Thorough financial planning means taking into account major life events. While it is certainly true that events can occur unexpectedly, we can usually anticipate others in order to prepare for them.
We know that university discounts help us prepare for retirement and other major life changes. But that’s not all that affects our finances.
So, how do you prepare for both the expected and unexpected life changing events? And what are the most common life events examples you should prepare for financially?
Top 9 major life events and tips for how to plan for them
These nine events are likely to occur in our daily lives. Some of them are not relevant to you, but most of them will be. Following your current circumstances and what you want to do in life, here is how you should prepare for important, life-changing occasions so you can become financially independent.
1. Education
As Benjamin Franklin said, “An investment in knowledge pays the highest interest.” He was right in that education can provide great benefits to your life. Regrettably, not all education is the same, and a college or postgraduate education can be quite pricey.
Most people, when thinking about the cost of education, are thinking of college. According to Educationdata.org, the annual average cost of attending a four year instate institution is $25,487.
If you’re not saving for a student’s college education, custodial accounts and 529 plans are excellent ways to save. There are many different ways to save for college, and you should look into your state’s options.
A custodial account is an account you retain control of until the child comes of age (normally 18 or 21). Funds don’t have to be used for education, but that’s a good way to invest it.
A 529 plan is a savings account that helps parents and other family members save on a child’s behalf. Your earnings on the account do not generate any taxes, and it grows tax-free over a period of up to 18 years. The money must be used for qualified education costs (or you pay a 10% penalty and standard income tax).
Now, you might also be thinking about your college costs. Completing a full-ride scholarship is also a major goal, but not everyone is able to achieve that goal. If you still have student loans outstanding, you likely have graduated from school.
If you attend school or college, try using scholarship and grant applications to save as much money as possible. Stick to a budget to stay out of debt, if applicable.
If you have student debt, you’ll want to figure out a student loan repayment plan. Even if your student loans are expected to be forgiven, you must adhere to every requirement of student loan forgiveness programs.
And even if that’s not an option, refinancing student loans may be a way to save significant money (particularly if your interest rate is high).
Plenty of vocational school programs exist that can provide greater income and increased job satisfaction. You may want to embark on a new venture, which would cost you some money and time.
Even if you remain in the same career or field, you need to continually learn new things to stay up to date. Even those who have careers frequently need to change training as technology evolves and laws change.
You could try one of the many job opportunities that do not require a college education, saving you a lot of money. There are many positions that pay well without a college degree, such as executive assistants, insurance sales agents, police officers, electricians, and many others.
Some of these classes necessitate training, and if you cannot afford to pay any fees, be sure to find out beforehand what you can expect to pay. Estimate how much a job might pay you after you’ve finished it, and make sure renting a vehicle will be worth the cost.
Whether you plan to go to university or graduate school or training, calculate your ROI by estimating the price of education against the benefits.
Be sure to calculate your return on investment (ROI) before enrolling in training programs or classes. You may need a bit of cash saved beforehand as you train for a new position. Be cautious when making major job decisions, and think carefully before making a commitment.
2. Getting married
Marriage is beautiful and one of the most life-altering events. However, weddings can also be expensive (estimated $28,000 on average in 2019). Here’s how to get married without spending a fortune.
Engagement doesn’t have to cost a lot of money even though it is one of the most important and significant life events. When shopping for an engagement ring, however, the biggest expense may be the gemstone. You can let your fiancée know your jewelry preferences. A precious diamond may be beautiful, but there are different grades of gemstones as well.
Let your loved one know if a ring is not important to you, or if you’d rather pick the engagement ring yourself. You can also suggest a budget to work with. Alternatively, you can look at preowned engagement rings as many individuals sell their engagement rings.
Wedding parties can raise the cost of getting married. I didn’t have one, but that’s entirely up to you and your spouse. Be sure to budget accordingly.
Wedding costs can be astronomical. Remember that, while a wedding ceremony is an event to celebrate, it should not bankrupt you.
The key to wedding planning is to settle a wedding budget that meets all of your criteria. Talk to your fiancé, parents, and any other individuals who might financially contribute, to come up with a maximum wedding budget.
Then, figure out each item’s total price. Focus on what is most important to you and allocate your spending accordingly. Do not use your wedding as an excuse to rack up debt.
Finally, if preparing for marriage, don’t forget to take this super-important part into account: consider how you’ll manage your money together. This in itself is a major life event. Discuss your finances with one another before getting married, and decide whether or not you’ll share a bank account.
Some couples may combine every cent of their budget, but many wives are financially abused, so you may need to keep a portion separate. Do whatever you can to discuss finances with your spouse before the wedding.
3. Having a baby
Having a child is one of the most delightful and most expensive events in a person’s life. If you want to become a parent, make sure you have a good idea ahead of time about how much it will cost.
