Each person’s financial goals, expectations, and circumstances are different, which is why each person’s financial plan is different. But there are a few major life events most people will experience, and these are often the milestone moments of life. Though financial planning is important at every stage, the financial decisions you make during these milestones can not only reverberate throughout your life, but potentially even the lives of your loved ones. The best way to make decisions that will help you financially is to take the time to prepare for each of these major moments. Let’s get acquainted with the financial life events everyone should plan for.
Speak with a financial advisor at Modern Family Asset Management for assistance on creating a financial plan that works for your specific needs. Contact Us.
Entering the Workforce
The change from school to a career is a major transition. Though your long-term financial plan may not be front of mind at this point, the financial decisions you make in these years can lay the groundwork for your entire financial future. Starting to save for major goals such as retirement during this time period gives you a major advantage, due to the power of compounding interest. These years are also when you build your financial habits. Be honest with yourself about what you’re doing well and where you have some room for improvement. It’s much easier to make adjustments now than it is to undo years of financial mistakes.
Marriage or Divorce
If you’re getting married, you’ll want to thoughtfully consider how you go about combining your finances. As with any other area of marriage, the key to success lies in honest communication. Instead of making assumptions, have conversations. If you haven’t already, now is the time to discuss long-term goals, debt, any credit issues, your budget, etc.
During a divorce, the focus is on protecting your assets. Both marriage and divorce are emotional times in life. That’s why it’s often a good idea to work with a professional who can provide objective financial advice.
Growing Your Family
Adding a child to your family, whether through birth or adoption, is both one of the most wonderful and disruptive life events. When you have a child, it’s easy to start thinking about life one day at a time. But when you become a parent, you become responsible for meeting all the needs of that child—and that includes its financial needs both short and long-term. When adjusting your financial plan to take into consideration the needs of your new family, you’ll want to create a college savings plan, update your will and other estate documents, and account for all the lifestyle changes and new expenses that come with having a child.
Buying or Selling a Home
A house is likely to be the biggest purchase of your life, so it’s worth completing the process thoughtfully. Even the most financially literate individual can be overwhelmed by the buying process—there’s the mortgage, interest rates, tax implications, and the effects on your financial plan to consider.
These considerations aren’t limited to the purchase of your first home. You’ll also need to consider all these factors when selling a home, buying a new home, purchasing a second home, or making a real estate investment.
Change in Job Status
A change in job status can have a major impact on you, your finances, your family, and your future. If you’ve received a promotion and an accompanying pay raise, you should think about how you want to use this extra money.
Many people choose to adjust their lifestyle to their income, but there’s no reason you have to. Instead, with either some or all of your extra income, you can invest, pay off debt, or save for retirement. If you’ve lost your job, hopefully, you will have prepared by having an emergency fund that’s large enough to cover at least six months’ worth of expenses. If you haven’t, or if you remain unemployed longer than you expected, make sure that whatever decisions you make take into account the long-term financial consequences.
It can be easy to use whatever money feels easiest to access, but your job status is temporary. The more financially responsible you are now, the easier it’ll be to get back on your feet later.
Retirement has the potential to be one of the best chapters of your life, but only if you prepare. Many people assume that if they save enough money, they’re prepared for retirement. But retirement planning requires far more than saving a certain number. You’ll need to plan out your income sources, decide when to claim Social Security, consider how different life expectancies affect your plan, and make sure you’re prepared for any healthcare issues or emergencies. You’ll also want to consider how you plan to spend your days and what your purpose will be upon retiring.
Contact Modern Family Asset Management
You can’t predict the future, but you can do your best to prepare for it. By creating a plan for these financial life events, you can set yourself up for more financial stability and less stress. For personalized support during any of these life events, work with a trusted and experienced financial advisor from Modern Family Asset Management.