What is life? For most people, it’s an endless series of problems, big and small, that require a stream of careful and smart solutions. Many of the problems people have come down to money, especially as their financial circumstances change.
During these transitions, it’s imperative to look at one’s finances says Howard Levine, an independent financial advisor. He points to a recent study by researchers that shows that people who seek professional advice during financial transition periods do much better than those who don’t. Families who seek professional help during transition periods end up more than $106,000 better off over the course of their lifetimes than those that don’t, according to the study.
So which life events require serious money plans?
Your First Real Job
When you’re young, you’re used to being broke and relying on other people for income, especially at college or university. But once you’re trained up and you leave the cocoon of academia, you’re suddenly thrust into a real world job and have a real-world paycheck to boot.
Bruce Stroup, a financial planner at a pensions company, says that when you’re young, time is on your side. There’s no better opportunity to save for retirement than during your twenties, as compound interest on your investments will add up to a large nest egg by the time you get to 65 – or whatever the retirement age happens to be in forty year’s time.
Tying The Knot
With the average wedding costing more than $25,000, tying the knot isn’t exactly cheap. But more costly than that are situations where each partner has different financial ambitions. It’s a good idea to check in with a financial planner when you first get married so that you and your partner can set your financial goals and work out who will pay for what. Financial planners can also help with employee benefits, making sure that you’re not paying for the same thing twice. Levine says that tensions in marriage almost always arise because of money, and so it’s a good idea to make sure that everybody knows their role from the outset.
Being Single Again
If you’re in an upper-middle class job, like creative director, programmer or doctor, then the chances of getting a divorce are slim. But if you’re in a lower-middle class occupation, the chances of separation are much higher. Only 30 percent of marriages in this group survive 20 years. Levine says that it’s a bad idea to wait until after the divorce to look at your investments and estate planning. Instead, he says, you should immediately approach your divorce attorney to make sure that you protect as many of your assets as possible.
You’ll also need to plan for life after divorce. You may find that without the support of your partner, your credit rating goes down and you’re less able to take out loans. This can be especially troubling if you want to take out a new mortgage on a new property. You’ll also want to talk to a financial planner about budgeting, now that you’re a singleton. Since you won’t be sharing bills, you may have less disposable income.