First, you’ll have to budget for a pregnancy. From doctor’s visits to prenatal vitamins to a possible hospital stay, you’ll need to plan ahead for this significant expense if possible.
One of the better things you can do if your goal is to become pregnant in the near future is to make sure you have good health insurance. Insurance coverage can be fairly expensive, but if you pay your premium, you can expect to decrease your out-of-pocket costs when you give birth.
Both maternity care and newborn care are vital health benefits. This means you should be able to get some level of coverage under a qualified health plan. And low-income households can receive a free or low-cost Medicaid or CHIP package.
If you can open a Health Savings Account (HSA), you may be able to chip in on some of the expenses of pregnancy.
Having fertility problems is one of the most tragic serious life events. It is among the most unfair elements of existence: not all women are able to achieve pregnancies easily. Many women who would be excellent mothers must fight for the opportunity, whether via fertility treatments or adoption.
We assume it will happen naturally when we decide we want to become pregnant. It’s difficult to predict infertility until we have a reason to expect it. About 10% to 15% of couples have trouble conceiving a child.
If you need funding for natural fertility treatments, be aware that your financial burden may be high.
Adoption is a great way to grow your family tree, but it can be more expensive and more difficult to adopt a baby than having a biological child. If you desire to adopt a child or wish to do so, it’s important to be aware of the costs and how to pay them.
It can be difficult to estimate how much your adoption may cost, since the price charged by different organizations varies so greatly. There is a great deal of red tape and paperwork (as well as a great deal of waiting).
Countries across the world have a range of costs associated with adoptions.
Clearly, these are large ranges, and adoption from foster care can be a more affordable option. But one way that people can get the funding for adoption is through fundraising. You can hold a GoFundMe campaign, sell baked goods and artwork at silent auctions, and have other kinds of fundraising events.
Whatever route you choose for becoming a parent, you will have to pay costs.
4. Divorce
Unfortunately, once we marry, not every relationship works out as we imagined it would. One of the major life upheavals that nobody wants to contend with is divorce. Before getting divorced, be certain to consider the financial consequences so you have a contingency plan.
Divorce frequently incurs legal fees, and the more complex your divorce case is, the more it will cost. When preparing for a divorce, shop around for divorce lawyers to find the most affordable rates.
Establish someone who you can depend on to help you during a difficult time. If you have a relatively amicable relationship with your soon-to-be ex-spouse, you will be able to resolve problems quickly and avoid paying costly legal fees.
Divorce costs you more than you might expect. You need to take a look at your financial statements and make sure you have access to your money.
Examine your credit score and determine whether any financial or other difficulties of your spouse could interfere with you. Before a divorce is finalized, you will need to consider your own financial situation. You may have to cover some of your spouse’s debts.
Even if you consider yourself happily married, it is still a good idea to consider the worst case scenario of divorce. Be sure to have some money in your name alone, even if you combine all of your funds.
When preparing for a divorce, consider expenses like housing.
If you have children, the cost of raising them may be a factor in the divorce proceedings, too. Again, a good attorney may be worth it so that you can adequately care for your house and kids after you divorce. You can rebuild your life with proper planning.
5. A major life event like personal injury or illness
You should keep an emergency preparedness kit on hand in case of any unforeseen circumstances. While we hope that we will never have to use it, injuries or illnesses do sometimes happen. You should be prepared for the challenges that may arise, and should be prepared financially for them.
It can be difficult to plan for emergencies such as cancer or diabetes. These major events are not set in stone, but they could happen. If you have a family history of certain diseases, you may want to consider getting health insurance coverage for those ailments.
Be sure to purchase supplementary types of insurance for cancer and other serious illnesses, as basic medical insurance typically does not cover everything. Pay more attention to having comprehensive health insurance, which covers many conditions.
Certain types of injuries may be covered by worker’s compensation insurance. If you are injured while at work, your medical bills and time away from work will be covered.
Again, having health insurance coverage is vital, but you may still have high medical bills if you have a serious injury.
6. Death or illness of a loved one
Unfortunately, even if we are healthy, we can expect that individuals we love will not live forever and that they will be stricken by illnesses or even die. Even healthy people can take steps to protect themselves before a tragedy occurs. Significant events include these incidents.
A partner or spouse is required to reimburse any debts created by a life insurance policy. A million-dollar policy may be necessary for individuals with particularly large debts, but smaller sums might be sufficient for others.
Usually, term life insurance is best for most people because it costs a fixed price for a set period of time and provides a death benefit. These policies are seldom very expensive.
You may be able to get life insurance through your employer, but watch out for drawbacks, since these policies usually do not transfer with you if you switch jobs. Getting your own policy is sensible, and the lower your age is when you begin the policy, the cheaper your premiums will be.
Life insurance is important to protect your assets. It ensures that if you die, your spouse will be able to cover the expenses your salary normally covers. Mortgage, school fees, living expenses, and debt may be paid for using life insurance proceeds.
