Important Life Events Require You to Reevaluate Your Financial Strategies
If there’s one certainty in life, it’s that change is constant. Life is full of transitions—some expected, some unforeseen—and many of these changes can have a significant impact on your financial situation. At B.A. Schrock Financial Group, we recognize how crucial it is to incorporate life transitions and financial planning to make sure your plan stays relevant as your needs evolve. Keeping your financial plan updated during these pivotal moments helps it continue to reflect your goals at every phase. Below, we’ll explore five key life events that should trigger a review and update of your financial strategy.
Life Transition #1: Marriage
Marriage is a prime example of how life transitions and financial planning go hand in hand. It’s a major life event that merges two lives and two financial situations. When you get married, it’s important to revisit and update your financial plan to align with your new shared goals and responsibilities as a couple, ensuring that your finances reflect this significant change.
Combining Finances
One of the first steps is deciding how to combine your finances, and there’s no one-size-fits-all approach. Will you merge all your accounts, keep them separate, or do a combination of both? Discuss your financial habits, debts, assets, and goals with your partner to create a plan that works for both of you. If you struggle to have financial conversations, here are some tips to help you get started.
Updating Beneficiaries
Make sure to update the beneficiaries on your retirement accounts, insurance policies, and other financial documents to reflect your new spouse. This ensures that your assets will be distributed according to your wishes.
Adjusting Your Budget
Marriage often changes your financial priorities and expenses. Create a new budget that accounts for shared expenses and joint savings goals. This budget should reflect your combined income and any changes in living expenses.
Life Transition #2: Having a Child
The arrival of a child is a joyful milestone that also introduces new financial responsibilities, illustrating the importance of life transitions and financial planning. As your family grows, it’s essential to update your financial plan to account for the changing needs and priorities that come with parenthood. Taking these steps ensures that your financial strategy adapts to your growing family’s future.
Increasing Insurance Coverage
With a new dependent, it’s essential to review your life and health insurance policies. Make certain that you have adequate coverage to protect your family in case of unforeseen events. After all, we all experience life’s curveballs from time to time.
Saving for Education
Start planning for your child’s education early. Consider opening a 529 college savings plan or other investment accounts to save for future educational expenses. The earlier you start, the more time your investments have to grow.
Updating Your Will and Estate Plan
Make sure your estate plan includes provisions for your child. This includes updating your will, designating a guardian, and setting up trusts if necessary. This will give you confidence that your child will be cared for according to your wishes.
Life Transition #3: Career Change
Whether you’re changing careers, earning a promotion, or starting a new business, career transitions are another key example of how life transitions and financial planning intersect. These changes can greatly impact your financial situation, making it essential to adjust your financial plan to reflect your new income, goals, and priorities. By doing so, you ensure your financial strategy stays aligned with your evolving career path.
Evaluating Income Changes
A new job or career change often comes with changes in income, marking another common instance of the need for financial planning during life transitions. Reevaluate your budget to reflect your new salary and adjust your savings and investment plans accordingly. Make a plan so that your financial goals are still achievable with your new income.
Reviewing Retirement Plans
When you change jobs, you may need to decide what to do with your retirement plan from your previous employer. Options include rolling it over into an IRA, transferring it to your new employer’s plan, or leaving it with your former employer. Consider the fees, investment options, and benefits of each choice.
Updating Benefits
Review the benefits offered by your new employer, such as health insurance, retirement plans, and other perks. Make sure to update your financial plan to incorporate these new benefits and take full advantage of them.
Life Transition #4: Buying a Home
Buying a home is an exciting milestone, but it’s also a major financial commitment that highlights the need for life transitions and financial planning. This step requires thoughtful consideration and careful budgeting, making it essential to update your financial plan to account for your new expenses and goals as a homeowner. Taking this approach helps keep your financial strategy aligned with this significant transition.
Adjusting Your Budget
Homeownership comes with additional expenses such as mortgage payments, property taxes, insurance, maintenance, and utilities. Update your budget to account for these new expenses and make certain that you can comfortably afford them.
Building an Emergency Fund
Owning a home increases the need for a robust emergency fund. Unexpected repairs and maintenance costs can arise, so it’s important to have sufficient savings to cover these expenses without derailing your financial plan.
Reviewing Insurance Coverage
Ensure that you have adequate homeowners insurance to protect your property. Additionally, consider purchasing other types of insurance, such as flood or earthquake insurance, depending on your location and risks.
Life Transition #5: Retirement
Of course, retirement is the most easily recognized evolution that brings with it the need for additional financial planning. It’s a significant transition that requires a comprehensive review and update of your financial plan to enjoy a comfortable and sustainable lifestyle.
Creating a Withdrawal Strategy
Develop a strategy for withdrawing funds from your retirement accounts. Consider factors such as required minimum distributions (RMDs), tax implications, and the sequence of withdrawals to maximize your retirement income.
Reviewing Investment Allocations
As you enter retirement, it’s important to reassess your investment portfolio. Adjust your asset allocation to reflect a more conservative approach, focusing on income-generating and lower-risk investments.
Planning for Healthcare Expenses
Healthcare costs can be a significant expense in retirement, and they should be considered when you are making a financial plan update. Review your healthcare coverage options, including Medicare and supplemental insurance, to be sure you have adequate protection.
Updating Estate Plans
Review and update your estate plans to reflect your current wishes. This includes updating your will, trusts, power of attorney, and healthcare directives. Make certain that your beneficiaries are correctly designated and that your assets will be distributed according to your wishes.
Do You Need Guidance on Life Transitions and Financial Planning?
Life is constantly in motion, and some life transitions can have a profound impact on your financial situation. By regularly reviewing and updating your financial plan, you can better navigate these changes and maintain financial stability.
At B.A. Schrock Financial Group, we are committed to helping you adjust your financial strategy to reflect your evolving needs and goals. Whether you’re getting married, having a child, changing careers, buying a home, or entering retirement, our team is here to support you every step of the way. Contact us today and let us help you unlock your financial future. We look forward to hearing from you!
