Financial Planning for Major Life Events: Marriage, Divorce, and Starting a Family
Major life events such as marriage, divorce, and starting a family greatly affect one’s financial situation and, therefore, require prudent planning. Each event brings with it a different set of challenges and opportunities that can have major influences on your financial health, and preparing for such changes can help in ensuring stability and security. Here’s how to navigate financial planning for these major life events.
Marriage
Marriage is one of those life events that require you to take a step back and, at times, reassess and perhaps even make course corrections in financial planning. Here’s how one needs to go about financial planning with a marriage in mind:
Merge Finances: A very important thing is discussing how you and your spouse are going to deal with finances as a team. Will you be keeping joint accounts? Separate accounts? Or a combination of some? You do need to be open with your future spouse regarding where you stand financially-how much each earns and owns, how much one owes, and where the money goes every month.
Establish Financial Goals: Align on both short-term and long-term financial goals. Such could include saving for a home, planning vacations, or retirement. Setting common goals makes sure that both spouses pull in the same direction regarding financial goals.
Budget: Create one unified budget that reflects both parties’ income and all the expenses. Consider savings, investments, and categories of discretionary spending. Periodically, review your budget to reflect changes in your financial situation.
Update Legal Documents: Update wills, power of attorney, and beneficiary designation accordingly to reflect the new marital status of an individual and to make certain that one’s assets flow in the directions intended when the time arises.
Divorce
Divorce can be a financially draining process that needs proper planning in order to wade through the assets division and financial adjustment process:
Asset and Debt Accounting: Make a detailed accounting of all marital assets and debts. It includes real estate, retirement accounts, investments, and liabilities. Knowing how these assets and debts are going to be divided is what constitutes post-divorce financial planning.
Update Financial Accounts: Given a divorce, update or close the joined financial accounts and open new individual accounts. Reassess your financial plans, including your budget and investment strategies, considering your new financial situation.
Revisit Estate Planning: Update your will, trust, and other estate-planning documents to remove or revise the ex-spouse and make sure your assets flow according to your current wishes.
Consider Alimony and Child Support. If married, appreciate what divorce may mean in terms of alimony and child support that could be owed. Budget for these, if possible, and plan accordingly.
Seek Professional Advice. Marriage dissolution can be quite substantial with taxation and legal issues involved. Seek a financial advisor and an attorney to help you overcome these difficulties and assist in the planning for a financially secure post-divorce future.
Starting a Family
A new beginning of a family means new financial burdens that require planning for the sole motive of keeping costs to a minimum to assure the financial security of a family. This may be done by:
New Expense Budget: Strategize expenses related to the rearing of a child, such as health care, childcare, education, and other things that come along with his growing up, within an adjusted current budget.
Review Health Insurance: Ensure your health insurance covers maternity and pediatric care, along with all such expenses. Go through your policy in order to keep in mind coverage options and make necessary updates if required.
- Create an Emergency Fund: Starting a family, or generally in life, requires building up an emergency fund. Save three to six months of living expenses in an account for that financial cushion that’s easily accessible.
- Plan for Education Costs: It may be fitting to initiate a college savings plan, such as a 529, whereby money can be set aside for future education expenses of a child. The earlier you start, the better, because it will begin compounding growth to build up so that when this cost does arise, it is not as shocking.
Estate Planning: Review and update your will and other estate-planning documents to provide for the naming of guardians for your child, and ensure that in the event of an asset distribution your wishes regarding your child are expressed. You may need to establish a trust in order to handle and maintain your child’s inheritance.
Conclusion
Financial planning for major life events such as marriage, divorce, and starting a family is a significant life event that requires thoughtful preparation and strategic adjustment. Among the key areas of concern, such as merging finances, revising legal documents, assessing assets, budgeting for added expenses, and making future plans, you will be better armed to face the changes in your life with greater confidence and assure financial stability. This could be further enhanced by seeking professional advice and periodic reviews of your financial plans.