While we’re discussing life insurance, we shouldn’t forget about estate planning. It’s an important part of any major life event. Too many people do not have a will, which could potentially put their families in debt.
Carefully review your finances and prepare a legal will and testament. This helps ensure the right person receives access to your financial accounts if you die. It is cheaper to use your salary for your dependents.
When a family member receives a dire prognosis, you may need to step up. Whether you would like to provide physical care, transport to and from medical appointments, or even have a relative move in with you, these all can take a toll on you.
Most people don’t use separate savings accounts for such events, but it’s wise to at least consider the issue beforehand. My wife and I have had many discussions over the years about whether or not we should be prepared to provide care for our parents and grandparents in the event that something were to happen. We understand it is one of the most important life changes we will encounter, and it may happen again.
We hope we are careful enough with the money that we have that we can take a month off. We can’t really budget for every possible situation, but by having an emergency fund, we can make it through life’s curveballs.
7. Moving homes
Another of the top major life events is relocating. Perhaps you’ve only lived in a specific location your whole life and never had to relocate. But it’s very unlikely that we will all survive to adulthood. Many of us will lose a substantial portion of our savings over time.
If you anticipate a shipment approaching, be sure to make the necessary arrangements ahead of time. If your company is going to be covering your move expenses, that’s wonderful! Keep to your budget.
To those of us who aren’t eligible for a company-sponsored relocation, we need to find a way to reduce our costs. Look into discounts ahead of time and plan for your payments.
Consider the costs you may pay:
When calculating the cost of moving, you may also attempt to negotiate a higher salary with your new employer to help offset those costs!
8. Changing jobs or careers
Whenever you choose to make a career pivot, it may cause some financial trouble. It can be one of the most impactful life-changing events!
Weigh the cost of training against the potential for increased salary or career advancement. Do not go into debt in order to be promoted, but occasionally college courses and student loans are necessary.
When you’re changing careers, you may have several months of unemployment. This is not a huge issue as long as you have an emergency fund in place.
One of the reasons for creating your emergency fund is to cover expenses in case you lose your job. It’s also available for unplanned events, such as if you decide to leave your current job to pursue something more exciting.
Along the same lines of changing careers, you may be able to branch out on your own. Starting your own business is one of the crucial life experiences to prepare for.
If you want to start your own business and be an entrepreneur, planning ahead is essential. There are a number of ways to start a business with no money, but funds may be tight for a long period of time.
One of the chief obstacles of becoming a business owner is acquiring adequate capital. It is not the only one who needs to be overcome, but if you can set yourself up for success by saving money, you will succeed.
Working overtime or foregoing luxuries for a while might be worthwhile for the goal of becoming your own boss.
You can also test the waters by starting a side gig while retaining your day job. Starting a business from scratch is difficult, but adding it part-time may be a good way to gain experience.
9. Economic hardship
The COVID-19 pandemic challenged many people’s livelihood stability and financial security, and many people are still recovering financially. Many people lost their jobs and livelihoods due to the pandemic, and there are still hazardous substances and contaminants remaining in some areas. You might find yourself financially burdened for no good reason.
Even if you’re the hardest worker at your company, you may not be promoted. Major life events, such as unemployment, could be devastating. Sometimes this is because of corporate restructuring, loss of revenue, or even an executive who dislikes you.
Keeping your emergency fund stocked up in preparation for a possible layoff could mean increasing your tolerance to fluctuations in your field. It may mean paying attention for job offers when you hear rumors regarding your industry.
Even inflation has no impact on our finances, including our savings and investments.
Inflation has soared since 2022 due to factors beyond our control.
You may not consider inflation as one of the most important life events to prepare for, but it impacts your budget. The cost of everyday items such as groceries, clothing, fuel, and household goods is elevated.
What we can do in the event of rising costs is attempt to decrease our spending on non-necessities. This is not fun, but it is necessary. It’s another reason to conserve money when your revenue is good, and not go too deeply into debt.
The coronavirus pandemic demonstrated the folly of making the best-laid plans. A pandemic, war in different regions, elections, and other events could disrupt our finances.
I wouldn’t recommend throwing your hands up in the air and saying “Well, whatever happens, happens!” You can drive yourself crazy worrying about the “what-ifs.”
But what we can do is try to be levelheaded when we hear about devastating events in the world. We can protect ourselves by making smart decisions with our money and our lives and hope that this keeps us safe from the worst catastrophes after world disasters.
Be sure to create a plan for these potentially life changing events!
These experiences are things we can choose, but others are just things that happen to us, which feels frustrating.
The best suggestion is to plan for what you can do and let go of what you cannot control.
Some things you can do to protect yourself and your finances should ease your mind: have an emergency reserve fund and life insurance, avoid hasty job changes, and get out of debt as quickly as possible.
Financial planning will go a very long way to ensuring your happiness, regardless of what happens in the world.
