- \ Gerard Gruber
- February 9, 2021
Getting in a groove with your finances feels like winning at adulthood. You have a set monthly budget and your savings plan is going well. You haven’t had a job change in a while and you are fully comfortable...
Getting in a groove with your finances feels like winning at adulthood. You have a set monthly budget and your savings plan is going well. You haven’t had a job change in a while and you are fully comfortable in either your single or married life.
But eventually life is going to happen and something in your life changes that affects your finances. Maybe you’re having a child, maybe your car broke down and you have to get a new one, or maybe you have to make a career change because of the COVID-19 pandemic.
The changes can range from minor to major, fortunate to unfortunate, and everywhere in between. So how do you know when you should update your financial plan? Here are the top six life transitions that should cause you to pause and review your financial plan:
- Marriage or Divorce
When you get married or divorced, your finances change in a big way. You will either be combining or splitting your assets, and your monthly budget will take on a completely new form. Many people also forget to update their beneficiaries for bank accounts, retirement accounts, and insurance policies. This may cause major headaches down the road. For example, if you get divorced and then remarried but forget to take your ex off your beneficiaries list, they would have a legal claim to your assets.
- Birth or Adoption of a Child
The birth or adoption of a child is most likely a planned event and a happy one. So it can be easy to forget some of the financial impact and steps you should take when you’re caught up in all of that joy — and sleeplessness. As a new parent, you probably need to think about college savings as early as possible. You also need to establish a will that includes who you want to take care of your child should anything happen to both you and your spouse. And, if you haven’t already, you should get a life insurance policy to help provide some stability for your family or child in the event that you pass unexpectedly.
- Job Change
Switching jobs can be a mix of emotions depending on the circumstances. In most situations, however, you will have to tackle the same list of financial impacts:
- Salary: Whether this goes up or down, it will affect your budget, taxes and your savings.
- Retirement account: If you had a 401(k) or other retirement account with your former employer, you will need to decide what to do with it.
- Benefits: Your new job could have the typical set of benefits like health, dental and vision insurance and paid time off accrual or you could have some different ones, such as remote work, unlimited time off, or a high-deductible health insurance plan only.
- Major Health Event
Most major health events come on suddenly and cause a major disruption to your daily life and finances. This is a time when it is important to take a hard look at your estate planning documents: will, living will or medical directive, powers of attorney, health care proxy and trusts. If you don’t have any, it is imperative that you get these set up immediately. Some of them cannot be completed if you are not physically or mentally well enough. If you do already have them completed, it is possible that you have had other big life transitions since the last time you reviewed them or that medical technology has made advancements that would cause you to change your wishes for care.
- Loss of Spouse
Trying to figure out your finances after a devastating loss can be overwhelming. But it is necessary. If you have estate planning documents in place, this transition can be easier, but there is also quite a bit of work. As a beneficiary on retirement accounts (IRAs as well as pensions), life insurance policies and more, you will need to navigate the transfer of assets and any tax liabilities that come with it. You may also be faced with large medical bills in addition to funeral costs.
- Retirement
Preparing for and navigating all of these major life transitions can be easier with a trusted financial advisor by your side. You can rely on their expertise to guide you through the financial aspects of your transition, so you can focus on what is most important about the personal ones.
If you or someone you love is facing one of these major life transitions, we encourage you to reach out to us. We provide the financial guidance you need to make it through the next stage of your life on solid financial ground. Schedule a call to learn more about our work with those managing life transitions. We look forward to hearing from you.