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5 major life events to financially prepare for (& how)

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Getting married, having a new baby, buying a home with a mortgage, changing job status, or purchasing a new vehicle. Financial planners often approach people and families who have recently experienced these five major life events because major life changes usually carry a significant financial impact, and most people don’t plan for that.

Financial counselors recommend pre-planning financially for these five major life events instead of trying to schedule time to tend to your financial affairs after a major life change. Life tends to get more hectic as it gets more complex.

This article is going to look at the five major life events mentioned above. We’ll look at why you need to get out in front of these events financially, what you need to prepare for, and how to do it. Being proactive financially tends to produce better outcomes than taking a reactive position.

Event #1: Getting married

For many couples, this is the first major life event they experience since graduating from college. From this big event often follow new babies, new homes, new jobs, and new cars. It’s the beginning of the domino effect financially.

Adding a spouse often means adding a paycheck to the family. But adding a spouse also carries with it more expenses, such as groceries and utilities. And along with rising income and rising costs comes increasing responsibility to care for the financial needs of another person.

How can you have your financial house in order before you get married? Consider these three steps:

  1. Meet with a financial advisor or a financial planner, preferably one who only charges a fee. The advice you receive is likely to be more objective. By meeting with an advisor, you can discuss your past financial habits, current situation, and future plans you have that will require advance planning, like a new home, college for kids, and establishing a sound savings and investment program.
  2. Start an emergency fund and begin contributing to it as a couple. Having three to six months of income set aside for the unexpected will take time, so start putting a percentage of your income into the fund as soon as possible. Financial emergencies happen to everyone, and financial strain on a new marriage is not the type of start you want to have.
  3. Take care of getting the insurance you need. If you both have health insurance through an employer, you’re fortunate. Otherwise, you need to shop for individual policies.

If you have group life insurance through work, it’s very likely not enough coverage, and it’s not portable if you leave your employer. Instead, get your own individual life insurance protection while you’re younger and healthy. Premiums go up every year you get older, and an adverse change in your health could impact your insurability.

You should also have disability income insurance. It’s a nice benefit if you have it through your employer. If you don’t, you need to buy your own and make sure your paycheck continues to arrive on time, even if you can’t go to work because of illness or injury. Twenty-five percent of Americans will experience a disability in their career before they retire. Those aren’t good odds for putting your financial future at risk.

Just married? Take 10 minutes to apply for disability insurance together.

[ Related: A stress-free guide to combining finances after marriage ]

Event #2: Having a new baby

If you are planning on having children, there are a couple of items you need to cross off your to-do list in preparation.

  • Start a college savings plan. If you’re paying off student loans, you know how expensive a good education is. You can help your kids get off on the right foot financially by having money set aside for them when they’re ready for higher education, whether it be a savings account or a Section 529 educational savings plan that comes with tax advantages.
  • Make sure you have life insurance in place. The last thing a spouse wants to do is leave behind their partner in life without replacing their income while having children to care for.

Also, make sure your health insurance plan covers maternity. If it doesn’t, you’ll need to start a separate savings account to pay doctors and hospital costs.

[ Related: 5 essential types of insurance for parents ]

Event #3: Buying a home with a mortgage

Even if you’re currently renting, the largest financial investment you’re probably ever going to make is buying a home and carrying a mortgage. You’re going to need money for a down payment, so it’s best to start saving for it today.

Once again, life insurance must be factored in. You don’t want to die and leave behind a family that has to make a mortgage payment without your income. In most cases, when that happens, surviving families must sell the home during what is probably the most trying time of their lives.

The same goes for disability insurance. What if you suddenly couldn't work due to injury or illness? Without paychecks coming in, the mortgage isn't going to pay itself. But with disability insurance, you won't have to worry about that. Keep making your payments while you focus on recovery.

Event #4: A change in your job status

If you’re climbing the corporate ladder — congratulations. If you’ve moved from employee status to self-employed (or plan to), you’ve got some planning to do.

Leaving a company and becoming your own boss often means leaving benefits behind. You’re going to need to replace all of the group insurance benefits you had at work. There are four major employee benefits you no longer have that must be replaced to protect you and your family:

  1. Health insurance
  2. Life insurance
  3. Disability insurance
  4. Retirement plan

Speaking of retirement, that’s a change in job status you have to plan for years in advance.

If your company offers a retirement plan benefit, like a 401(k) plan, contribute as much as you can out of each paycheck (at least up to the employer match). As your income increases, don’t forget to increase the percentage of your income that you’re contributing to the plan. 401(k) plans offer tax-advantaged contributions and tax-deferred growth of your investments in the plan; you want to take advantage of that and be prepared for retirement.

Learn More: Disability Insurance for Self-Employed Professionals

Get a quote for disability insurance for the self-employed.

Event #5: Buying a car

This event may not sound like it needs any advance planning, but there are a couple of questions you can ask yourself to see if that’s correct.

Where is the down payment for the car coming from?

You probably won’t be paying cash for your new car, and you don’t want to be paying for eight years on a car you’re not likely to keep that long. Making a down payment will reduce the loan amount you’ll be carrying and save you money in the long run.

Will my vehicle’s insurance costs rise?

Chances are your new car will be more valuable and more costly to insure than your old car. Depending on your age and where you live, it could cost you substantially more. You’ll need to plan for this as well.

Final thoughts

Eleanor Roosevelt once said, “It takes as much energy to wish as it does to plan.” So many people wish, with fingers crossed, that everything works out fine for them financially. But, unfortunately, they don’t plan for what is going to be needed when they experience major life events.

Reading articles like this and meeting with a financial planner is a large part of the foundation of living a life free of financial stress. Put together your plan today and take one action step to start to gain momentum. You’ll be pleasantly surprised by how good you feel about getting started.

The information and content provided herein is for educational purposes only, and should not be considered legal, tax, investment, or financial advice, recommendation, or endorsement. Breeze does not guarantee the accuracy, completeness, reliability or usefulness of any testimonials, opinions, advice, product or service offers, or other information provided here by third parties. Individuals are encouraged to seek advice from their own tax or legal counsel.

— Published September 20, 2021
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