Top 12 Major Life Events to Financially Prepare for

By Travis J. McShane, CFP®, CFA

Major life events are an ideal time to step back and review your long-term financial plans. Whether you hear wedding bells ringing, you’re buying a house, your oldest is heading off to college, or you’re getting ready to retire, you should use milestones as prompts to review your financial goals and consult with your financial advisor to make sure you’re financially prepared.

We recommend planning for major life events as early as possible because small adjustments early can have a big financial impact later. Taking the time to talk with a fee-only financial advisor can help alleviate some of the financial stress that tends to accompany these events.

The list below is not meant to be comprehensive, but I hope it will give you an idea of some of the things we think about when our clients go through major life events.

1. Child Born

First, medical coverage is critical when welcoming a child into the world. It’s a good idea to review your medical insurance policies so you have an idea of what to expect in terms of medical costs, deductibles, and coverages, and you should set aside cash to cover these expenses.

We recommend speaking with your employer to make sure you understand the family leave policy and whether you’ll be entitled to temporary disability benefits. It’s also a good idea to review your life insurance coverages and assess whether it makes sense to add additional term coverage to provide for your family in the event something happens to you.

2. Child Going to College

Get ready to start saving early if you plan on helping pay for your child’s or grandchild’s college expenses. College savings plans such as 529 plans are an excellent tool because they allow the growth on your contributions to be withdrawn tax-free if used for qualifying education expenses.

3. Child Graduating from College

The most common issue for students graduating from college is how they should manage their student loans as they begin their careers. It’s important to understand each loan’s terms to prioritize the order in which they should be paid off.

4. Marriage

Congratulations! Money management just got twice as hard. (I’m joking.) Communication is key, and it can be a really good idea to have your advisor go through the goal-setting process with you.

We joke internally that it’s better for your marriage to be mad at your advisor than it is to be mad at your spouse.

5. Divorce

Unfortunately, divorce is all too common these days and can be one of the most stressful events of a person’s life. It’s important to have a proper understanding of your entire financial situation to make sure you can minimize the impact on your finances.

We often see documents drawn up that don’t consider tax characteristics of the assets owned, which can be a rude awakening when tax season arrives.

6. Switching Jobs/Income Changes

Switching jobs usually forces you to evaluate the options available to you through your new employer. Alternatively, if you are striking out on your own, it is crucial to do some extra planning to make sure you are covered.

Typical topics include medical benefits, retirement plans, salary, tax withholdings, group life insurance, disability coverage, cafeteria plans, and many others.

You probably will have a good amount on your plate already just transitioning into your new job!

7. Selling a Business

Structuring the sale of a business takes a lot of advanced planning, and it can be helpful to talk through the tax implications of various sale structures to understand the impact on your finances.

Remember, it’s the amount of money you get to keep after taxes that matters and not necessarily the highest list price.

8. Buying a Home/Selling a Home

Do you have enough for a down payment? How much strain will your mortgage payment place on your monthly cash flow? Are you eligible for a capital gain exclusion because you are selling your principal residence?

What about your property taxes? Are you allowed to transfer your property tax base to your new home in Orange County? How should you title your house? Should you add your kids to the title of your house?

These are just a sampling of some of the questions we see regularly.

9. Inheriting Property

Does your inheritance receive a step up in basis? How do you take a required minimum distribution from an inherited IRA? Should you keep your inheritance in a separate account, or can you transfer it directly to your joint account?

The answer to each of these is “It depends,” but you’ll want to have a handle on the implications associated with each decision.

10. Retirement

The most common questions we work through with clients are “Do I have enough to retire?” and “How much can I spend during retirement?” At the heart of both questions is a desire to maintain a lifestyle that you’ve grown accustomed to and make sure you don’t run out of money down the line.

We work with clients to run projections unique to their retirement income sources (Social Security, pensions, rentals, investments) to provide context around what retirement could look like.

As a backdrop to these projections, you’ll also need to work through decisions around investment management and retirement savings goals.

11. Illness

When was the last time you reviewed your estate planning documents and advanced health care directives?

When we think about estate planning, we generally focus on the death planning or what happens to your stuff if you die. The overlooked piece that is just as important is who will manage your assets for you in the event you can’t handle them yourself. Proper estate planning documents and proper asset titling are critically important in this respect.

12. Death of a Loved One

A loved one’s death is another one of the most stressful periods of life, and to compound matters, you need to navigate a whole new world of administering trusts, retitling accounts, canceling memberships, filing tax returns, claiming insurance settlements, opening inherited retirement accounts, and completing a long list of other items.

Your advisor should have experience navigating each of these issues and can help you avoid pitfalls along the way. If you’re able to plan ahead of these, a good advisor can set things up so things are as simple and stress-free as possible from the financial angle.

Schedule a 15-minute discovery call with a fee-only financial advisor to discuss your personal situation.