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Always Plan for Major Life Events by Consulting a Financial Advisor
There are critical milestones in everyone’s life that can bring about significant changes and leave a lasting impression. These moments are not only emotionally impactful, but they also carry considerable financial implications. For example, graduating from college is a milestone that many people aspire to cross, yet it often comes with the burden of student loans that require immediate financial attention as soon as you start earning. Ensuring your financial well-being during such times is essential, and a financial advisor can play a crucial role in this process.
A financial advisor can greatly simplify the financial planning process and help you prepare for different life milestones with ease. This article will explore the key life events that require financial planning and help you understand how a financial advisor can help you prepare for them effectively.
Table of Contents
Below are 6 life events that require a financial advisor:
1. Marriage or divorce
Getting married is a major financial milestone in your life. It can involve consolidating all your finances with your spouse, such as merging bank accounts, getting used to each other’s savings and spending habits, planning for future expenses like your children’s education and setting joint financial goals like retirement. Additionally, couples may need to address more complex matters like home ownership. A financial advisor can help you plan for these events by providing advice on the best way to combine your finances. For instance, they can help you create a budget that accommodates both partners’ financial capacities, needs, and habits. Many a time in a marriage, one spouse can be financially dependent on the other. In such a case, a financial advisor can help you evaluate your joint goals and ensure both partners are financially secure, even if only one spouse brings home the money.
A lot of people sign a prenup before marriage to protect their financial interests in case of divorce. A financial advisor can help you understand the financial implications of such an agreement and ensure that it aligns with your long-term financial goals. They can ensure that you are not duped and that your financial assets are secured in case of a divorce.
Divorce can present its own set of financial challenges. Dividing assets can be a complex financial planning process. A financial advisor can evaluate your financial situation and ensure a fair division of assets based on the prenup. If you do not have a prenup, the division of property, investments, and other assets can become even more complicated. In such a case, there is no pre-decided agreement on what happens to the joint assets. A financial advisor can help you understand the legal and financial aspects of the division and ensure that your financial interests are protected. Additionally, divorce may alter your financial goals and plans. For instance, you may need to rethink your retirement savings target, adjust your budget for a single-income household, or manage alimony or child support payments if you have children. A financial advisor can help you adjust to your new life and plan for the future.
2. Fluctuations in income due to changes in your employment status
In case of any changes in your income situation, whether positive or negative, you need to sit down and reconsider your overall financial approach. Say you receive a salary hike. As tempting as it can be to immediately start spending more in tandem with your salary, you must refrain from doing so. It is essential to allocate this additional income wisely to enhance your savings and investments and even tackle existing debt. The importance of financial planning cannot be underscored at this point. For instance, this could be an opportune time to focus on eliminating debt if you have outstanding loans or credit card dues. You can pay down high-interest debt and free up more money for future investments.
Switching jobs can also bring changes to your compensation package, such as potential stock options. While these can be valuable additions to your income, they also require careful management. A financial advisor can help you understand your stock options, including when and how to exercise them and the tax implications involved if you sell them. Furthermore, a new job might offer new benefits, such as employer-sponsored retirement plans like a 401(k) or health insurance. A financial advisor can help you evaluate these changes and make informed decisions about how to adjust your financial strategy accordingly.
Losing a job is one of the most challenging financial situations anyone can face. In such a scenario, a financial advisor can help you understand the budget cuts you need to make and how to best use your emergency savings to stay afloat until you find a new job. They can work with you to create a budget that prioritizes essential expenses while reducing unnecessary costs. In addition to managing day-to-day finances, a financial advisor can also provide guidance on liquidating your assets if necessary. They can help you determine which assets to sell and when to do so in a way that minimizes financial loss and amplifies your gains.
3. Starting a family
Starting a family is an emotional milestone, but it also requires careful financial planning. From healthcare expenses to education costs, raising a child can be financially demanding. As a parent, you will need to plan for a variety of expenses, including food, clothing, medical care, and education. A financial advisor can conduct a comprehensive financial health check to help you develop a savings plan that ensures your child’s future needs are fully funded.
While public schools may offer free education, you would still have to save for your child’s college education. According to Northwestern Mutual research, the average person anticipates spending around $77,300 on college costs. This can be a significant burden for your child to bear alone. Thankfully, you can help ease this financial strain as a parent by saving from a young age. Planning ahead helps prevent your child from falling into a debt trap as soon as they graduate. A financial advisor can recommend suitable savings accounts for preparing for college costs. They can also ensure you have suitable health insurance and are able to address your child’s ongoing medical needs. This includes planning for unexpected medical expenses and other financial emergencies that may arise.
