10 life events that require financial planning
Sometimes, even the best events in life – a birth, new job or dream relocation – require a financial plan. They might necessitate the need for more insurance coverage, a new budget or guidance from a financial advisor. Here are 10 positive events that should inspire you to do some financial planning:
1. The opportunity to buy a vacation home.
Summer rental homes can represent bliss; a great escape you've had every year. Then, the landlord offers a sweet insider price you can't refuse. Summer homes are often bought as emotions rise at the end of the season. But purchasing a vacation home – especially one that requires rental income to finance – can be a complicated long-term commitment. A financial planner, not a real estate agent, can tell you what to consider.
2. You got that big raise you've been counting on for years.
Pay raises are typically small and incremental if they come at all, so getting a big raise is cause for celebration. They also mean it's time to do some planning to determine how much you should be saving for the future, too. It might be time to bump up your retirement savings.
3. Wedding bells are ringing, finally.
Couples might be marrying later these days than they used to, so when they finally do tie the knot, combining finances can be even more complicated. Prenups might be a buzzkill, but they can help protect each person's savings and prevent any misunderstandings. They are especially important if either member of the couple is bringing financial responsibilities like children into the marriage.
4. You got your diploma.
Graduates might not think they have enough money to talk to a financial planner. But they face key money choices as they start repaying their share of the overall $1 trillion in college debt with "starter" jobs. They could use help prioritizing payments for credit cards and student loans.
5. You're relocating.
The 50 states can be as different as moving to another country. Tax rates differ and cost of living can shift dramatically. There are scores of moving-related expenses. This might be the time to see a financial planner (consider national firms with offices in new and old locations) who offers hourly rates for one-time consultations.
6. You just got an inheritance.
Baby boomers stand to inherit significant wealth in the coming years, and receiving lump sums also carries with it financial responsibility. It can raise questions about spending habits, charitable contributions, tax payments and a slew of other concerns. You might want to get help from a professional as you figure out how to handle the money.
7. You're expecting a new arrival in the family.
When the baby arrives, life inevitably gets more complicated. It could be worth it to fit in some financial planning alongside baby naming or stroller shopping. You might want to open a 529 account, for example, to start paying for college, as well as take out additional life insurance policies.
8. You got a job.
Parents, consider paying a one-time fee to a planner as a gift to your child (and to yourself, since it makes your child more independent). Kids might act like they just want to have fun, but they often need – and even want – guidance during this key life transition.
9. You get offered a generous severance package.
Emotions often run high when your employer offers a big severance package. Some people want to call a lawyer to get more, others a travel agent to get out. It's important to understand the complex financial issues associated with severance packages. Most plans are immediately taxable, for example, and you want to make sure you understand all the fine print before you sign on the dotted line.
10. You retire.
Retirement is considered the pivotal financial moment in a person's life. If you haven't already worked with a financial planner to figure out your plans and budget, then now is the time. In fact, financial advisors urge even clients in their 20s and 30s to start planning for this major life transition, to make sure they're saving enough along the way, during their peak earning years. It's also a good time to reflect on what you want out of the final third of life.
Copyright 2015 U.S. News & World Report
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