Planning for Life's Major Events
Melissa A. Seamon, CFP®
Senior Financial Advisor
We cannot predict how life will unfold, but we can equip ourselves with the tools to navigate its complexities. For families, this often means planning for life's major events: buying your first home, childbirth, college, and retirement to name a few. Preparing for these milestones requires thoughtful consideration and planning.
The thing about many of life's significant events is that they can be expensive and typically require a commitment to saving. Here are the key financial planning steps to make life happen as you prefer.
Set Clear Goals
Determine what you want to achieve, what it will look like, and what it will cost. If you want to buy a house, pinpoint the general location, type, and size to determine the potential cost. Goals should be realistic in terms of what you can afford and the timeline for achieving them.
Working toward a goal is easier if you break it down into smaller milestones and plot them on a timeline. For example, if you're planning a wedding and expect it to cost $20,000 two years out, you can break the goal into quarterly milestones of $2,500. That makes it easier to track your progress.
Prioritize Your Goals
If you have multiple goals, which most people do, you must prioritize them, putting your most important goal on top and lining the others up in order of importance. This will help you determine how to allocate your resources. If your resources are currently limited, you should allocate them to your top priorities. As more resources become available, you can allocate them to lower priorities.
Many people make the big mistake of ignoring their number one priority: securing their financial future in retirement. Many mistakenly believe they may have more time to save for retirement than some of their shorter-range goals. The problem with that thinking is that the longer you wait to get on track to your retirement goal, the more expensive it becomes.
If it comes down to a choice between saving for your retirement or your child's college education, it's highly advisable to allocate first to your retirement. If you can't save for both, you could find ways to cut some expenses or pick up some extra income.
Create a Spending Plan
With your goals set and prioritized, you can determine where the money will come from to save toward the goals. This will require itemizing and totaling all your income and expenses. Your first expense should be the money you need to save toward your goals. The rest of your spending plan should be built around that. So, if your goal requires $500 a month, you need to adjust your spending plan to accommodate that commitment.
Suppose your expenses exceed your income. In that case, you need to adjust your spending, looking first at discretionary costs, such as leisure and entertainment, clothing, subscription services, books, music, other media, and holiday expenses.
Prepare for the Unexpected
Life doesn't always unfold the way you expect. As you plan for life's great moments, it takes just one unexpected expense—a medical emergency, a significant home or car repair, a job loss, etc.—to derail your plans. Your first priority should be building an emergency fund covering six to 12 months of living expenses. Nothing else will matter much if you're unable to cover basic costs due to an unexpected life event.
In addition, it's critical to ensure that your insurance coverages are sufficient, including your life and disability insurance. Check whether your liability coverage on your car or home insurance is sufficient.
Always Know Where You Are in Relation to Your Goals
With your goals set and a savings plan in place, checking your progress periodically is vital. That's easier to do if you break your goals into shorter milestones. For instance, if your goal is saving for your child's college education, you should know where you need to be every two years. You can adjust your savings rate or goal if you're short of the milestone. The more frequently you check your milestones, the more minor the adjustments.
Build a Support Team
Achieving your life ambitions can be daunting, with many challenges and setbacks. There's no reason to go it alone. Getting your family on board is critical for the support they can provide. It would also be essential to partner with a quality financial advisor who can keep you focused on your goals and the strategies needed to achieve them.
Our team at Gardey Financial Advisors is here to help you prepare for and enjoy life’s biggest moments. Don’t hesitate to reach out to us anytime to schedule a meeting, learn more about our services, and see if Gardey Financial Advisors could be a good match. We best serve clients looking for exceptional client service, who value a long-term partnership, and have a minimum of $500,000.00 in investable assets.
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