Moreover, a financial advisor can help you balance your responsibilities as a parent with your own financial needs. It is important to remember that while providing for your child is a top priority, maintaining your financial security is equally essential. While students can take an education loan, there is no retirement loan for parents. A financial advisor can help you create a plan that supports your family’s well-being while also securing your financial future.
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4. Illnesses or disability
A life-changing illness or disability can be just as financially draining as it is physically and emotionally challenging. It can have a considerable impact on your finances. In such a situation, figuring out how to cover your basic needs and healthcare expenses can be overwhelming. Hiring a financial advisor can be helpful in such a situation. Advisors can suggest you explore insurance options to cover your healthcare expenses. If you incur debt due to continued medical expenses, a financial advisor can work with you to develop a strategy for paying off that debt without jeopardizing your financial stability.
In cases where you need to liquidate some of your investment assets to cover your medical expenses, a financial advisor can guide you on which assets to sell and the best timing for doing so. Moreover, if your illness or disability affects your ability to work, a financial advisor can help you explore alternative financial support. This may include government programs, tax benefits, and other forms of assistance that you may qualify for.
5. Starting a business
Starting a business requires money, which can impact your personal finances. You may have to use your personal savings or liquidate your investments. Additionally, you will also need to secure external funding options, especially if you cannot tackle the costs alone. It is also crucial to consider the tax implications that can arise out of starting a business and differentiate between your business and personal income. A financial advisor can help you with all of these things. They can conduct a thorough financial health check to help you understand how your business’s needs fit into your overall financial strategy.
Whether you use your personal savings, take out a business loan, or seek out investors to invest in your business, a financial advisor can help you evaluate all your options and select the most suitable one for financing your business. They can guide you in assessing startup costs, including the costs for purchasing new equipment, stocking up on inventory, marketing and advertising the company, etc., so you have a comprehensive understanding of your financial requirements. Financial advisors can also help you create a business budget based on your cash flow projections.
Understanding the tax implications of running a business is also essential for maintaining your overall financial health. A financial advisor can help you understand business taxes, such as deductions, credits, etc. They can also advise you on how to properly separate your business income from your personal income to ensure that you are meeting all tax obligations. A financial advisor can help you balance your personal and business financial needs, so you do not underestimate the resources required for your own needs, ultimately helping you achieve a sustainable balance.
6. Retirement
Retirement is perhaps the most important life event that requires financial planning. When you retire, your primary sources of income will shift from your salary to savings and investment returns. Hence, it is important to ensure you save enough for your golden years while you have the time for it. A financial advisor can develop a suitable strategy for your retirement and recommend appropriate investment vehicles, such as stocks, bonds, real estate, and other assets, based on your risk appetite and long-term goals. They can help you create a diversified portfolio that aligns with your retirement objectives. A financial advisor can guide you in using various accounts, such as traditional Individual Retirement Accounts (IRAs), Roth IRAs, and 401(k)s, to optimize your tax situation both now and in the future. They can help you understand the tax implications of each account type and ensure you maximize your contributions while ensuring tax diversification.
Moreover, financial advisors do not just help you plan for retirement but also transition into it. They can help you make mindful withdrawals from your retirement accounts in a tax-efficient manner to ensure that you have a steady and reliable flow of funds throughout your retirement. This ensures you do not outlive your savings. Adequate health insurance and long-term care coverage are two vital components of retirement planning. A financial advisor can help you assess your insurance needs to ensure financial protection against medical expenses and long-term care costs. This is particularly important as healthcare needs tend to increase with age.
Ultimately, the goal of retirement planning is to achieve financial independence and security for the rest of your life. A financial advisor can help you develop a comprehensive plan that addresses multiple aspects to ensure your overall financial well-being. From saving and investing to managing withdrawals and being financially self-reliant for as long as you live, you can plan for all your needs with the help of a financial advisor.
To conclude
Preparing for major milestones can be a complex financial planning process. However, having a financial advisor can make a significant difference. These professionals are equipped to handle the financial details, so you can focus on the emotional aspects of these important life events. Their expertise can streamline the planning process, making major milestones like the ones mentioned above more manageable and less stressful for you and your loved ones.
Use the free advisor match tool to get matched with experienced financial advisors who can leverage their expertise to help you plan for major milestones. Answer some simple questions about your financial needs and get matched with 2 to 3 advisors who can best fulfill your financial requirements.
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