they regard as a comfortable but not extravagant lifestyle. They don't really budget, and they're not entirely sure what they spend their money on, but they seem to be able to keep their heads above water without too much trouble.

They've never sought financial advice because they've never felt the need to.

Their thinking is that, unless you win the lottery, you only need to see an adviser once you are retired, with a large lump sum from your superannuation fund to invest. They also believe that financial advisers are quite expensive.

Is this sounding familiar so far?

Andrew and Rebecca were out to dinner with a group of friends recently when the subject of retirement came up. An older couple in the group were talking about the income they generate from a couple of investment properties they own. Another couple, both of whom were self-employed, bemoaned the fact that they hardly have any superannuation savings and will probably have to work forever.

On the way home, Andrew and Rebecca realised that they had never really given all this any thought. While Andrew's father had died some years ago, his mother, in her early 70s, and Rebecca's parents, both nearly 80, were still going strong. Retirement and old age still seemed a long way off. It was partly for that reason that they had never got around to building any serious investments. Aside from their superannuation, built up through the compulsory super component of their salaries, they owned a few shares?-?and that was about it. Beyond maintaining their lifestyle, there had never been enough spare money or time to consider doing much else.

To put it simply, when it comes to money matters, Andrew and Rebecca have had the luxury of more or less coasting through life.

Now they face the prospect of a whole lot of uncertainty and change.

The kids will soon launch themselves into the 'real' world. Their parents are likely to need more care in the coming decade or so, if not sooner. And the prospect of retirement and life after work, and the financial implications of that, are no longer something they can simply ignore.

The sandwich generation

Andrew and Rebecca are typical of what I call the 'sandwich generation'. It's a generation of people in their 40s, 50s and 60s who are 'sandwiched' between their young adult or nearly adult children on one side and their ageing parents on the other. Just when they thought life might have been going to get a bit easier, they find themselves with a lot to think about.

Of course, the 'Andrews and Rebeccas' of the world come in many forms. Some members of the sandwich generation have higher incomes and some lower. Some are financially comfortable, at least on the surface, while for others being financially stressed is a day-to-day reality. Some have substantial investments behind them, while others have carried a high level of debt for many years. (We'll come back to this, but let me make the point now that having a high income is no guarantee of avoiding financial stress or indebtedness.)

Some have found themselves on their own, either through divorce or death, and are discovering that they now have to sort out their finances by themselves, without any prior experience. Some have immediate challenges with ageing parents, while for others this is a future prospect. Some have health challenges of their own. Some want to retire sooner than others. And of course, people's priorities in life vary widely.

People in the sandwich generation share:

• worries about the prospect of change, of moving from one phase of life into another and dealing with the uncertainty that change brings
• concerns about not knowing where to turn for help
• worries about how they can best guide their young adults towards a sound financial future, especially in an era when finding a permanent, stable job seems rare?-?and the prospect of young adults buying their own home has become almost an impossibility
• concerns about how they can help their parents deal with getting older, getting their affairs in order and potentially making some tough decisions in the not-too-distant future. How will they deal with having to make decisions about aged care, including the complicated financing involved, if it comes to that?

On the flip side, many in the sandwich generation are enjoying a period of time in which they get to spend more time with their young adult children who have stayed home while they try to save for a deposit for their own home or for travel, possibly while they complete their tertiary education.

People in the sandwich generation are also seeing the benefits of their parents living longer, and with a much higher quality of life, even if that raises new concerns about ensuring that their money lasts as long as possible.

And, of course, many in the sandwich generation wonder how they can prepare themselves for life after work, both psychologically and financially.

This is not just about money. Members of the sandwich generation are on the cusp of a whole new phase of life: a phase that, provided they are properly prepared, should be incredibly positive and enjoyable.

The 'One Day' myth

When people like Andrew and Rebecca come to see me for the first time, most of them are sitting 'close to the line' financially.

This couple are living comfortably by spending most or all of what they earn. Their only major assets are their house and super, and their mortgage is their only major debt. Nevertheless, in reality they are only one large, unexpected expense away from getting into trouble. It could be the discovery of a structural issue with their house, or a sudden health scare.

Whatever it is, an expense of even $10?000 or $20?000 could be enough to put them into debt, either by having to take out a personal loan or maxing out a credit card. Many people are aware of this vulnerability, but they'd prefer to hope it doesn't happen than face the potential consequences.

Others are already less than comfortable. Some are only just meeting their high mortgage payments every month. While they intend to pay off the credit card in full every month, they often fail to do so. Over time this has seen their credit card debt, and the cost of interest, creep up to the point where it is an ongoing burden. They're getting by, but worrying about money is something they spend a lot of time doing.

Talking to people, whether singles or couples, in either of these situations tends to take a familiar path.

First, they tell me that they've been meaning to get around to organising their finances?.?for years.

Second, they tell me that they always thought their money challenges would be solved when they got that next promotion, or the better job with a better salary, or even just paying off the mortgage. In other words, they thought it would all be okay 'one day'.

This is what I call the 'One Day' myth.

The 'One Day' myth is the idea that while we might be living on the financial edge now, it will all come together?.?one day. The money will look after itself?.?when they have access to a bit more of it.

Sadly, I call this a myth for good reason: it is a myth.

What actually happens, 99 per cent of the time, is that if and when 'a bit more money' comes along?-?let's say through a pay rise?-?it is quickly absorbed into an improved lifestyle. A bit more is spent eating out, holidaying in a slightly better hotel, buying a bigger television (either on the credit card or by taking out an 'interest-free' loan) or through any of the myriad other options for spending more money that we are surrounded by.

Why does this happen? For multiple reasons. Most of us like spending money, and having more of it only makes spending all the more tempting. 'I deserve it' is a common refrain, reinforced by marketing everywhere we look.

The other significant factor?-?perhaps the major one?-?is that most people don't know where they are spending their money in the first place, so they don't even notice that they have 'adjusted' to spending more now that more is coming in.

Whatever the reason, the point is that you mislead yourself by thinking that your money challenges, small or large, are going to disappear when you get that next pay rise or the better job. It would be far better to get control of your money now and start making meaningful plans for the future.

Reality hits home

The motivation for people like Andrew and Rebecca to come to see someone like me is usually a combination of all the factors I've just described:

• An epiphany that...