The Impact Of Life Transitions On Financial Planning

The course of your financial life will be spread out across decades. From whenever you enter the market to when you begin retirement and estate planning, there will be several notable moments. However, these moments are not confined to purely financial matters.

Your life and your own unique situation will be comprised of ups and downs, and the only constant is change. While some changes may be welcome and some may be unexpected, there are certain life transitions that will more than likely occur. A good comprehensive financial plan should plan for these transitions and adequately prepare. 

Questions or concerns about your retirement plan? As one of the top North Carolina financial advisory firms, the services offered by the retirement planners at TFA offer a solution to the most complex financial situations.

Common Life Transitions to pay Mind to

Life transitions are bound to happen, and they vary in severity and impact. Harder life transitions include divorce, death, and business and professional failures. These types of transitions are inherently difficult because of their despondent nature. However, they are also crucial times to resolve any potential financial issues and changes resulting from these events. 

Life is bound to change, as do finances. Marriage and having children are other (happier) life transitions that will result in a changeup for your finances, necessitating a review of your budget and financial goals. The longer we live, the more we will experience, increasing the chances of a significant life transition that may necessitate a review of your finances. 

While some transitions may be better than others, regardless of their nature, managing your emotions in response to changes and making objective and intelligent decisions regarding your finances is critical. This can be a difficult undertaking by yourself. Your Greensboro certified financial planners at TFA are here to help you manage your affairs and make the best decision for you and your family.

Accounting for Life Transitions When Financial Planning

The way to stay accountable in the face of life transitions is to plan for them and respond accordingly when they do happen. 

Having an emergency fund for any unexpected circumstances is an excellent (and necessary) way to put yourself in the best position for an unexpected and unpleasant life transition. However, for other life transitions, it is critical to respond to them in a timely manner.

For example, once you develop an estate plan, the bulk of the work is done. However, an estate plan is a living and breathing plan that needs to be reviewed both every few years semi-regularly as well as after significant life events. Wise wealth management and financial discipline demand the same responsibility. Regardless of the transition-marriage, divorce, the birth of a child, death of a loved one, be sure to analyze and review your finances, investment goals, and portfolio afterward in a timely manner. 

Managing Your Finances During a Life Transition

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There are many different life transitions, and naturally, there will be many different ways to manage your finances in response to them. If the transition in question is something that you can plan for, such as the birth of a child or a big move, then plan ahead of time and create a realistic budget that allows you to pay your expenses while still meeting your financial goals. 

Having a good fallback plan is important too. This can be a different investing strategy (think Plan B) or having an ample emergency fund in case something unexpected comes up. 

Prioritizing your needs is crucial. Doing so will determine what is covered by your budget if things get tight and prioritize what is important to you, such as family or investment goals. Prepare for the worst and know how you plan on delegating your finances in the event of a life transition to ensure a smooth transition. 

Consequences of not Planning Adequately

Not dedicating the appropriate amount of time towards forming an effective plan for life transitions can only result in more stress and difficulty during the transition. This stress will only be exacerbated even more if the life transition in question is negative in nature, such as a death or divorce. 

These life events and the subsequent transitions are anything but fun, and having an adequate plan in place to effectively manage your finances during this transition will allow you more time to spend handling them as opposed to struggling to develop a plan once the transition has already begun. 

Do you know the best way to adjust your retirement plan annually? Check out what your Carolina retirement planners at TFA advise to ensure your plan is in good shape.

Being Proactive

Being proactive is ubiquitously important in all areas of financial planning, from investment management to estate planning. The first step is to ensure that your current financial situation is in good order and you’re either meeting your goals or staying on track to do so. If you’re currently struggling or lost, then it will be hard to effectively plan for future life transitions. 

The next step would be to plan for transitions that you know will take place. If you’re engaged and have a wedding date set, or if you and your spouse are planning on having children, then you can lay the groundwork for a smooth transition now before these transitions begin. 

For life transitions that you may not be able to prepare for, such as death or divorce, do your best to outline contingencies in your head to at least have an outline of what you think you would do should events transpire. Furthermore, having an adequate amount in your savings and emergency fund will also help to ensure that you are in the best possible position financially in the face of unexpected circumstances. 

Life transitions can be difficult to prepare for, and the advisors at TFA are here to serve all of your Greensboro financial planning needs. Contact us today to see how we can help you prepare financially for any life transitions on the horizon, expected or not. 

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More about the author: John Marske

JOHN MARSKE, CFP® is a Lead Advisor at TFA. He spearheads client relationships by helping people envision and act on their retirement goals.

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