How to Prepare for Big Transitions Financially and Emotionally

Preparing Financially and Emotionally for Life’s Big Transitions

Do you remember the story about the grasshopper and the ant? The one where the grasshopper spends all day at play while the ant gathers food? Sometimes, we all need a reminder about how that story ends – with the ant prepared for a long winter and the grasshopper completely ill-equipped.

In this age of intense busyness, it’s easy to spend our time focusing on the day to day and ignoring the future, but this puts us at a disadvantage. Life has a habit of catching us off guard, and we would all do well to spend a bit more time like the wise ant did, preparing for a future transition we know is coming.

Research shows that 51% of Americans are stressed about their finances over the next few years.[i] If you count yourself among them, consider carving some time out of your hectic schedule to plan and prepare for your future. The advice shared below is meant to help you make this invaluable investment in order to provide financial and emotional peace of mind for you and your family.

Family

Wherever you are in life, there’s undoubtedly an event on the horizon. If you’re planning to get married, for example, you can expect to pony up around $35,329 for the average American wedding.[ii] Planning to buy a home? You’ll need considerable cash savings for a down payment.

If you’re expecting a child, living expenses will rise and childcare won’t come cheap. Of course, there’s college to plan for, too. Consider taking proactive steps. For example, you could open a 529 education savings plan and contribute to it regularly. Encourage family members to contribute for birthdays and holidays, too, and it will quickly add up. Getting a head start on saving for college, in a way that allows your money to grow tax-free, can take a huge burden off your shoulders in the future. Considering that the average undergraduate degree costs around $50,000, and only 5 percent of Americans have education savings accounts, preparing in this way will put you ahead of the game.[iii]

As you get older, there may be other expenses you’re anticipating, such as helping to pay for a child’s wedding or caring for aging parents. Wherever you are in your life, odds are good that you have a financial and emotional event around the corner. Proper planning and preparation can make all the difference in how you and your family respond when the time comes.

Career

So much of our lives are spent working, and each stage along our career paths comes with trials, tribulations, and financial challenges. If you took on student debt while training for your dream job, for example, don’t let it stop you from focusing on the future by taking advantage of any employer 401(k) matches, even as you make student loan payments. Take a leaf out of the ant’s book and make saving a habit early on – it’s bound to pay off down the road. Having emergency savings can make all the difference when considering a career change or facing a lay-off in the future.

Health

Are you treating your health as an investment? You should be! Maintain health insurance and schedule regular check-ups. Practice moderation with your diet and exercise as regularly as possible. You may think you’re too busy to focus on your health, but adding just 15 minutes of walking each day could help you live three years longer.[iv] If that isn’t enough of an incentive to be mindful of your health, consider that 66.5% of all bankruptcies are tied to medical issues.[v] Plan ahead so that, if your health does begin to fail, you can remain on firm financial footing. To that end, consider naming a medical power of attorney, carrying a life insurance policy to protect your family and making known your intentions regarding your end of life wishes. If you plan to age in your home, for example, put plans in place to make it possible. Take the time to modify your home to make it safer by adding grab bars in the bathroom, moving bedrooms to the first floor and changing out the flooring that may cause trip and fall accidents. We’re all going to age and, eventually, face health concerns. Preparing before an emergency happens means you’ll have more options available to you.

Retirement

There are no two ways about it – the earlier you start saving for retirement, the better. Aim to have a diverse portfolio and seek the guidance of a financial advisor. Take advantage of employer matches and catch-up contribution periods if you can. You can even take steps like downsizing your home now in order to maximize your resources later in life. Plan what you want your retirement to look like, then make preparations to ensure your finances will measure up. Your financial advisor is a great resource for retirement planning, so don’t neglect these important retirement conversations even if you’ll still be working for several decades to come.

End of Life and Giving

Planning ahead can save your family a lot of grief, so it’s crucial to have a will drawn up. If you have children, name guardians in the unfortunate case that you’re unable to care for them. You should also name a power of attorney to oversee your finances if you become unable to make decisions for yourself. Ensure that any beneficiaries are current and align with your will. To protect your legacy and provide for your family, you may even wish to establish trusts for children or grandchildren. Seek the guidance of a trusted financial advisor to help navigate the complexities of charitable giving, trusts, and other end of life financial details. The more you can plan in advance, the more control you have over your estate and your wishes.

Each stage of life brings with it transitions that impact us both emotionally and financially. Proactive planning – even in the face of busy schedules – allows you to handle each with grace, saving you from the fate of the ill-prepared grasshopper.

 

[i] https://finance.yahoo.com/news/personal-finance-stress-americans-161617267.html

 

[ii] https://www.aarp.org/money/budgeting-saving/info-2017/who-pays-for-the-wedding.html

 

[iii] https://www.nytimes.com/2019/08/30/opinion/sunday/college-tuition.html

 

[iv] https://www.aarp.org/health/healthy-living/info-2019/exercise-longevity-wellness-benefits.html

 

[v] https://www.cnbc.com/2019/02/11/this-is-the-real-reason-most-americans-file-for-bankruptcy.html

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